Scanfil swings to profit

Turnover for the second quarter totalled EUR 58.9 million (62.4 in the corresponding period in 2006).Operating profit was EUR 4.0 (5.1) million representing 6.7 (8.2)% of turnover. The major restructurings in the telecommunications sector that affected the markets for telecommunications network products in late 2006 and early 2007 were completed during the period under review. Markets are beginning to normalise, and demand increased slightly towards the end of the period under review. Increase in demand is the strongest in the growing markets of Asia and India. Due to a tough price competition in these lower-cost countries and a less expensive cost structure of new products, the average prices of telecommunications network products have continued to decrease. The demand for industrial electronics products has developed favourably in the period under review, and the production volume was higher than in the corresponding period in 2006. Scanfil's operations in Asia continue to grow. The Chinese plants' sales, including deliveries to the Group's other plants, represented 41% of the Group's total sales in the period under review (32% in 2006 and 28% in the corresponding period in 2006). The Chinese subsidiaries employ half of the Group's personnel, and a total of 73% of the Group's personnel worked in the international subsidiaries on 30 June 2007. The transfer of the remaining manufacturing operations of the Oulu and Äänekoski plants to the Group's other units advanced according to schedule. Production in both locations will cease by the end of the third quarter. CPS Elektroniikka Oy, a subsidiary of the Scanfil Group, was dissolved on 15 June 2007 in accordance with the decision of the Annual General Meeting. The company has not engaged in any production activities since 30 April 2005. The dissolution does not affect the Group's financial performance. The markets for telecommunications networks are expected to grow only slightly in 2007. Tough price competition, growth of demand shifting more and more to developing markets, and the replacement of current high-volume products with simpler and more inexpensive telecommunications network products will intensify in late 2007, due to which the turnover in this product group is expected to decrease in 2007. The favourable development in the demand for industrial electronics products is expected to continue in the second half of 2007. Based on available forecasts, Scanfil plc's sales for 2007 are expected to fall short of the 2006 level. Profitability for the full year is estimated to be at a satisfactory level.