Elcoteq sales up 38%

Most of the increase in net sales came from Europe and especially from Americas due to Elcoteq's acquisition of the Thomson manufacturing plant in Juarez, Mexico, at the end of 2004. The Group's operating income in the first quarter developed as the company predicted and amounted to MEUR 9.5 (MEUR 8.1), or 1.2% of net sales. Operating income from continuing operations improved slightly on last year's level but relative profitability weakened mainly because of an unfavorable product mix and the cost impacts of several simultaneous expansion projects. Income before taxes totaled MEUR 6.5 (MEUR 6.8) and net income from continuing operations was MEUR 4.4 (MEUR 3.1). Elcoteq has two business areas: Terminal Products and Communications Network Equipment. In the first quarter of 2005 Terminal Products contributed 80% (79%) and Communications Network Equipment 20% (21%) of Elcoteq's net sales. The companies within the Ericsson and Nokia groups accounted for altogether 63.1% (73.4%) of Elcoteq's first-quarter net sales. The figures do not include business activities with Sony Ericsson. Business activities with the new customers announced during 2004 (RIM, Siemens, Thomson and Vitelcom) have developed favorably. First-quarter net sales of Terminal Products totaled MEUR 645.2 (MEUR 461.4) and the segment's operating income was MEUR 16.9 (MEUR 15.4). The increase in net sales compared to the first quarter of 2004 was almost 40%, an important reason for which was the transfer of production at Thomson's Juarez plant to Elcoteq at the end of 2004. Elcoteq manufactures set-top boxes at this plant. Net sales of the Communications Network Equipment business area increased by approximately 32% on the comparison period, totaling MEUR 165.1 (MEUR 125.1). The segment's operating income, however, was weaker than last year, amounting to MEUR 2.6 (MEUR 4.7). Operating income was weakened by certain one-time items at the Überlingen plant in Germany. During the first quarter Elcoteq and Tellabs reached agreement on the discontinuation of co-operation in the fall of 2005. Underlying this decision were changes in Tellabs' own business operations and strategy. Elcoteq has three geographical areas: Europe, Asia-Pacific and Americas. Net sales grew in all geographical areas during the first quarter. In Europe net sales reached MEUR 466.0 (MEUR 366.6) and in Asia-Pacific MEUR 177.1 (MEUR 159.7). Net sales in the Americas almost tripled compared to the same period last year to MEUR 167.2 (MEUR 60.2), a major reason for which was the acquisition of the Thomson plant in Mexico at the end of 2004. Elcoteq's new manufacturing plant in Bangalore, India, was completed in record time during the first quarter. This plant will serve both terminal products and communications network equipment customers. When operating at full capacity the plant will have approximately 1,000 employees. At the end of March Elcoteq employed 18,753 (14,011) people, 874 (1,317) of whom worked in Finland and 17,879 (12,694) elsewhere. The geographical distribution of the personnel was as follows: Europe 9,825 (8,109), Asia-Pacific 5,262 (4,624) and Americas 3,666 (1,278). On average Elcoteq employed 19,047 (13,758) people between January and March, and the average number of people on Elcoteq's direct payroll was 14,560 (13,222).