Elcoteq SE
Interim Report
October 27, 2010 at 9.00 am (EET)
Improvement in operating profitability, cash flow clearly positive, net debt
significantly reduced and actions to strengthen balance sheet proceeding
July - September
- Net sales EUR 250.7 million (EUR 331.7 million in July - September 2009)
- Operating income excluding restructuring costs EUR 1.3 million (-1.6)
- Operating loss EUR -2.5 million (-3.3).
- Loss before taxes EUR -16.8 million (-7.5)
- Earnings per share (EPS) EUR -0.57 (-0.19)
- Cash flow after investing activities EUR 47.9 million (42.7)
- Rolling 12-month return on capital employed (ROCE) 15.5% (-14.4%)
January - September
- Net sales EUR 803.6 million (EUR 1,237.7 million in January - September 2009)
- Operating loss excluding restructuring costs EUR -12.4 million (-37.4)
- Operating loss EUR -22.3 million (-53.1).
- Profit before taxes EUR 44.5 million (-80.8)
- Earnings per share (EPS) EUR 0.44 (-2.26)
- Cash flow after investing activities EUR 29.9 million (64.2)
- Interest-bearing net debt EUR 23.0 million (173.2)
- Gearing 0.2 (2.6)
- Solvency 18.6% (9.7%)
Outlook
Fourth-quarter net sales are expected to be on the level of the third quarter.
Operating income is expected to further improve from the third quarter. The
changes in the business volumes have caused need for slightly higher
restructuring costs than originally anticipated in both Q3 and Q4 in 2010. The
company expects the operating profit excluding restructuring costs to turn
positive for the second half of 2010. Due to the restructuring of subordinated
debt, the net income for 2010 will be clearly positive.
The company earlier estimated the operating profit to turn positive for the
second half of 2010 based on the impact of implemented cost reduction actions,
the stabilization of underlying business and the contribution of recently won
new customer contracts.
This interim report has been prepared in accordance with IFRS. Tables have been
prepared in compliance with the IAS 34 requirements approved by the EU. The
comparative figures given in the body text of this report are figures for the
corresponding period in the previous year, unless stated otherwise.
Elcoteq's President and CEO Jouni Hartikainen:
"Financial development during the past two quarters has been very satisfactory.
On the top line, the comparison to the previous year is unfavorable due to the
loss of Sharp's KIN business and its impact on our net sales, but the
implemented cost reduction actions and the shift in our strategic focus towards
increasing the value content have clearly improved our profitability.
Practically all of our customers have been satisfied with the solid development
in strengthening our balance sheet. I am pleased to say that even during the
tough times our quality and performance have never been an issue for our
customers, but mainly our financial capacity and credibility as a long-term
outsourcing partner. Now that our financial situation has improved significantly
during the second and third quarter, we are gradually starting to see the
results of this regained customer confidence.
Both System Solutions' EMS business and the Consumer Electronics-related repair
business have been developing well. In both areas we have been able to win new
customers and strengthen our position with existing customers, which tells us
that the new strategic direction has been well received by our existing and
target customers. Business in Europe is currently developing very well but
unfortunately our loading-related challenges - especially at our Chinese
factories - are slowing our overall development.
During the last quarter of 2010 our focus will be on implementing the revised
strategy in practice and finalizing the very promising customer programs we
currently have in the sales pipeline. We will also continue our efforts to
further strengthen our balance sheet and long-term financing."
July - September
Elcoteq recorded net sales of EUR 250.7 million in July-September (EUR 331.7
million in July - September 2009). Operating loss continued to decrease from the
previous quarter, and totaled EUR -2.5 million (-3.3). Operating income
excluding restructuring costs was EUR 1.3 million (-1.6). Net sales continued to
decrease from the previous year, especially due to the divestment of Ericsson-
related operations in Tallinn, Estonia to Ericsson in July 2009. As expected,
net sales declined also from the previous quarter mainly due to Sharp's sudden
decision to put the KIN smartphone deliveries on hold. In 2010, operating result
has improved solidly due to the consistent cost savings actions carried out
during the review period.
The Group's net financial expenses were EUR 14.3 million (4.1). The increase was
due to unrealized foreign exchange losses resulting from the valuation of
intercompany USD denominated loans. Loss before taxes was EUR -16.8 million (-
7.5) and net loss totaled EUR -17.7 million (-6.3). Earnings per share (EPS)
were EUR -0.57 (-0.19).
The Group's gross capital expenditures on fixed assets between July and
September were EUR 2.6 million (1.1), or 1.0% of net sales (0.3%). Depreciation
amounted to EUR 7.2 million (13.5). During the review period, investments were
earmarked mainly for the manufacturing equipment of new customer programs.
Cash flow after investing activities remained positive and was EUR 47.9 million
(42.7). Major contributor for the cash flow came from the reduction of working
capital. The Group had EUR 84.0 million sold accounts receivable without
recourse at the end of September 2010 (no sold accounts receivable at the end of
September 2009 and EUR 3.3 million at the end of June 2010).
At the end of September 2010, Elcoteq had cash totaling EUR 84.9 million
(231.0). The company has reduced the EUR 100 million syndicated committed credit
facility signed in April 2010 to EUR 73.5 million. The credit facility was fully
utilized.
At the end of September, the Group's interest-bearing net debt amounted to EUR
23.0 million (173.2). Net debt decreased by 69.9% from the second quarter of
2010. The solvency ratio was 18.6% (9.7%) and gearing was 0.2 (2.6). Rolling 12-
month return on capital employed (ROCE) was 15.5% (-14.4%).
January - September
Net sales in January - September decreased significantly compared to the same
period last year, standing at EUR 803.6 million (EUR 1,237.7 million in January
- September 2009). The decline in net sales resulted from the divestment of
Ericsson related operations in Estonia in July 2009 and the lower mobile device
deliveries. Operating loss was EUR -22.3 million (-53.1) and excluding
restructuring costs operating loss was EUR -12.4 million (-37.4). Improvement in
profitability resulted from the restructuring actions implemented in 2009 and
early 2010. Profit before taxes was EUR 44.5 million (-80.8). Earnings per share
(EPS) were EUR 0.44 (-2.26). Cash flow after investing activities was EUR 29.9
million (64.2).
Gross capital expenditures on fixed assets in January - September amounted to
EUR 8.2 million (4.6) or 1.0% of net sales (0.4%). Depreciation totaled EUR
24.0 million (48.4).
Strategic Business Units
Until the end of September 2010, Elcoteq had two Strategic Business Units (SBUs)
as its segments: Consumer Electronics and System Solutions. In the third quarter
of 2010, Consumer Electronics contributed 62% (73%) and System Solutions 38%
(27%) of the Group's net sales.
Net sales of the Consumer Electronics SBU in the third quarter were EUR 156.2
million (243.5). Sales declined mainly due to lower deliveries in mobile
devices. During the quarter, the SBU showed good progress in developing its
business. The segment started cooperation with a leading Korean consumer
electronics OEM and expanded its cooperation with Philips in LED lighting by
starting manufacturing cooperation in Bangalore, India. Also the AMS (After
Market Services) business developed and expanded with several existing and new
customers. The segment's operating income was EUR 1.5 million (-2.3) and
excluding restructuring costs operating income was EUR 5.2 million (-0.8).
Net sales of the System Solutions SBU in July-September were EUR 94.6 million
(88.2). The segment's operating income was EUR 3.9 million (6.9) and excluding
restructuring costs operating income was EUR 4.0 million (6.9). Compared to the
second quarter of 2010, the SBU's net sales increased and were higher than
anticipated due to the start of new customer mass production and high customer
demand, especially in Europe. However, component shortages postponed some orders
to the fourth quarter. Higher net sales were delivered with better customer
balance and higher sales margin, improving the segment's profitability compared
to the previous quarter. During the quarter, the SBU was also able to balance
its geographical plant split as new customer projects were ramped up in
Bangalore (India), Pécs (Hungary) and Dongguan (China). The SBU has showed good
progress in winning new customers. New customers and businesses are being ramped
up during late 2010 and early 2011.
Personnel
At the end of September 2010, the Group employed 9,344 (10,770) people. The
geographical distribution of the workforce was as follows: Europe 4,240 (4,068),
Asia-Pacific 2,013 (3,347) and Americas 3,091 (3,355). The average number of
employees on Elcoteq's direct payroll between January and September was 8,318
(12,014).
Changes in the Organization
On September 6, Elcoteq launched a new organization structure effective as of
October 1, 2010, in order to better support the execution of the redefined
strategy introduced in early 2010.
In the new organization, Elcoteq has two Business Segments. The EMS (Electronics
Manufacturing Services) Business Segment concentrates on serving its customers
in Engineering, Manufacturing and Fulfillment services globally. The Business
Segment will concentrate on serving the existing product segments and actively
seeking new segments with a focus on value adding services rather than high
material content.
The AMS (After Market Services) Business Segment concentrates on providing its
customers with reverse logistics, configuration, repair, refurbishment and other
after market services. By concentrating these services into its own separate
Business Segment the company targets to establish stronger and more focused
management for its AMS business. Elcoteq aims to expand both its geographical
footprint and service offering in the AMS business.
Restructuring Plan
Elcoteq continues the restructuring actions launched in the global organization
in order to identify and execute further cost-saving potential. The new
organization is also expected to improve cost efficiency.
Related to this, Elcoteq convened a meeting of the employee representatives of
Elcoteq SE Finnish Branch, Elcoteq Finland Oy and Elcoteq Design Center Oy for
statutory personnel negotiations on September 6, 2010. The company estimates
that personnel reductions, if any, could concern maximum of 25 employees totally
in all three companies.
Shares and Shareholders
On July 20, the conversion of altogether 105,770,000 Elcoteq SE's series K
founders' shares into Series A shares was completed. The conversion took place
with the ratio of ten series K founders' shares to one series A shares. As a
result, the total number of series A shares grew by 10,577,000 from 22,362,185
to the current 32,939,185. Elcoteq now has only one series of shares, the series
A shares, which are listed on Nasdaq OMX Helsinki with the ticker symbol ELQAV.
At the end of September 2010, the total number of Elcoteq's outstanding A shares
was 32,939,185 shares. On September 30, the company had 10,509 shareholders. By
that date, there were a total of 4,102,885 foreign and nominee registered A
shares, which corresponds to 12.5% of the share capital. The number of A shares
in the company's possession was 12,625.
Events After the Review Period
On October 8, Elcoteq appointed Olli-Pekka Vanhanen, born 1964, M.Sc. (Econ.),
as Vice President, Business Control and Accounting and a member of the
Management Team as of January 1, 2011. At the same time, Mikko Puolakka, the
company's current CFO and member of the Management Team, announced his
resignation from the company as of December 1, 2010.
On September 27, the Board of Directors of Elcoteq decided to convene an
Extraordinary General Meeting (EGM) of shareholders to decide on actions
enabling the advancement with the equity raising project. In order to allow the
company to raise new capital, the Board proposed to the EGM to grant an
authorization to the Board to issue new shares. It is also proposed to extend
the authorized capital period in order to follow the maturity of the existing
and planned new instruments issued by the company.
The EGM was held on October 12, 2010, in Luxemburg. The quorum requirement was
not met in the first EGM and the company will convene a second EGM on November
11, 2010.
However, a qualified majority and quorum were not required for proposals
regarding the election of Mr. Hannu Krogerus and Mr. Paul Paukku to the Board of
Directors and hence this point on the agenda was validly discussed at the
meeting on October 12, 2010. As a result, the EGM approved both Mr. Paukku's and
Mr. Krogerus' election to the Board of Directors.
Short-Term Risks and Uncertainty Factors
The company operates in a working capital intensive business environment where
the access to and availability of sufficient financing represents a risk factor.
The Board of Directors has assessed the company's financing requirements against
the business plan. The company's ability to implement its business plan is
highly dependent on the availability of debt financing, better control of
working capital and cash pooling as well as ability to stabilize the financing
structure, including the strengthening of shareholders' equity under volatile
market conditions.
The company bases component purchases and resource commitments on customers'
forecasts. Sudden changes in customers' demand may cause the company to have
excess inventories which are under customers' liability but which the company
may have to finance for a certain period of time. The company makes a
significant part of its purchases and sales in currencies other than the euro
and currency fluctuations may result in deviations from business plans. The
ability to provide the right service offering to customers is a key element in
keeping existing customers and winning new customers. Under the changing market
conditions, a failure to identify and respond to the customer requirements may
prevent the company from achieving its strategic objectives and the above
operative targets.
The company's key short-term operative challenges are to increase sales,
proactively manage fixed costs according to sales fluctuations and significantly
improve profitability.
Outlook
Fourth-quarter net sales are expected to be on the level of the third quarter.
Operating income is expected to further improve from the third quarter. The
changes in the business volumes have caused need for slightly higher
restructuring costs than originally anticipated in both Q3 and Q4 in 2010. The
company expects the operating profit excluding restructuring costs to turn
positive for the second half of 2010. Due to the restructuring of subordinated
debt, the net income for 2010 will be clearly positive.
The company earlier estimated the operating profit to turn positive for the
second half of 2010 based on the impact of implemented cost reduction actions,
the stabilization of underlying business and the contribution of recently won
new customer contracts.
The activities in the equity increase and balance sheet strengthening will be on
the highest priority in the coming months. Company continues putting strong
efforts to maintain the good customer win rates achieved in the first nine
months of 2010 to create a solid new customer basis for 2011. Furthermore,
continuous effort is put on further reducing the operating costs.
Elcoteq plans its material purchases and capacity based on the forecasts
received from customers and market analysis. Such forecasts may fluctuate during
the forecast period, causing uncertainty in the company's own forecasts.
October 26, 2010
Board of Directors
Further information:
Jouni Hartikainen, President and CEO, +358 10 413 11
Mikko Puolakka, CFO, tel. +358 10 413 1287
Press Conference and Webcast
Elcoteq will hold a combined press conference, conference call and webcast in
English at 2.30 pm (EET) on Wednesday, October 27, in the Bulsa-Freda room at
Scandic Hotel Simonkenttä (address: Simonkatu 9, Helsinki, Finland).
To participate via a conference call, please, dial number +44 (0)20 7162 0077
some 5-10 minutes before the beginning of the event. When dialing in, the
participants should quote 869213 as the conference ID. The password is Elcoteq.
The press conference can also be followed as a live webcast or later as a
recording via Elcoteq's website www.elcoteq.com.
The presentation material used at the press conference (pdf file) will be
available on the company's website www.elcoteq.com on October 27, 2010.
Enclosures:
1 Consolidated statement of comprehensive income
2 Consolidated Balance Sheet
3 Consolidated Cash Flow statement
4 Consolidated statement of changes in equity
5 Formulas for the calculation of key figures
6 Key figures
7 Segment reporting
8 Restructuring expenses
9 Assets pledged and contingent liabilities
10 The hybrid bonds and the warrants
11 Quarterly figures
The Group adopted the following standards on January 1, 2010:
- Revised IFRS 3 Business combinations
This adopted standard has not had impact on the reported results.
Other new interpretations or amendments to standards effective as of January
1, 2010 have not been relevant to the Group.
APPENDIX 1
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE Q3/ Q3/ 1-9/ 1-9/ 1-12/
INCOME, MEUR 2010 2009 Change,% 2010 2009 Change, % 2009
--------------------------------------------------------------------------------
NET SALES 250.7 331.7 -24.4 803.6 1,237.7 -35.1 1,503.2
Change in work in progress
and finished goods 0.0 -8.2 9.5 -34.5 -44.4
Other operating
income 1.0 5.5 -81.7 3.0 9.1 -66.7 13.3
Operating expenses -243.2 -317.2 -23.3 -804.6 -1,201.3 -33.0 -1,451.5
Restructuring
expenses -3.8 -1.7 -9.9 -15.7 -37.0
Depreciation and
impairment -7.2 -13.5 -46.3 -24.0 -48.4 -50.5 -60.1
--------------------------------------------------------------------------------
OPERATING LOSS -2.5 -3.3 -25.5 -22.3 -53.1 -58.0 -76.5
% of net sales -1.0 -1.0 -2.8 -4.3 -5.1
Financial income
and expenses -14.3 -4.1 66.8 -27.6 -40.5
Share of profits
and losses of
associates 0.0 -0.1 0.0 -0.1 -0.1
--------------------------------------------------------------------------------
PROFIT/LOSS BEFORE
TAXES -16.8 -7.5 44.5 -80.8 -117.1
Income taxes -1.4 0.7 -29.2 6.0 8.1
--------------------------------------------------------------------------------
NET PROFIT/LOSS -18.2 -6.8 15.2 -74.8 -109.0
Other comprehensive income
Cash flow hedges 0.4 0.4 0.4 3.2 3.1
Net gain/loss on
hedges of net
investments in
foreign operations 0.0 0.3 -0.6 2.8 3.0
Foreign currency
translation
differences for
foreign operations 2.4 -0.1 0.7 0.3 1.1
--------------------------------------------------------------------------------
Other
comprehensive
income for the
period. net of tax 2.8 0.6 0.5 6.3 7.2
TOTAL
COMPREHENSIVE
PROFIT/LOSS FOR
THE PERIOD -15.4 -6.2 15.7 -68.5 -101.8
PROFIT/LOSS FOR THE PERIOD ATTRIBUTABLE TO:
Equity holders of
the parent company
* -17.7 -6.3 16.9 -73.7 -105.0
Minority interests -0.6 -0.5 -1.7 -1.1 -3.9
--------------------------------------------------------------------------------
-18.2 -6.8 15.2 -74.8 -109.0
TOTAL COMPREHENSIVE PROFIT/LOSS ATTRIBUTABLE TO:
Equity holders of
the parent company -14.3 -5.9 16.7 -66.9 -98.4
Non-controlling
interest -1.1 -0.3 -1.0 -1.6 -3.3
--------------------------------------------------------------------------------
-15.4 -6.2 15.7 -68.5 -101.8
Earnings per share
(EPS), EUR -0.57 -0.19 0.44 -2.26 -3.22
Diluted earnings
per share
(EPS),EUR - - 0.42 - -
Income tax is the amount corresponding to the actual
effective rate based on year-to-date actual tax
calculation.
* The Group's reported net income for the period.
APPENDIX 2
Dec. 31,
BALANCE SHEET, MEUR Sept. 30, 2010 2009 Change, %
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 25.9 25.4 2.1
Tangible assets 67.1 81.0 -17.1
Investments 0.7 0.7 -3.6
Long-term receivables 17.4 41.9 -58.5
--------------------------------------------------------------------------------
Non-current assets, total 111.1 148.9 -25.4
Current assets
Inventories 138.1 69.4 98.9
Current receivables 195.9 189.9 3.1
Cash and equivalents 84.9 87.9 -3.4
--------------------------------------------------------------------------------
Current assets, total 418.9 347.3 20.6
Assets classified as held for sale - 19.0 -100.0
--------------------------------------------------------------------------------
ASSETS, TOTAL 530.0 515.3 2.9
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital* 13.2 13.2 0.0
Other shareholders' equity 35.1 11.6 202.4
--------------------------------------------------------------------------------
Equity attributable to equity holders of the
parent company, total 48.2 24.8 94.8
Non-controlling interest 6.8 7.8 -12.9
--------------------------------------------------------------------------------
Hybrid capital loans 43.4 - -
--------------------------------------------------------------------------------
Total equity 98.5 32.6 202.1
Long-term liabilities
Long-term loans 28.0 109.8 -74.5
Other long-term debt 3.0 2.8 9.2
--------------------------------------------------------------------------------
Long-term liabilities, total 31.1 112.5 -72.4
Current liabilities
Current loans 79.7 165.4 -51.8
Other current liabilities 317.6 200.0 58.8
Provisions 3.1 4.7 -34.5
--------------------------------------------------------------------------------
Current liabilities, total 400.4 370.1 8.2
SHAREHOLDERS' EQUITY AND LIABILITIES, TOTAL 530.0 515.3 2.9
APPENDIX 3
1-9/ 1-9/ Change 1-12/
CONSOLIDATED CASH FLOW STATEMENT, MEUR 2010 2009 ,% 2009
-----------------------------------------------------------------------
Cash flow before change in working capital 23.4 -6.5 14.0
Change in working capital * 13.9 76.3 50.5
Financial items and taxes -18.0 -14.7 22.7 -24.2
-----------------------------------------------------------------------
Cash flow from operating activities 19.3 55.1 40.4
Purchases of non-current assets -6.4 -3.6 79.1 -4.4
Acquisitions - - 0.3
Disposals of non-current assets 17.1 12.7 34.3 16.6
-----------------------------------------------------------------------
Cash flow before financing activities 29.9 64.2 52.9
-----------------------------------------------------------------------
Hybrid capital loans 28.5 - -
Change in current debt -46.4 44.4 -56.1
Repayment of long-term debt -19.0 - 0.0
Dividends paid 0.0 - -2.4
-----------------------------------------------------------------------
Cash flow from financing activities -36.9 44.4 -58.6
Change in cash and equivalents -6.9 108.6 -5.7
Cash and equivalents on January 1 87.9 95.1 -7.5 95.1
Effect of exchange rate changes on cash held 3.9 -2.6 -1.5
Cash and equivalents at the end of the period 84.9 201.0 -57.7 87.9
*The change in working capital includes the change in sold accounts receivable.
The impact of this change has improved cash flow by EUR 84 million during the
reporting period.
APPENDIX 4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders
of the parent
Addi- Trans- Non-
tio- Ot- Hed- la- Re- cont- Hybrid
Sha- nal her ging tion serve Retai- rol- ca To-
re paid-in re re- re- for ned ling pi tal
capi- capi- ser ser- ser- own sha earn- To inte- tal equi
MEUR tal tal ves ve ve res ings tal rest lo-ans ty
--------------------------------------------------------------------------------
BALAN
CE AT
JAN 1,
2010 13.2 225.0 8.4 -0.1 6.8 -0.1 -228.4 24.8 7.8 - 32.6
Total
comp
re
hen
sive
in
come 0.4 -0.6 0.0 16.9 16.7 -1.0 15.7
Hybrid
capi
tal
loans 43.4 43.4
Option
rights 6.7 6.7 6.7
--------------------------------------------------------------------------------
BALAN
CE AT
SEPT
30,
2010 13.2 225.0 8.4 0.3 6.2 0.0 -204.8 48.2 6.8 43.4 98.5
--------------------------------------------------------------------------------
BALAN
CE AT
JAN 1,
2009 13.0 225.0 8.4 -3.1 3.2 -0.1 -124.0 122.5 12.7 - 135.2
Total
comp
re
hen
sive
in
come 3.2 3.5 -73.7 -66.9 -1.6 -68.5
Share-
based
pay
ments 1.0 1.0 1.0
--------------------------------------------------------------------------------
BALAN
CE AT
SEPT
30,
2009 13.0 225.0 8.4 0.1 6.8 -0.1 -196.6 56.6 11.1 - 67.7
--------------------------------------------------------------------------------
K founders' shares converted into A shares on July 20, 2010.
APPENDIX 5
FORMULAS FOR THE CALCULATION OF KEY FIGURES
Return on equity (ROE) =
Net income x 100
---------------------------------------------
Total equity, average of opening and closing balances
Return on investments (ROI/ROCE) =
(Income before taxes + interest and other financial expenses +
income from discontinued operations before taxes and
financial expenses) x 100
-------------------------------------------------------------
Total assets - non-interest bearing liabilities, average of opening
and closing balances
Return on investment (ROI/ROCE) for trailing 12 months =
(Income before taxes + interest and other financial expenses +
income from discontinued operations before taxes and
financial expenses) x 100
----------------------------------------------------------
Total assets - non interest-bearing liabilities, average of opening
and closing balances
Current ratio =
Current assets + assets classified as held for sale
----------------------------------------------------------
Current liabilities + liabilities classified as held for sale
Solvency =
Total equity(incl. hybrid securities) x 100
--------------------------------------------
Total assets - advance payments received
Gearing =
Interest-bearing liabilities - cash and equivalents
---------------------------------------------------------
Total equity (incl. hybrid securities)
Equity per share =
Total equity (incl. hybrid securities)
----------------------------------------------------------------------
Adjusted average number of shares outstanding end of the
period
Earnings per share (EPS) =
Net income attributable to equity holders of the parent
- accumulated interest of hybrid securities for the reporting period
-------------------------------------------------------------------
Adjusted average number of shares outstanding during
the period
Earnings per share, diluted (EPS) =
Net income attributable to equity holders of the parent
- accumulated interest of hybrid securities for the reporting period
----------------------------------------------
Adjusted average number of shares outstanding during the
Period + effect of dilution on the number of shares
APPENDIX 6
1-9/ 1-9/ 1-12/
KEY FIGURES 2010 2009 Change,% 2009
----------------------------------------------------------------------------
Personnel on average during the period 8,318 12,014 -30.8 11,271
Gross capital expenditures, MEUR 8.2 4.6 78.3 6.4
Return on equity (ROE), % 23.3 -73.7 -129.9
Return on investment (ROI/ROCE), % 25.4 -12.7 -18.9
From 12 preceding months:
Return on equity (ROE), % -22.8 -88.9 -129.9
Return on investment (ROI/ROCE), % 15.5 -14.4 -18.9
Earnings per share (EPS), EUR 0.44 -2.26 -3.22
Diluted earnings per share (EPS), EUR 0.42 - -
Current ratio 1.0 1.0 1.0
Solvency, % 18.6 9.7 6.3
Gearing 0.2 2.6 5.8
Shareholders' equity per share, A shares, EUR 2.78 1.74 0.75
Interest-bearing liabilities, MEUR 108.0 374.2 -71.1 275.4
Interest-bearing net debt, MEUR 23.0 173.2 -86.7 187.5
Non-interest-bearing liabilities, MEUR 323.5 259.6 24.6 207.3
APPENDIX 7
SEGMENT REPORTING
Elcoteq applies IFRS 8 Operating Segments in its segment reporting. The
presented segment information is based on the information provided to the
Group's management.
Elcoteq has two Strategic Business Units (SBUs): Consumer Electronics and System
Solutions. Elcoteq reports these strategic business units as its segments. Both
SBUs are responsible for managing and developing their existing customer
relationships and applicable service offerings, while Group Operations and
Sourcing is responsible for supply chain and production.
Strategic Business Unit Consumer Electronics covers products such as mobile and
wireless phones, their parts and accessories, set-top boxes, flat panel TVs and
other consumer products as well as related after market services.
Strategic Business Unit System Solutions covers wireless and wireline
infrastructure systems and modules
enterprise network products and various other industrial segment products as
well as related after market
services.
1-9/ 1-9/ 1-12/
STRATEGIC BUSINESS UNITS, MEUR 2010 2009 2009
------------------------------------------------------------------
Net sales
Consumer Electronics 577.9 916.2 1,127.3
System Solutions 225.7 321.5 375.9
------------------------------------------------------------------
Net sales, total 803.6 1,237.7 1,503.2
Segment's operating income/loss
Consumer Electronics -1.0 -27.0 -38.2
System Solutions 7.8 -1.9 -2.0
Group's non-allocated expenses/income
General & Administrative expenses -26.4 -23.0 -35.2
Other expenses -2.7 -1.2 -1.2
------------------------------------------------------------------
Operating income/loss, total -22.3 -53.1 -76.5
Group's financial income and expenses 66.8 -27.6 -40.5
Share of profits and losses of associates 0.0 -0.1 -0.1
------------------------------------------------------------------
Income before taxes 44.5 -80.8 -117.1
Segments' operating income for January-September 2010 include following
restructuring expenses: Consumer Electronics EUR 7.9 million and System
Solutions EUR 1.9 million. Group's non-allocated expenses/income include
restructuring costs of EUR 0.2 million.
APPENDIX 8
RESTRUCTURING EXPENSES
During the first quarter of 2009, Elcoteq launched a restructuring plan that
applies to whole Group.
The plan targets is to assure the company drive to increase profitability, cost-
efficiency and operational excellence. The plan has contained several elements
already in year 2009 such as the closure of several plants and the merge of the
plant in Shenzhen (China) to the plant in Beijing, organizational changes to aim
for further cost reduction and various assets impairment charges.
The Restructuring plan actions continues still in year 2010 and the Group's
restructuring expenses, 9,920 thousands euros, comprise of the following items:
EUR 1,000 2010
---------------------------------------
Personnel expenses 1,528
Production material and services -26
Impairment of fixed assets 2,973
Reversal of impairment -1,225
Sales loss of fixed assets 6,670
---------------------------------------
Restructuring expenses, total 9,920
The above restructuring expenses include also the effect of sales of Elcoteq's
subsidiary in St. Petersburg, Russia.
APPENDIX 9
ASSETS PLEDGED AND CONTINGENT LIABILITIES, MEUR
Sept. 30, Sept. 30, Change Dec. 31,
2010 2009 , % 2009
--------------------------------------------------------------------------------
BUSINESS MORTGAGES
MEUR 100.0 , from which the open liability 73.5 - 100.0
PLEDGED OTHER RECEIVABLES - - 3.0
PLEDGED CASH AND CASH EQUIVALENTS 70.0 - 56.2
PLEDGED ACCOUNTS RECEIVABLES - 0.0 -
PLEDGED LOAN RECEIVABLES - 0.1 0.1
ON BEHALF OF OTHERS
Guarantees 1.0 1.0 1.0
Operating leases, production machinery
(excl. VAT) 0.5 2.4 -80.5 1.2
Operating leases, real estate (excl. VAT) 11.2 11.0 1.7 12.3
Operating leases, others (excl. VAT) 0.4 1.1 -63.8 0.9
DERIVATIVE CONTRACTS
Currency forward contracts, transaction
risk,
hedge accounting not applied
- Nominal value, open deals 1.9 198.2 -99.1 43.2
- Nominal value, closed deals - 20.1 130.1
- Fair value 0.1 0.0 58.5 0.0
Currency forward contracts, transaction
risk,
hedge accounting applied
- Nominal value, open deals 12.0 7.6 59.3 70.6
- Nominal value, closed deals - - 11.4
- Fair value 0.3 0.1 -0.1
Currency forward contracts, translation risk
- Nominal value - 20.0 -
- Fair value - 0.0 -
Currency forward contracts, financial risk
- Nominal value 29.9 109.5 110.7
- Fair value 0.6 0.1 -0.2
APPENDIX 10
THE HYBRID BONDS AND THE WARRANTS
Elcoteq has issued two hybrid securities during year 2010, one in January and
one in May.
The hybrid security issued in January 2010 amounts to EUR 29 million and Elcoteq
can redeem it after January 2014 at its consideration. The nominal value of the
hybrid security issued in May 2010 is EUR 21.5 million and Elcoteq can redeem it
after December 2012 at its consideration. In this transaction EUR 21.5 million
debentures were exchanged for hybrid securities. The cumulative interests
related to the hybrid securities totaled EUR 2.3 million at the end of September
2010. In accordance with the terms and conditions of the May 2010 hybrid
security an additional interest in the amount of EUR 1,740,080 will be paid on
the Hybrid Bonds on December 15, 2012.
In accordance with the terms and conditions of the May 2010 exchange offer,
4,350,138 warrants in total were issued, each warrant entitling its holder to
subscribe for one new Elcoteq series A share at a subscription price of EUR
0.40. The exercise period of the warrants will commence on March 16, 2012 and
expire on April 11, 2012. Warrants cannot be transferred until they will be
listed on NASDAQ OMX Helsinki Ltd on November 30, 2010 and after that they are
freely transferable.
The fair value of the warrants, EUR 6.7 million, has been separated from the
principal of Hybrid bonds to which they relate. The fair value of the warrants
is reported in the retained earnings.
APPENDIX 11
QUARTERLY FIGURES
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
INCOME STATEMENT, MEUR 2010 2010 2010 2009 2009 2009 2009
--------------------------------------------------------------------------------
NET SALES 250.7 332.3 220.5 265.5 331.7 436.0 470.0
Change in work in progress
and finished goods 0.0 4.8 4.8 -9.9 -8.2 -4.4 -21.9
Other operating income 1.0 1.1 0.9 4.2 5.5 1.4 2.3
Operating expenses -243.2 -332.6 -228.8 -250.2 -317.2 -428.0 -456.1
Restructuring expenses -3.8 -3.9 -2.3 -21.3 -1.7 -0.4 -13.6
Depreciation and impairments -7.2 -8.7 -8.1 -11.7 -13.5 -16.0 -18.9
--------------------------------------------------------------------------------
OPERATING INCOME -2.5 -6.9 -12.9 -23.4 -3.3 -11.5 -38.3
% of net sales -1.0 -2.1 -5.9 -8.8 -1.0 -2.6 -8.2
Financial income and expenses -14.3 5.2 75.9 -12.9 -4.1 -11.9 -11.5
Share of profits and losses of
associates 0.0 0.0 0.0 0.0 -0.1 0.0 0.0
--------------------------------------------------------------------------------
INCOME BEFORE TAXES -16.8 -1.7 63.0 -36.4 -7.5 -23.4 -49.9
Income taxes -1.4 -4.8 -23.0 2.2 0.7 1.5 3.7
--------------------------------------------------------------------------------
NET INCOME FOR
THE PERIOD -18.2 -6.5 40.0 -34.2 -6.8 -21.8 -46.1
ATTRIBUTABLE TO:
Equity holders of the parent
company -17.7 -5.8 40.3 -31.3 -6.3 -21.8 -45.6
Non-controlling interest -0.6 -0.7 -0.4 -2.9 -0.5 0.0 -0.5
--------------------------------------------------------------------------------
-18.2 -6.5 40.0 -34.2 -6.8 -21.8 -46.1
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
BALANCE SHEET, MEUR 2010 2010 2010 2009 2009 2009 2009
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 25.9 26.1 26.0 25.4 25.9 26.6 27.4
Tangible assets 67.1 76.2 79.1 81.0 110.3 129.8 149.7
Investments 0.7 0.7 0.7 0.7 2.1 2.2 2.3
Long-term receivables 17.4 19.9 22.3 41.9 46.8 45.8 53.0
--------------------------------------------------------------------------------
Non-current assets, total 111.1 122.9 128.1 148.9 185.1 204.3 232.4
Current assets
Inventories 138.1 125.3 102.9 69.4 101.1 113.7 174.2
Current receivables 195.9 290.0 202.2 189.9 193.4 221.4 221.9
Cash and equivalents 84.9 72.5 69.8 87.9 201.0 154.8 98.0
--------------------------------------------------------------------------------
Current assets, total 418.9 487.8 374.9 347.3 495.5 489.8 494.1
Assets classified as held for sale - - 17.2 19.0 21.0 41.0 20.7
--------------------------------------------------------------------------------
ASSETS, TOTAL 530.0 610.6 520.3 515.3 701.6 735.1 747.1
SHAREHOLDERS' EQUITY AND
LIABILITIES
Equity attributable to equity
holders of the parent company
Share capital 13.2 13.2 13.2 13.2 13.0 13.0 13.0
Other shareholders' equity 35.1 42.9 51.1 11.6 43.5 48.7 64.5
--------------------------------------------------------------------------------
Equity attributable to equity
holders 48.2 56.0 64.3 24.8 56.6 61.8 77.5
of the parent company, total
Non-controlling interest 6.8 8.1 8.0 7.8 11.1 12.0 12.8
--------------------------------------------------------------------------------
Hybrid capital loans 43.4 50.2 28.7 - - - -
--------------------------------------------------------------------------------
Total equity 98.5 114.3 100.9 32.6 67.7 73.7 90.3
Long-term liabilities
Long-term loans 28.0 28.1 44.4 109.8 110.1 159.6 158.9
Other long-term debt 3.0 3.3 3.5 2.8 2.8 5.7 6.7
--------------------------------------------------------------------------------
Long-term liabilities, total 31.1 31.4 47.8 112.5 113.0 165.2 165.6
Current liabilities
Current loans 79.7 120.4 128.9 165.4 263.8 210.7 225.4
Other current liabilities 317.6 340.3 238.0 200.0 250.2 279.0 257.4
Provisions 3.1 4.2 4.6 4.7 6.9 5.7 8.4
--------------------------------------------------------------------------------
Current liabilities, total 400.4 464.9 371.5 370.1 520.9 495.4 491.2
Liabilities classified as held for
sale - - - - - 0.8 -
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
AND LIABILITIES, TOTAL 530.0 610.6 520.3 515.3 701.6 735.1 747.1
Personnel on average during the
period 7,508 8,541 10,024 8,882 9,877 11,693 14,446
Gross capital expenditures, MEUR 2.6 2.6 3.0 1.8 1.1 1.5 2.0
ROI/ROCE from 12 preceding months,
% 15.5 16.8 11.4 -18.9 -14.4 -14.4 -11.3
Earnings per share (EPS), A-shares,
EUR -0.57 -0.18 1.22 -0.96 -0.19 -0.67 -1.40
Solvency, % 18.6 18.7 19.4 6.3 9.7 10.0 12.1
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2010 2010 2010 2009 2009 2009 2009
CONSOLIDATED CASH FLOW
STATEMENT, MEUR
--------------------------------------------------------------------------------
Cash flow before change in
working capital -14.8 25.9 12.3 20.5 7.0 -6.4 -7.1
Change in working capital 67.7 -28.5 -25.3 -25.8 34.1 81.1 -38.8
Financial items and taxes -4.8 -5.5 -7.7 -9.5 -5.0 -3.9 -5.8
--------------------------------------------------------------------------------
Cash flow from operating
activities 48.2 -8.1 -20.8 -14.8 36.1 70.7 -51.7
Purchases of non-current assets -0.5 -3.3 -2.6 -0.8 -1.1 -0.4 -2.1
Acquisitions - - - 0.3 - - -
Disposals of non-current assets 0.3 16.7 0.1 3.9 7.8 1.8 3.1
--------------------------------------------------------------------------------
Cash flow before financing
activities 47.9 5.3 -23.3 -11.3 42.7 72.2 -50.7
--------------------------------------------------------------------------------
Hybrid capital loans 0.6 0.1 27.8 - - - -
Change in current debt -31.2 -8.6 -6.5 -100.5 5.2 -12.2 51.4
Repayment of long-term debt 0.0 1.6 -20.6 - - - -
Dividends paid 0.0 0.0 0.0 -2.4 - - -
--------------------------------------------------------------------------------
Cash flow from financing
activities -30.7 -6.8 0.7 -103.0 5.2 -12.2 51.4
Change in cash and equivalents 17.2 -1.5 -22.6 -114.3 48.0 59.9 0.7
Cash and equivalents at the
beginning of the period 72.5 69.8 87.9 201.0 154.8 98.0 95.1
Effect of exchange rate changes
on cash held -4.7 4.1 4.5 1.1 -1.7 -3.1 2.2
Cash and equivalents at the end
of period 85.0 72.5 69.8 87.9 201.0 154.8 98.0
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
STRATEGIC BUSINESS UNITS, MEUR 2010 2010 2010 2009 2009 2009 2009
--------------------------------------------------------------------------------
Net sales
Consumer Electronics 156.2 251.7 170.0 211.1 243.5 328.1 344.6
System Solutions 94.6 80.6 50.6 54.5 88.2 107.9 125.3
--------------------------------------------------------------------------------
Net sales, total 250.7 332.3 220.5 265.5 331.7 436.0 470.0
Operating income
Consumer Electronics 1.5 1.3 -3.8 -11.2 -2.3 -4.6 -20.1
System Solutions 3.9 1.7 2.1 -0.1 6.9 1.5 -10.3
Group's non-allocated
expenses/income
General &
Administrative
expenses -7.9 -7.8 -10.7 -12.1 -7.6 -8.2 -7.2
Other expenses 0.0 -2.2 -0.5 0.0 -0.3 -0.1 -0.7
--------------------------------------------------------------------------------
Operating income, total -2.5 -6.9 -12.9 -23.4 -3.3 -11.5 -38.3
Restructuring expenses recognized in
segment's operating income
Consumer Electronics -3.6 -3.0 -1.3 -15.6 -1.5 0.0 -7.2
System Solutions -0.1 -0.9 -0.9 -5.7 0.0 -0.4 -5.8
Group's non-allocated
expenses/income 0.0 0.0 -0.2 0.0 -0.2 0.0 -0.6
--------------------------------------------------------------------------------
Restructuring expenses, total -3.8 -3.9 -2.3 -21.3 -1.7 -0.4 -13.6
Financial income and expenses -14.3 5.2 75.9 -12.9 -4.1 -11.9 -11.5
Share of profits and losses of
associates 0.0 0.0 0.0 0.0 -0.1 0.0 0.0
--------------------------------------------------------------------------------
Income before taxes -16.8 -1.7 63.0 -36.4 -7.5 -23.4 -49.9
[HUG#1455725]
Elcoteq SE's Interim Report January - September 2010 (Unaudited)
| Quelle: Elcoteq
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