Elcoteq SE
Interim Report
October 28, 2009, at 9.00 am (EET)
Elcoteq's third-quarter net sales totaled 331.7 million euros (436.0
million euros in April-June 2009). Operating income continued to
improve and totaled -3.3 million euros, and excluding restructuring
costs amounted to -1.6 million euros (-11.5 in April-June 2009). Cash
flow after investing activities in July-September was positive at
42.7 million euros (72.2 in April - June 2009 and -66.7
July-September 2008). Interest bearing net debt decreased by 114.2
million euros compared to July - September 2008. The equity project
proceeded, and Elcoteq signed a Letter of Intent with Videocon. The
company is also continuing to restructure its balance sheet.
July - September
- Net sales 331.7 million euros (740.5 in July - September 2008)
- Operating loss -3.3 million euros (0.3), and excluding
restructuring costs -1.6 million euros (0.3)
- Loss before taxes -7.5 million euros (-6.8)
- Earnings per share (EPS) -0.19 euros (-0.35)
- Cash flow after investing activities 42.7 million euros (-66.7)
- Rolling 12-month return on capital employed (ROCE) -14.4% (-5.6%)
- Gearing 2.6 (1.7)
January - September
- Net sales 1,237.7 million euros (2,554.1 in January - September
2008)
- Operating loss -53.1 million euros (-8.6), and excluding
restructuring costs -37.4 million euros (-8.6)
- Loss before taxes -80.8 million euros (-27.7)
- Earnings per share (EPS) -2.26 euros (-1.13)
- Cash flow after investing activities 64.2 million euros (-146.3)
- Interest-bearing net debt 173.2 million euros (287.4)
This interim report has been prepared using IFRS recognition and
measuring principles. 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.
July - September
Elcoteq recorded net sales of 331.7 million euros (740.5 in July -
September 2008) between July and September. Operating loss continued
to decrease from the previous quarter, and totaled -3.3 million
euros, excluding restructuring costs -1.6 million euros (0.3 in July
- September 2008 and -11.5 in April-June 2009). The company has
continued to adjust its operations to lower volumes, but it has at
the same time maintained its global platform to serve customers close
to their end markets. There are good business opportunities and
demand for the services Elcoteq provides, but customers have withheld
their orders until the company's balance sheet has been restructured
and the existing credit facility is refinanced. In the light of the
current volatile market situation, the company will continue to seek
further potential for cost base improvements.
The Group's net financial expenses were 4.1 million euros (7.0). Loss
before taxes was -7.5 million euros (-6.8) and net loss totaled -6.3
million euros (-11.5). Earnings per share (EPS) were -0.19 euros
(-0.35).
The Group's gross capital expenditures on fixed assets between July
and September were 1.1 million euros (17.2), or 0.3% of net sales.
Depreciation amounted to 13.5 million euros (20.5). Investments have
been reduced to a minimum to increase existing asset capacity
utilization ratios.
Cash flow after investing activities remained positive and was 42.7
million euros (-66.7). Elcoteq had no sold accounts receivable at
the end of September (115.4). The company has continued actions to
lower its working capital level, especially by optimizing material
flows.
At the end of September 2009, Elcoteq had cash and unused but
immediately available credit lines totaling 231.0 million euros
(187.0). These credit limits included a 230 million euro syndicated,
committed credit facility. The refinancing of the existing 230
million euro credit facility, the debenture conversion to equity and
the completion of the equity increase are seamlessly linked to each
other. Thus a new re-financing solution for the existing 230 million
euro credit facility is now under negotiation.
At the end of September, the Group's interest-bearing net debt
amounted to 173.2 million euros (287.4). Net debt decreased by 20%
from the second quarter of 2009. The solvency ratio was 9.7% (15.9%
at the end of September 2008) and gearing was 2.6 (1.7). Rolling
12-month return on capital employed (ROCE) was -14.4%
(-5.6%).
January - September
Net sales in January - September decreased significantly compared to
the same period last year, standing at 1.237,7 million euros (2.554,1
in January - September 2008). Operating loss was -53.1 million euros
(-8.6), excluding restructuring costs -37.4 million euros. Loss
before taxes was -80.8 million euros (-27.7). Earnings per share
(EPS) were -2.26 euros (-1.13). Cash flow after investing activities
improved significantly from last year's comparable period and was
positive at 64.2 million euros (-146.3).
Gross capital expenditures on fixed assets in January - September
amounted to 4.6 million euros (61.5), 0.3% of net sales. Depreciation
totaled 48.4 million euros (55.8).
Strategic Business Units
Since the beginning of 2008, Elcoteq's segment reporting has covered
three Business Areas: Personal Communications, Home Communications
and Communications Networks. During the third quarter of 2009 the
company changed its organization and combined Personal Communications
and Home Communications under one new segment. Elcoteq now has only
two Strategic Business Units (SBUs) as its segments: Consumer
Electronics and System Solutions. In the third quarter of 2009,
Consumer Electronics contributed 73% (76%) and System Solutions
contributed 27% (24%) of the Group's net sales.
Net sales of the Consumer Electronics SBU in the third quarter were
243.5 million euros (564.2). The segment's operating income was -2.3
million euros (1.0), and -0.8 million euros excluding restructuring
costs (1.0).
Net sales of the System Solutions SBU were 88.2 million euros
(176.3). The segment's operating income was 6.9 million euros (7.6).
Net sales were affected by the divestment of Ericsson-related
operations in Estonia. At the same time, the segment has been able to
further reduce costs to offset the volume decline. The segment's
profitability was affected by a number of positive one-time items
arising from restructuring.
Elcoteq's third-quarter net sales were derived from the geographical
areas as follows: Europe 49% (49%), Asia-Pacific 18% (23%) and
Americas 33% (28%).
Personnel
At the end of September 2009, the Group employed 10,770 (21,404)
people. The geographical distribution of the workforce was as
follows: Europe 4,068 (9,118), Asia-Pacific 3,347 (6,060) and
Americas 3,355 (6,226). The average number of employees on Elcoteq's
direct payroll between January and September was 12,014 (17,598).
Changes in the Organization
Since the beginning of 2008, Elcoteq has had three Business Areas:
Personal Communications, Home Communications and Communications
Networks. They have been reported as separate segments. The Personal
Communications and Home Communications Business Areas were combined
during the third quarter, and the company now has only two Strategic
Business Units (SBUs): Consumer Electronics and System Solutions.
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.
Consumer Electronics covers products such as mobile and wireless
phones, their parts and accessories, set-top boxes, flat panel TVs
and other consumer products. System Solutions covers wireless and
wireline infrastructure systems and modules, enterprise network
products and various other industrial segment products.
By combining the Home Communications and Personal Communications
segments under the Consumer Electronics SBU, the company can better
utilize the synergies between these businesses. The company also aims
to reduce costs further by streamlining and simplifying the
organization by removing organizational layers and overlapping roles.
More emphasis is also put on new sales activities which are now under
a separate global function, New Sales and Business Development. The
function focuses on identifying new business opportunities, acquiring
new customers and exploring new service segments for the company.
As of August 27, 2009 the Management Team consists of the following
persons:
Mr. Jouni Hartikainen, President and CEO
Mr. Sándor Hajnal, Senior Vice President, Human Resources
Mr. Vesa Keränen, Senior Vice President, Consumer Electronics
Mr. Markus Kivimäki, Senior Vice President, Legal Affairs
Mr. Tommi Pettersson, Senior Vice President, System Solutions
Mr. Mikko Puolakka, CFO
Mr. Tomi Saario, Senior Vice President, New Sales and Business
Development
Mr. Roger Taylor, Senior Vice President, Group Operations and
Sourcing
As a result of streamlining the organization, the company has
implemented personnel reductions in its Group and former Business
Area functions.
Equity Project
Equity investment negotiations with Shenzhen Kaifa Technology Company
Limited ended in September. On October 2, Elcoteq announced the
signing of a non-binding Letter of Intent with Videocon Industries
Ltd (Videocon). Elcoteq's Board of Directors has given authorization
to proceed with the due diligence and contract negotiations with
Videocon. The parties are aiming at a rapid process to conclude the
negotiations and sign the definitive Agreement. The transaction is
expected to close by the end of the year. The signing of the
Agreement is subject to successful senior and subordinate debt
restructuring and complete due diligence. The closing of the
transaction will be subject to all the requisite and applicable
regulatory, statutory and corporate approvals of both Videocon and
Elcoteq.
Elcoteq stated in July 2009 that it is the company's intention, in
agreement with its relevant creditors, to restructure its
interest-bearing debt as an integral part of the project to
strengthen its balance sheet. This planned restructuring will
require, among other things, measures to be taken with respect to the
company's outstanding debentures. The company held a meeting with its
debenture holders on September 3, 2009 to amend the terms and
conditions of its debentures. These amendments were made in order to
be able to carry out the needed actions.
Pohjola Corporate Finance as the advisor of Elcoteq will approach
debenture holders with a concrete proposal whereby the debenture
holders would be requested to make an irrevocable commitment to sell
the holder's debentures at a price of 25% of the nominal value plus
the accrued interest. Elcoteq is planning a structure in which a
potential investor would buy the debentures and possibly subsequently
convert the debentures to shares in Elcoteq. According to the plan,
Elcoteq shall retain the right to withdraw its proposal.
Restructuring Plan
Elcoteq SE and Ericsson completed a transaction on July 31, 2009
whereby the majority of the machinery, equipment and materials of
Elcoteq's Tallinn manufacturing operations were sold to Ericsson.
Cost-saving measures have continued at other factories as well.
Incentive Schemes
The company has a share subscription plan from 2007 that allows the
company to issue shares to key personnel on the basis of the
improvement of the profit before taxes for the full financial year
2008. According to the plan, the actual number of new series A shares
to be transferred to the personnel on November 12, 2009 is 336,266.
Elcoteq SE's Board of Directors has amended the 2009 Share
Subscription Plan. The amendments concern the issuance of shares in
case of a public tender offer and secondly, a situation where the
company's registered share capital value would increase at least 50%
during the second half of 2009. If such situations occur, a maximum
of 750,000 shares will be issued. Exact details about the Share
Subscription Plan can be found on the company's website.
Shares and Shareholders
At the end of September 2009, the company had 127,795,919 shares
divided into 22,025,919 series A shares and 105,770,000 series K
Founders' shares. All the series K Founders' shares are held by the
company's three principal owners.
Elcoteq had 10,306 shareholders on September 30, 2009. There were a
total of 5,225,083 foreign and nominee registered shares,
representing 4.1% of the votes.
Short-Term Risks and Uncertainty Factors
The company's key short-term challenges are to conclude both the
planned debt restructuring, including the extension of the revolving
credit facility, and the equity project as well as to ensure customer
satisfaction and maximize sales. In the changing market
circumstances, the company must continue to maintain the right
service offering, optimized cost level and ability to react rapidly
to demand changes.
Prospects
Fourth-quarter net sales are expected to decline further compared to
the third quarter of 2009. Operating income is expected to be
negative. Cash flow is expected to be positive.
Securing the company's long-term financing in the future is expected
by the new and existing customers. This will speed up the signing of
several new programs that are under negotiations. Elcoteq's customers
are giving continuous positive feedback as regards the company's
operational performance.
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 27, 2009
Board of Directors
Further information:
Jouni Hartikainen, President and CEO, +358 10 413 11
Mikko Puolakka, CFO, tel. +358 10 413 1287
Minna Aila, Director, Communications and Corporate Responsibility,
tel. +358 10 413 1908
Press Conference and Webcast
Elcoteq will arrange a combined press conference, conference call and
audio webcast for media and analysts on Wednesday, October 28, at
2.30 pm (EET). The event will be held in English and it will be
hosted at the Scandic Hotel Simonkenttä, Bulsa-Freda room (Simonkatu
9, Helsinki, Finland).
To listen to the press conference either live or as an on-demand
version, please visit www.elcoteq.com. To participate via a
conference call, please dial in 5-10 minutes before the beginning of
the event: +44 (0)20 7162 0125 (Europe) or +1 334 323 6203 (USA).
When dialing in, the participants should quote 848165 as the
conference ID. The password is Elcoteq.
Enclosures:
1 Income statement
2 Balance sheet
3 Cash flow statement
4 Statement of changes in shareholders' equity
5 Formulas for the calculation of key figures
6 Key figures
7 Strategic Business Units
8 Restructuring expenses
9 Assets and liabilities classified as held for sale
10 Impact of business combinations of the consolidated financial
statements
11 Assets pledged and contingent liabilities
12 Quarterly figures
The Group adopted the following standards on January 1, 2009:
- IFRS 8 Operating Segments. The adoption of the standard does not
have an impact on the Interim Report.
- Revised IFRS 23 Borrowing Costs. The adaptation of the standard
causes a change in the accounting principles used in the consolidated
financial statements. The adoption of the standard does not have a
material impact on the Group currently.
- Revised IAS 1 Presentation of Financial Statements. The change of
the standard has impact on the presentation of Income Statement and
Statement of Changes in Shareholders' Equity.
The following changes in the accounting principles do not have an
impact on the consolidated financial statements:
- IFRS 2 Share-based Payments
- IFRS 1 First-Time adoption and IAS 27 Consolidated and Separate
Financial Statements
- IFRIC 15 Agreements for the Construction of Real
Estate
APPENDIX 1
INCOME
STATEMENT, Q3/ Q3/ Change, 1-9/ 1-9/ Change, 1-12/
MEUR 2009 2008 % 2009 2008 % 2008
NET SALES 331.7 740.5 -55.2 1,237.7 2,554.1 -51.5 3,443.2
Change in work in progress
and finished
goods -8.2 -4.4 -34.5 -11.7 195.6 -35.5
Other
operating
income 5.5 4.4 25.2 9.1 9.0 1.0 11.2
Operating
expenses -317.2 -719.7 -55.9 -1,201.3 -2,504.2 -52.0 -3,346.8
Restructuring
expenses -1.7 - -15.7 - -13.5
Depreciation
and
impairment -13.5 -20.5 -34.1 -48.4 -55.8 -13.2 -78.9
OPERATING
PROFIT/LOSS -3.3 0.3 -53.1 -8.6 519.3 -20.4
% of net
sales -1.0 0.0 -4.3 -0.3 1 178.0 -0.6
Financial
income and
expenses -4.1 -7.0 -41.0 -27.6 -19.1 44.7 -32.4
Share of
profits and
losses of
associates -0.1 -0.1 -0.1 - -0.1
LOSS BEFORE
TAXES -7.5 -6.8 10.4 -80.8 -27.7 191.1 -52.9
Income taxes 0.7 -4.0 6.0 -7.1 -184.3 -11.1
NET LOSS -6.8 -10.7 -36.8 -74.8 -34.8 114.6 -64.0
Other comprehensive income
Cash flow
hedges 0.3 1.2 3.6 0.3 -2.5
Net gain/loss
on hedges of
net
investments
in foreign
operations 0.6 -4.7 3.8 -5.4 -6.4
Foreign
currency
translation
differences
for foreign
operations -0.1 2.1 0.3 7.6 11.2
Income tax
relating to
components of
other
comprehensive
income -0.2 1.2 -1.4 1.4 0.4
Other
comprehensive
income for
the period,
net of tax 0.6 -0.2 6.3 3.9 2.7
TOTAL
COMPREHENSIVE
LOSS FOR THE
PERIOD -6.2 -10.9 -68.5 -30.9 -61.3
LOSS FOR THE PERIOD ATTRIBUTABLE TO:
Equity
holders of
the parent
company * -6.3 -11.5 -73.7 -36.8 -65.9
Minority
interests -0.5 0.8 -1.1 2.0 1.9
-6.8 -10.7 -74.8 -34.8 -64.0
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
Equity
holders of
the parent
company * -5.9 -12.9 -66.9 -34.0 -64.8
Minority
interests -0.3 2.0 -1.6 3.1 3.5
-6.2 -10.9 -68.5 -30.9 -61.3
Earnings per
share (EPS),
A shares EUR -0.19 -0.35 -2.26 -1.13 -2.02
Earnings per
share (EPS),
K founders'
shares EUR -0.02 -0.04 -0.23 -0.11 -0.20
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
Sept. 30, Dec. 31,
BALANCE SHEET, MEUR 2009 2008 Change, %
ASSETS
Non-current assets
Intangible assets 25.9 27.6 -6.2
Tangible assets 110.3 167.8 -34.3
Investments 2.1 2.2 -6.5
Long-term receivables 46.8 46.4 0.9
Non-current assets, total 185.1 244.0 -24.2
Current assets
Inventories 101.1 256.2 -60.5
Current receivables 193.4 336.3 -42.5
Cash and equivalents 201.0 95.1 111.4
Current assets, total 495.5 687.5 -27.9
Assets classified as held for sale 21.0 23.9 -12.2
ASSETS, TOTAL 701.6 955.4 -26.6
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital* 13.0 13.0
Other shareholders'
equity 43.5 109.4 -60.2
Equity attributable to equity holders of
the parent company, total 56.6 122.5 -53.8
Minority interests 11.1 12.7 -12.4
Total equity 67.7 135.2 -49.9
Long-term liabilities
Long-term loans 110.1 159.3 -30.9
Other long-term debt 2.8 5.6 -49.5
Long-term liabilities, total 113.0 165.0 -31.5
Current liabilities
Current loans 263.8 173.9 51.7
Other current
liabilities 250.2 473.9 -47.2
Provisions 6.9 7.5 -8.1
Current liabilities, total 520.9 655.3 -20.5
Liabilities classified as held for sale - - -
SHAREHOLDERS' EQUITY AND LIABILITIES,
TOTAL 701.6 955.4 -26.6
* Share capital includes both A-shares listed in Nasdaq OMX Helsinki
Exchange and K-founders' shares.
APPENDIX 3
CONSOLIDATED CASH FLOW
STATEMENT, MEUR 1-9/2009 1-9/2008 Change, % 1-12/2008
Cash flow before change in
working capital -6.5 50.3 71.9
Change in working capital * 76.3 -106.8 -60.2
Financial items and taxes -14.7 -20.8 -29.4 -33.7
Cash flow from operating
activities 55.1 -77.3 -22.0
Purchases of non-current assets -3.6 -57.4 -93.7 -61.9
Acquisitions - -15.5 -23.9
Disposals of non-current assets 12.7 3.9 225.8 8.1
Cash flow before financing
activities 64.2 -146.3 -143.9 -99.7
Change in current debt 44.4 110.8 -60.0 119.7
Repayment of long-term debt - -0.2 -20.4
Dividends paid - -1.0 -2.0
Cash flow from financing
activities 44.4 109.6 -59.5 97.3
Change in cash and equivalents 108.6 -36.7 -395.8 -2.5
Cash and equivalents on January
1 95.1 92.7 2.6 92.7
Cash and equivalents classified
as held for sale - - -
Effect of exchange rate changes
on cash held -2.6 3.5 4.9
Cash and equivalents at the end
of the period 201.0 59.5 237.9 95.1
* The company had no sold accounts receivable at the end of September
2009.
APPENDIX 4
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY,
MEUR
Attributable to equity holders of the parent
Addi- Mino
tional Re- rity
paid- Hed- Trans- tained inte- Total
Share in Other ging lation Re- ear- rests equity
serve
ca- ca- reser- reser- diffe- for nings
own
pital pital ves ve rences shares Total
BALANCE
AT JAN. -124.0
1, 2009 13.0 225.0 8.4 -3.1 3.2 -0.1 122.5 12.7 135.2
Other comprehensive
income 3.2 3.5 -73.7 -66.9 -1.6 -68.5
Share-based payments 1.0 1.0 1.0
BALANCE
AT SEPT.
30, 2009 13.0 225.0 8.4 0.1 6.8 -0.1 -196.6 56.6 11.1 67.7
BALANCE
AT JAN.
1, 2008 13.0 225.0 8.4 -1.0 0.0 -0.1 -58.7 186.6 11.3 197.9
Other comprehensive
income 0.3 2.4 -36.8 -34.0 3.1 -30.9
Share-based payments 0.2 0.2 0.2
Dividends -1.0 -1.0
BALANCE
AT
SEPT.30,
2008 13.0 225.0 8.4 -0.7 2.4 -0.1 -95.3 152.8 13.4 166.2
*) The Group has applied hedge accounting to derivative instruments
related to purchases from June 30,2007 and related to personnel
expenses from October 15,
2008.
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 x 100
--------------------------------------------
Total assets - advance payments received
Gearing =
Interest-bearing liabilities - cash and equivalents
-------------------------------------------------------------------
Total equity
Equity per share =
Equity attributable to equity holders of the parent company
--------------------------------------------------------------------------------
Adjusted average number of A shares outstanding end of the
period + (adjusted average number of K founders' shares
outstanding end of the period/10)
Earnings per share, A shares (EPS) =
Net income attributable to equity holders of the parent, A shares
-------------------------------------------------------------------------------------
Adjusted average number of A shares outstanding during the period
Earnings per shares, K founders' shares (EPS) =
Net income attributable to equity holders of the parent,
K founders' shares
--------------------------------------------------------------------------
Adjusted average number of K founders' shares outstanding
during the period
APPENDIX 6
1-9/ 1-9/ 1-12/
KEY FIGURES 2009 2008 Change, % 2008
Personnel on average during the period 12,014 17,598 -31.7 17,401
Gross capital expenditures, MEUR 4.6 61.5 -92.6 71.4
Return on equity (ROE), % -73.7 -19.1 -38.4
Return on investment (ROI/ROCE), % -12.7 -0.7 -3.1
From 12 preceding months:
Return on equity (ROE), % -88.9 -34.8 -38.4
Return on investment (ROI/ROCE), % -14.4 -5.6 -3.1
Earnings per share (EPS), A-shares,
EUR -2.26 -1.13 100.1 -2.02
Earnings per share (EPS), K-founders'
shares, EUR -0.23 -0.11 105.6 -0.20
Current ratio 1.0 1.1 1.1
Solvency, % 9.7 15.9 14.2
Gearing 2.6 1.7 1.8
Shareholders' equity per share,
A-shares, EUR 1.74 4.69 3.76
Shareholders' equity per share,
K-founders' shares, EUR 0.17 0.47 0.38
Interest-bearing liabilities, MEUR 387.6 346.9 11.7 333.6
Interest-bearing net debt, MEUR 173.2 287.4 -39.7 238.5
Non-interest-bearing liabilities, MEUR 384.0 529.5 -27.5 486.7
APPENDIX 7
STRATEGIC BUSINESS UNITS
From 2009, Elcoteq has applied IFRS 8 Operating Segments in its
segment reporting. The transfer to IFRS 8 has not changed the
previously reported information. The presented segment reporting is
based on the figures provided to the company's management.
Since the beginning of 2008, Elcoteq has had three Business Areas:
Personal Communications, Home Communications and Communications
Networks. They have been reported as separate segments. Personal
Communications and Home Communications Business Areas were combined
during the third quarter under a new Strategic Business Unit,
Consumer Electronics. Communications Networks business has been
included into a new Staregic Business Unit, System Solutions. The
company now only has two Strategic Business Units (SBUs): Consumer
Electronics and System Solutions. 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.
Strategic Business Unit System Solutions covers wireless and wire
line infrastructure products like complete cellular base stations,
further enterprise products like switches as well as infrastructure
products like complex
controllers.
STRATEGIC BUSINESS UNITS, MEUR 1-9/2009 1-9/2008 1-12/2008
Net sales
Consumer Electronics 916.2 2,055.5 2,739.5
System Solutions 321.5 498.5 703.7
Net sales, total 1,237.7 2,554.1 3,443.2
Segment's operating income
Consumer Electronics -27.0 12.3 15.0
System Solutions -1.9 6.7 1.6
Group's non-allocated expenses/income
General &
Administrative
expenses -23.0 -27.6 -37.1
Other expenses -1.2 -0.1 0.2
Operating income, total -53.1 -8.6 -20.4
Group's financial income and expenses -27.6 -19.1 -32.4
Share of profits and losses of associates -0.1 - -0.1
Income before taxes -80.8 -27.7 -52.9
Segments' operating income for January-September 2009 includes
following restructuring expenses: Consumer Electronics 8.7 million
euros and System Solutions 6.2 million euros. Group's non-allocated
expenses/income includes restructuring costs of 0.8 million
euros.
APPENDIX 8
RESTRUCTURING EXPENSES
During the first quarter of 2009, Elcoteq launched a restructuring
plan that applies to whole Group. Some part of the costs relating to
the plan were recognized already in 2008. The plan targets to prepare
the company for the exceptionally uncertain market situation and
general economic development. This plan is the next step in the
company's drive to increase profitability, cost-efficiency and
operational excellence. The plan has contained several elements such
as the closure of the plants in Arad (Romania), Richardson (USA) and
St. Petersburg (Russia) as well as to consolidate the plant in
Shenzhen (China) to the plant in Beijing. Processes with the target
to reduce personnel at several plants globally have been carried
out.
In addition the company has reduced other operative
costs.
In August 2009, Elcoteq announced further organizational changes (see
Appendix 7). The target is to better utilize the synergies between
businesses and to aim for further cost reductions. Consequently
personnel reductions have been and will be carried out at several
Elcoteq
sites.
The Group's restructuring expenses 15,723 thousand euros, comprise
the following items:
EUR 1, 000 2009
Personnel expenses 9,437
Impairments 2,829
Production materials and services 1,124
Other operating expenses 2,333
Restructuring expenses, total 15,723
Impairments of non-current assets:
EUR 1, 000 2009
Intangible rights -
Goodwill -
Buildings 1,231
Machinery and equipment 1,598
ADP software -
Other financial assets -
Impairments, total 2,829
Impairments of buildings as well as machinery and equipment are
primarily due to plant closures.
APPENDIX 9
ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Assets classified as held for sale amounting to 21.0 million euros
relate to real estates on sale. The company did not have liabilities
classified as held for sale at the end of the reporting period.
APPENDIX 10
IMPACT OF BUSINESS COMBINATIONS OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Elcoteq SE signed in September 4, 2008 an agreement to purchase
Philips' flat panel TV (FTV) assembly operations in Juarez, Mexico.
The deal includes a long-term cooperation agreement with Philips to
provide manufacturing services to Philips for its Latin American FTV
business and its Philips Business Services business in the Americas.
The deal includes also a long term cooperation agreement with Funai
Electric Co., Ltd to provide manufacturing services to Funai's FTV
business in North America.
The acquisition includes certain fixed assets and inventories of
Philips' Juarez manufacturing operation and will be used in the
manufacturing of products to be supplied to Philips. The assets and
liabilities were acquired at fair value.The impact of acquisition to
the group's net profit in 2008, had the agreement been signed at the
beginning of 2008, cannot be reliably determined. Acquisition cost
include 0.5 million euros legal service fees.
The assets and liabilities acquired in business combinations are
valued at their fair values.
The final acquisition price was confirmed in 2009. Purchase price
allocation and the values of the acquired the assets and liabilities
are as
follows:
Assets and liabilities acquired in business combinations
in:
2008 2008
EUR 1,000 Fair Value Book Value
Non-current assets
Intangible assets 364 -
Tangible assets 5,235 5 235
Current assets
Inventories 15,181 15,181
Current receivables 7,021 7,021
Cash and equivalents 406 406
Assets, total 28,207 28,004
Liabilities
Current liabilities 5,033 5,033
Acquisition cost 23,174 -
Acquisition price paid in cash 24,094 -
Cash and equivalents of acquired subsidiary -406 -
Impact on cash flow 23,688 -
The acquisition in 2008 was made in US dollars. The acquisition cost
was translated into euros using the exchange rate of the acquisition
date. The acquisition price paid in cash was translated into euros
using the payment date's rate of the acquisition.
APPENDIX 11
ASSETS PLEDGED AND CONTINGENT Sept. 30, Sept. 30, Dec. 31,
LIABILITIES, MEUR 2009 2008 Change, % 2008
PLEDGED SALES RECEIVABLE 0.0 - 26.9
PLEDGED LOAN RECEIVABLES 0.1 - 0.8
ON BEHALF OF OTHERS
Guarantees 1.0 1.0 1.0
LEASING COMMITMENTS
Operating leases.
production machinery (excl.
VAT) 2.4 14.2 -82.8 9.0
Rental commitments.
real-estate (excl. VAT) 11.0 15.1 -27.1 15.4
DERIVATIVE CONTRACTS
Currency forward contracts, transaction risk,
hedge accounting not applied
Nominal value 218.3 116.1 88.0 118.3
Fair value 0.0 4.2 -99.1 -0.2
Currency forward contracts, transaction risk,
hedge accounting applied
Nominal value 7.6 97.1 -92.2 69.4
Fair value 0.1 -0.7 -118.1 -3.5
Currency option contracts, transaction risk,
hedge accounting applied, bought options
Nominal value - - 17.0
Fair value - - 0.3
Currency forward contracts, translation risk
Nominal value 20.0 46.2 -56.8 20.2
Fair value 0.0 -1.2 -0.8
Currency forward contracts, financial risk
Nominal value 109.5 228.5 -52.1 172.3
Fair value 0.1 -0.8 -3.1
Interest rate and foreign exchange swap
contracts
Nominal value - 1.5 1.5
Fair value - 0.2 0.2
The derivative contracts have been valued using the market prices and
the exchange reference rates of the European Central Bank on the
balance sheet date. The figures also include closed
positions.
APPENDIX 12
QUARTERLY FIGURES
INCOME STATEMENT, Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1
MEUR 2009 2009 2009 2008 2008 2008 /2008
NET SALES 331.7 436.0 470.0 889.1 740.5 904.8 908.7
Change in work in progress
and finished goods -8.2 -4.4 -21.9 -23.9 -4.4 -10.1 2.9
Other operating
income 5.5 1.4 2.3 2.2 4.4 3.1 1.6
Operating expenses -317.2 -428.0 -456.1 -842.6 -719.7 -878.9 -905.6
Restructuring
expenses -1.7 -0.4 -13.6 -13.5 - - -
Depreciation and
impairments -13.5 -16.0 -18.9 -23.2 -20.5 -18.2 -17.1
OPERATING INCOME -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5
% of net sales -1.0 -2.6 -8.2 -1.3 0.0 0.1 -1.0
Financial income and
expenses -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0
Share of profits and
losses of associates -0.1 0.0 0.0 0.0 -0.1 - -
INCOME BEFORE TAXES -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4
Income taxes 0.7 1.5 3.7 -4.0 -4.0 -7.3 4.2
NET
INCOME
FOR
THE
PERIOD -6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3
ATTRIBUTABLE TO:
Equity holders of
the parent company -6.3 -21.8 -45.6 -29.1 -11.5 -13.7 -11.6
Minority interests -0.5 0.0 -0.5 -0.1 0.8 0.9 0.3
-6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
BALANCE SHEET, MEUR 2009 2009 2009 2008 2008 2008 2008
ASSETS
Non-current assets
Intangible
assets 25.9 26.6 27.4 27.6 28.4 28.5 29.5
Tangible
assets 110.3 129.8 149.7 167.8 190.0 184.0 182.0
Investments 2.1 2.2 2.3 2.2 2.2 2.1 2.1
Long-term
receivables 46.8 45.8 53.0 46.4 49.2 48.5 47.3
Non-current assets,
total 185.1 204.3 232.4 244.0 269.8 263.2 260.9
Current assets
Inventories 101.1 113.7 174.2 256.2 358.2 322.5 321.7
Current
receivables 193.4 221.4 221.9 336.3 326.4 320.0 271.7
Cash and
equivalents 201.0 154.8 98.0 95.1 59.5 50.5 91.9
Current assets,
total 495.5 489.8 494.1 687.5 744.0 692.9 685.3
Assets classified as
held for sale 21.0 41.0 20.7 23.9 28.7 30.5 30.2
ASSETS, TOTAL 701.6 735.1 747.1 955.4 1,042.6 986.6 976.4
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent company
Share capital 13.0 13.0 13.0 13.0 13.0 13.0 13.0
Other
shareholders'
equity 43.5 48.7 64.5 109.4 139.7 152.4 162.8
Equity attributable to equity
holders
of the parent
company, total 56.6 61.8 77.5 122.5 152.8 165.4 175.9
Minority interests 11.1 12.0 12.8 12.7 13.4 12.5 11.3
Total equity 67.7 73.7 90.3 135.2 166.2 177.9 187.2
Long-term
liabilities
Long-term
loans 110.1 159.6 158.9 159.3 159.4 159.3 159.4
Other
long-term
debt 2.8 5.7 6.7 5.6 5.5 5.2 5.0
Long-term
liabilities, total 113.0 165.2 165.6 165.0 164.9 164.5 164.4
Current liabilities
Current loans 263.8 210.7 225.4 173.9 187.2 111.2 75.7
Other current
liabilities 250.2 279.0 257.4 473.9 519.9 526.8 544.7
Provisions 6.9 5.7 8.4 7.5 4.4 4.8 3.7
Current liabilities,
total 520.9 495.4 491.2 655.3 711.5 642.8 624.1
Liabilities
classified as held
for sale - 0.8 - - - 1.4 0.7
SHAREHOLDERS' EQUITY
AND LIABILITIES,
TOTAL 701.6 735.1 747.1 955.4 1,042.6 986.6 976.4
Personnel on average
during the period 9,877 11,693 14,446 17,050 17,304 17,543 17,894
Gross capital
expenditures, MEUR 1.1 1.5 2.0 9.9 17.2 16.6 27.7
ROI/ROCE from 12
preceding months, % -14.4 -14.4 -11.3 -3.1 -5.6 -6.2 -10.7
Earnings per share
(EPS), A-shares, EUR -0.19 -0.67 -1.40 -0.89 -0.35 -0.42 -0.35
Solvency, % 9.7 10.0 12.1 14.2 15.9 18.0 19.2
CONSOLIDATED CASH Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
FLOW STATEMENT, MEUR 2009 2009 2009 2008 2008 2008 2008
Cash flow before
change in working
capital 7.0 -6.4 -7.1 21.5 32.8 16.2 1.3
Change in working
capital 34.1 81.1 -38.8 46.6 -65.2 -66.3 24.7
Financial items and
taxes -5.0 -3.9 -5.8 -13.0 -7.6 -5.6 -7.5
Cash flow from
operating activities 36.1 70.7 -51.7 55.2 -39.9 -55.8 18.4
Purchases of
non-current assets -1.1 -0.4 -2.1 -4.4 -12.8 -24.6 -20.0
Acquisitions - - - -8.4 -15.5 - -
Disposals of
non-current assets 7.8 1.8 3.1 4.1 1.5 1.8 0.5
Cash flow before
financing activities 42.7 72.2 -50.7 46.6 -66.7 -78.5 -1.1
Change in current
debt 5.2 -12.2 51.4 8.9 72.2 36.3 2.4
Repayment of
long-term debt - - - -20.2 - -0.2 -
Dividends paid - - - -1.0 -1.0 - -
Cash flow from
financing activities 5.2 -12.2 51.4 -12.3 71.1 36.1 2.4
Change in cash and
equivalents 48.0 59.9 0.7 34.2 4.4 -42.4 1.3
Cash and equivalents
at the beginning of
the period 154.8 98.0 95.1 59.5 50.5 91.9 92.7
Cash and cash
equivalents
classified as held
for sale - - - - - 0.2 -0.2
Effect of exchange
rate changes on cash
held -1.7 -3.1 2.2 1.4 4.6 0.9 -1.9
Cash and equivalents
at the end of period 201.0 154.8 98.0 95.1 59.5 50.5 91.9
STRATEGIC BUSINESS Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
UNITS, MEUR 2009 2009 2009 2008 2008 2008 2008
Net
sales
Consumer
Electronics 243.5 328.1 344.6 684.0 564.2 721.5 769.8
System Solutions 88.2 107.9 125.3 205.2 176.3 183.3 139.0
Net sales, total 331.7 436.0 470.0 889.1 740.5 904.8 908.7
Segment's operating income
Consumer
Electronics -2.3 -4.6 -20.1 2.7 1.0 6.5 4.8
System Solutions 6.9 1.5 -10.3 -5.1 7.6 3.3 -4.2
Group's non-allocated expenses/income
-7.6 -8.2 -7.2 -9.5 -8.3 -9.2 -10.1
-0.3 -0.1 -0.7 0.2 -0.1 - -
Operating income,
total -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5
Group's financial
income and expenses -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0
Share of profits and
losses of associates -0.1 0.0 0.0 0.0 -0.1 - -
Income before taxes -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4
Restructuring expenses recognized in segment's operating
income
Consumer
Electronics -1.5 0.0 -7.2 -8.1 - - -
System Solutions 0.0 -0.4 -5.8 -5.4 - - -
Group's
non-allocated
expenses/income -0.2 0.0 -0.6 - - - -
Restructuring
expenses, total -1.7 -0.4 -13.6 -13.5 - - -
Elcoteq SE's Interim Report January - September 2009 (Unaudited)
| Source: Elcoteq
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