ASPOCOMP GROUP OYJ Quarterly report November 15, 2007 at 8:00
am
- Net sales: EUR 76.1 million (EUR 110.7 million in 1-9/2006). The
reference period figure includes the Chinese lower technology plant
that was divested in April 2007. Eliminating the effect of the plant,
comparable net sales declined by -19.5 percent (EUR 94.5 million in
1-9/2006). Net sales of the Salo plant waned due to a limited number
of products and production ramp-down. The plant was closed down in
July. Sales at the Chinese plant picked up gradually and reached the
reference quarter level in the July-September period. Sales fell
noticeably at the Thai plant and remained on a par with the reference
period at the Oulu plant.
- Operating profit: EUR -47.2 million (-13.0). The decline was mostly
attributable to write-offs amounting to EUR 20.4 million at the Salo
plant, compensation of EUR 10.1 million to the former employees of
Aspocomp S.A.S and the decrease in the profitability of the Thai and
Chinese plants. The plants in Oulu and China continued to turn a
profit.
- Earnings per share from continuing operations: EUR -1.36 (-0.60).
- Cash flow from operations: EUR -17.8 million (0.8).
- Investments: EUR 46.6 million (17.9). Investments consisted mostly
of the purchase of a minority share in the Chinese subsidiary.
- Per-share cash flow after investments: EUR -1.40 (-0.56).
- On November 8, 2007, Aspocomp announced it will transfer its
subsidiaries in China and India as well as certain equipment from the
Salo plant to a new holding company. Meadville Holdings Limited will
purchase an 80 percent stake in the company and Aspocomp will remain
a minority owner.
- Aspocomp's CEO changed on November 9, 2007.
The report and reference period figures do not include the Modules
division divested in August 2006. Unless otherwise stated, the
reference period figures include the Chinese lower technology plant.
THE JULY-SEPTEMBER PERIOD IN BRIEF
(Reference figures are for 7-9/2006)
Net sales and operating profit, EUR million
7-9/2007 change, % 7-9/2006
Net sales 24.4 -37.2 37.7
Operating profit -6.3 -4.3
The Aspocomp Group's net sales for the July-September period were EUR
24.4 million (37.7). The Group's comparable net sales for the period
were EUR 32.0 million, excluding net sales of the Chinese lower
technology plant sold in April. Comparable net sales fell by 23.6
percent and in China by 5.0 percent on the reference quarter. As
production at the Salo plant was closed down in July, the plant's net
sales waned due to a limited number of products sold from the stock.
After global overstocking of the handset market in the first quarter
of the year, sales at the Chinese plant reached the reference quarter
level. Lower technology products of the Thai plant were still under
heavy price pressure, which shrank its sales volumes.
Net sales of the Oulu plant fell somewhat on the reference period.
The total net sales of the Finnish Salo and Oulu plants declined by
18.2 percent.
Comparable net sales of the Asian plants in China and Thailand,
eliminating the effect of the lower technology plant sold in China,
declined by 4.5 percent.
The Group's net sales per plant were as follows:
- the Finnish plants, 31 percent (33%)
- the Asian plants, 69 percent (67%)
The Group's net sales by market area were as follows:
- Europe, 66 percent (58%)
- Asia, 22 percent (26%)
- the Americas, 12 percent (16%)
The Group's net sales per product area were as follows:
- handheld devices and telecom networks, 72 percent (61%)
- automotive, industrial and consumer electronics, 28 percent (39%)
Operating profit was EUR -6.3 million (-4.3), or -25.7 percent
(-11.5%) of net sales. The substantial decline in operating profit
was mostly attributable to production shut-down at the Salo plant and
the unfavorable product mix of the Chinese plant. Although the Thai
plant's lower technology products were still under heavy price
pressure, losses of the plant shrank clearly on the reference quarter
due to improved performance.
The Group's net financial expenses were EUR -3.1 million (-0.5) and
the profit for the period was EUR -9.5 million (-4.5). Financial
expenses included EUR 2.3 million in Aspocomp S.A.S litigation
interest. Earnings per share were EUR -0.19 (-0.10).
OUTLOOK FOR THE FUTURE
Aspocomp's main priority towards the end of 2007 is the restructuring
of the Group and the successful closing of the transaction with
Meadville Holdings Limited. This enables the company to develop its
market position and competitiveness, serve the main global customers
and increase cost-effectiveness through the joint venture with
Meadville. In addition, the transaction is expected to strengthen the
liquidity of the Aspocomp Group; however, the liquidity will remain
weak.
The full-year net sales of the Aspocomp Group from continuing
operations and excluding the sold plant in China are forecast to
decrease compared to the previous year. Profitability, excluding
one-off items, is anticipated to remain on a par with 2006 and the
full-year 2007 result is expected to be markedly unprofitable.
Aspocomp estimates that the Group's consolidated cash flow from
continuing operations is not likely to reach break-even during the
last quarter of this year. The cash flow of the operative
subsidiaries Aspocomp Oulu Oy in Finland and ACP Electronics Ltd. in
China is expected to stay positive.
ISTO HANTILA, PRESIDENT AND CEO:"Aspocomp signed an agreement on November 8, 2007 to sell its
shareholdings in its subsidiaries in China and India as well as
certain equipment from its Salo plant to a new holding company. A
majority of the holding company's shares, 80 percent, will be sold to
Meadville Holdings Limited and Aspocomp will remain a minority
owner.
The assets that Aspocomp will transfer to the new joint venture are
valued at about EUR 77 million. Meadville will pay about EUR 61
million for its 80 percent holding. Aspocomp will use about EUR 40
million of this consideration to repay its loan to Standard Chartered
Bank in full and about EUR 8 million to repay the working capital
facilities of its Chinese subsidiary. The balance of the
consideration will be used to partially repay Aspocomp's interest
bearing liabilities in Finland and to improve its liquidity.
Aspocomp's financial position will remain weak.
The arrangement aims to ensure the future operation and volume
production of Aspocomp's Asian subsidiaries. The parties have agreed
that they may either list the joint venture in 2012 at the earliest,
or alternatively the parties may exercise mutual put and call option
rights concerning Aspocomp's 20 percent shareholding in 2013 at the
earliest.
The agreement with Meadville is subject to the approval of Aspocomp's
Extraordinary General Meeting. Provided the shareholders support the
arrangement, the companies expect to finalize the transaction by the
end of November 2007.
The restructuring improves the company's ability to serve the main
customers both at the transferred plants and at the Group's Finnish
and Thai subsidiaries."
PRINTED CIRCUIT BOARD MARKET
The overbuilt global inventory cleared by the third quarter of 2007
and global HDI PCB manufacturing picked up. Material costs remained
unfavorable.
Although growth in the handheld devices industry has slowed down over
the past few quarters, Aspocomp's customers in the segment reported
strong performance in the July-September period. In the telecom
infrastructure market, the Group's customers experienced mostly flat
or slightly growing sales. The automotive electronics market appeared
to be stable during the review period.
In 2007, the global production value of technologically complex HDI
PCBs is forecast to grow by almost 6 percent on previous year,
amounting to almost USD 6 billion (about EUR 4 billion). Market
researchers expect the value of global HDI PCB production to grow to
nearly USD 8 billion by 2011. Over USD 5 billion of this will be
generated in Asia (excluding Japan). In China, in particular, HDI PCB
production value is expected to grow by 10 percent annually between
2007 and 2011.
CONSOLIDATED NET SALES AND OPERATING PROFIT, JANUARY-SEPTEMBER
(Reference figures are for 1-9/2006)
Net sales and operating profit, EUR million
1-9/2007 change, % 1-9/2006
Net sales 76.1 -31.1 110.7
Operating profit -47.2 -13.0
The Aspocomp Group's net sales for the review period were EUR 76.1
million (110.7). Comparable net sales, taking into account the
Chinese lower technology plant sold in April, declined by 19.5
percent to EUR 94.5 million. This was mainly due to weak sales at the
Salo and China plants.
Net sales of the Chinese plant were down 8.8 percent from the
reference period to EUR 29.2 million. After global overstocking of
the handset market in the first quarter of the year and management
transition in the second quarter, sales at the Chinese plant picked
up gradually during the third quarter. Net sales of the Thai plant
fell by 25.2 percent to EUR 15.3 million due to weak demand for lower
technology products.
Net sales of the Salo plant declined by 38.3 percent to EUR 16.2
million as a result of a limited number of products and production
ramp-down. The plant was closed down in July. Net sales posted by the
Oulu plant increased by 1.5 percent on the corresponding period of
last year, amounting to EUR 14.8 million.
The Group's comparable net sales per plant were as follows:
- the Finnish plants, 41 percent (37%)
- the Asian plants, 59 percent (63%)
The Group's comparable net sales by market area were as follows:
- Europe, 67 percent (55%)
- Asia, 21 percent (29%)
- the Americas, 12 percent (16%)
The Group's comparable net sales per product area were as follows:
- handheld devices and telecom networks, 79 percent (66%)
- automotive, industrial and consumer electronics, 21 percent (34%)
During the review period, the share of Aspocomp's overall PCB
production accounted for by HDI PCBs totaled 67 percent (54%).
Aspocomp's five largest customers during the period were Continental
Automotive Systems, Elcoteq, Nokia, Philips and Wabco. The five
largest customers accounted for 72 percent of net sales (54%).
Operating profit was EUR -47.2 million (-13.0), or -62.1 percent
(-11.7%) of net sales.
The severe decline in operating profit was mostly attributable to
write-offs amounting to EUR 20.4 million at the Salo plant, of which
the plant building accounted for EUR 11 million, and the compensation
of EUR 10.1 million paid to the former employees of Aspocomp S.A.S.
The Salo write-offs, both building and machinery, include
uncertainties and the final outcome may differ from current amounts.
Losses of the Thai plant mounted on the reference period due to
weaker sales; however, its result improved towards the end of the
period. Although the profit posted by the Chinese plant declined due
to global overstocking in the handset market and the unfavorable
product mix, its profitability remained good. Profit at the Oulu
plant declined somewhat but was clearly in the black.
The Group's net financial expenses were EUR -7.4 million (-1.1). The
profit for the period was EUR -57.1 million (-13.9) and earnings per
share from continuing operations were EUR -1.36 (-0.60).
Taxes include an avoir fiscal tax asset write-off of EUR 2.2 million.
After the closing of the Salo plant, it is unlikely that the tax
asset can be utilized in the near future.
FINANCING, INVESTMENTS AND EQUITY RATIO
The Aspocomp Group's consolidated cash flow from operations during
the review period was negative, totaling EUR -17.8 million. The
Group's consolidated net liquid assets at the end of the period
amounted to EUR 16.8 million (15.5). Aspocomp Group Oyj's liquid
funds, including unused limits, were EUR 2.4 million (3.2).
Interest-bearing net debt rose to EUR 84.4 million (45.6). The figure
contains EUR 20.3 million (21.6) in financial lease liabilities.
Gearing was 826.2 percent (53.0%), rising due to poor performance,
write-offs, the Aspocomp S.A.S litigation settlement and the higher
debt level. Non-interest-bearing liabilities amounted to EUR 35.5
million (41.8).
Cash flow from operations amounted to EUR -17.8 million (0.8) and
investments to EUR 46.6 million (17.9). Per-share cash flow after
investments was EUR -1.40 (-0.56).
Investments primarily consisted of the minority share purchase in the
Chinese subsidiary. Capital expenditures were EUR 45.0 million (8.7)
in Asia and EUR 1.6 million (9.1) in Europe. Net financial expenses
were 9.8 percent (1.0%) of net sales.
The Group's equity ratio at the end of September stood at 7.0 percent
(45.5%).
The major part of the net proceeds obtained from the rights offering
issued in March was used to fund the company's working capital
requirements.
RESEARCH AND DEVELOPMENT
The Group's research and development expenditure amounted to EUR 1.7
million (3.0), or 2.2 percent (2.7%) of net sales.
Product development was initiated at the Chinese plant during the
third quarter. The first project that was kicked off involved
harmonizing of the reliability laboratory. The planning of the
laboratory layout and test equipment transfer continued. In addition,
evaluations of continuing industrialization projects, such as carbon
printing and HDI Semi-Flex research transfer to the Chinese plant,
were carried out.
The main focus of technology development was on HDI semi-flex PCBs.
The industrialization of two flex layer HDI semi-flex PCBs was
reviewed in the production of the Chinese plant. The first test
products were manufactured in order to determine any possible
capability gaps and equipment transfer needs at the Chinese plant.
Further development of the new manufacturing methods and materials
continued.
During the review period, a market study for Any Layer Microvia type
PCBs continued and an analysis of the customers' needs in this regard
began.
Research related to optoelectronics progressed with evaluation of
material technology throughout the review period.
Research of the HDI rigid-flex concept for the dynamic application of
hinge solutions for handheld devices continued. The most critical
area in this concept appears to be the selection of a material that
meets the flexibility requirement.
SHARES AND SHARE CAPITAL
The total number of Aspocomp's shares at September 30, 2007, was
49,905,130 and the share capital stood at EUR 49,905,130. Of the
total shares outstanding, the company held 200,000 treasury shares,
representing 0.4 percent of the aggregate votes conferred by all the
shares. The number of shares adjusted for the treasury shares was
49,705,130.
A total of 55,928,907 Aspocomp Group Oyj shares were traded on the
Helsinki Stock Exchange during the period from January 1 to September
30, 2007. The aggregate value of the shares exchanged was EUR
33,039,185. The shares traded at a low of EUR 0.29 (September 11,
2007) and a high of EUR 2.20 (January 29, 2007). The average share
price was EUR 0.77. The closing price at September 28, 2007, was EUR
0.31. At the end of the period, nominee-registered shares accounted
for 6.6 percent of the total shares and 0.7 percent were directly
held by non-Finnish owners.
Following the rights issue described below, Aspocomp was notified on
April 19, 2007 that the stake of Erkki Etola and companies managed by
him in Aspocomp Group Oyj's shares and votes had decreased below the
5 percent threshold. The total amount of the shares is 2,398,000 and
they represent 4.80 percent of Aspocomp's shares and votes.
Standard Chartered Bank (Hong Kong) Limited notified Aspocomp on
April 20, 2007 that, following the completion of the share offering,
if it uses its right to subscribe for the 4,000,000 shares in full,
its proportion of shares and votes of the new number of Aspocomp
shares would amount to 7.42 percent and the proportion of shares and
votes of the currently registered 49,905,130 shares would amount to
8.02 percent.
On May 25, 2007, the stake of Varma Mutual Pension Insurance Company
in Aspocomp Group Oyj's shares and votes decreased below the 5
percent threshold to 3.79 percent. The amount of shares and votes
held by Varma was 1,890,607.
On June 20, 2007, the stake of Sampo Life Insurance Company Limited
in the company's shares and votes decreased below the 10 percent
threshold to 9.24 percent, or 4,611,372 shares and votes. On August
22, 2007, it decreased below the 5 percent threshold to 3.89 percent,
or 1,939,000 shares and votes.
The Extraordinary General Meeting of January 19, 2007, authorized the
Board of Directors to decide on issuing 50,000,000 new shares and
conveying the 200,000 Aspocomp shares held by the company. The
authorization is valid for two years from the date of the decision of
the meeting. Based on the authorization, a total of 29,823,078 new
shares were subscribed for in a rights issue that ended in April
2007, increasing the total amount of company shares to 49,905,130.
Trading with the new shares commenced on the Helsinki Stock Exchange
on April 20, 2007.
The Annual General Meeting of May 10, 2007 authorized the Board to
decide on issuing and/or granting a maximum of 40,000,000 new shares
and conveying and/or receiving a maximum of 200,000 Aspocomp shares
held by the company. The new shares can be issued and the company's
own shares conveyed either against payment (rights issue) or for free
(bonus issue) to the company's shareholders in proportion to their
holding, or by means of a directed issue, waiving the pre-emptive
subscription right of shareholders, if there is a weighty financial
reason for the company to do so. The authorization also includes the
right to grant special rights, as specified in Article 1 of Chapter
10 of the Companies Act, to receive new shares in the company or
Aspocomp shares held by the company against payment such that either
the share subscription price will be paid in cash or the subscriber's
receivables will be offset against the subscription price. In
addition, the authorization includes the right to decide on a bonus
issue to the company itself such that the number of shares issued to
the company can amount to no more than one-tenth (1/10) of all the
company's shares. The Board of Directors has the right to decide on
other particulars of the share issues and the granting of special
rights. The authorizations are valid for two years from the date of
the decision of the Annual General Meeting. They do not cancel
previous unexercised share issue authorizations.
Kaupthing Bank Oyj, which has been a market maker in Aspocomp shares,
discontinued market making in Aspocomp shares until further notice on
May 11, 2007. Kaupthing has provided bids and offers for Aspocomp
shares such that the maximum difference between a bid and offer price
is 2 percent of the bid. Bids or offers include at least 1,000
shares. Since Aspocomp shares trade below 0.50 euros and the minimum
tick size is 1 cent, it is not possible to provide bids and offers at
less than 2 percent of the share price.
RIGHTS OFFERING
On March 16, 2007, the Board of Aspocomp Group Oyj decided on a
rights issue whereby the shareholders of Aspocomp were entitled to
subscribe for three new shares for every two old shares. A total of
29,823,078 new shares were offered for subscription at a subscription
price of EUR 0.84 per share. The offer shares represented
approximately 150 percent of the total shares and voting rights of
the company prior to the offering and 60 percent after the offering.
The share issue was based on the authorization granted by the
Extraordinary General Meeting of January 19, 2007.
In the secondary subscription any investor could subscribe for any
offer shares that had been left unsubscribed for on the basis of the
subscription rights. The company received an underwriting commitment
for the full amount of the offering from a group of investors
comprising 2M Ventures Oy, Ajanta Oy, Avenir Rahastoyhtiö Oy, E.
Öhman J:or Fondkommission AB, Oy Hammaren & Co Ab, Varma Mutual
Pension Insurance Company Ltd, Oy Finvestock Ab, Ramsay & Tuutti Oy
Ab and Sampo Life Insurance Company.
The subscription period commenced on March 26, 2007. It expired on
April 12, 2007 with respect to the subscription rights, and on April
13, 2007 with respect to the secondary subscription. A total of
27,221,343 shares were subscribed for in the primary subscription and
a total of 2,601,735 shares in the secondary subscription. New equity
raised by the offering was approximately EUR 25 million prior to the
deduction of fees and expenses. The total number of Aspocomp's shares
increased to 49,905,130 shares and trading with all shares commenced
on the Helsinki Stock Exchange on April 20, 2007.
Evli Bank Plc, Corporate Finance acted as the Manager of the share
issue.
STOCK OPTIONS AND CONVERTIBLE DEBENTURE LOAN
As part of the financing arrangement for the minority share
acquisition in China, and on the basis of the authorization from the
Extraordinary General Meeting of January 19, 2007, the Board of
Directors of Aspocomp resolved on March 21, 2007 to issue 4,000,000
warrants to Standard Chartered Bank (Hong Kong) Limited in deviation
from shareholders' pre-emptive subscription rights. Each warrant
entitles its holder to subscribe for one share in the company. As a
result, the total number of the company's shares can increase by a
maximum of 4,000,000 shares. The warrants may be exercised from
October 3, 2008 (or earlier if a person or entity will acquire over
30 percent of the company's shares) until March 31, 2010. Following
the share offering described above, the Board of Directors noted on
April 18, 2007, that the share subscription price on the basis of the
warrants granted to Standard Chartered Bank (Hong Kong) Limited will
be approximately EUR 1.13 per share.
Aspocomp also made a commitment to Standard Chartered Bank not to
issue, without its consent, more than 40,000,000 shares on the basis
of the authorization from the Extraordinary General Meeting of
January 19, 2007. In addition, Aspocomp undertook to reserve
10,000,000 shares of the authorization for a possible share issue on
commercially acceptable terms. The issue would take place in the
event Standard Chartered Bank requests it within 120 days prior to
the repayment of the loan granted for the minority acquisition in
China, scheduled for September 2008. The schedule for the possible
issue may change if the term of the loan is extended.
Following the share offering described above, the Board of Directors
resolved on April 18, 2007 to amend the subscription prices of the
convertible debenture loan I/2006 and the stock options issued by
Aspocomp. The subscription price of convertible debenture loan I/2006
was reduced by EUR 0.43 to EUR 2.1407 per share. In order to reduce
the subscription price, the Board resolved to entitle the holders of
the loan to subscribe for a total of 804,810 new shares of the
company. As a result of the amendment, each book-entry issued for the
loan entitles the holder to convert the book-entry into 467 shares of
the company instead of the current 389 shares of the company.
As part of the incentive scheme for Aspocomp's management, the Board
of Directors decided on May 10, 2007 to distribute stock options -
which were issued by the Annual General Meeting held on April 10,
2006 - to the Group's key personnel. The shareholding scheme and the
financial performance-linked subscription rights aim to align the
objectives of executives and other shareholders.
The Board of Directors distributed a total of 310,000 stock options
2006B and 25,000 stock options 2006A to key personnel of the Group.
The beginning of the share subscription period for stock options
2006B is subject to attainment of the targets set for the Group's
cash flow. The Board of Directors decided on the financial targets
for stock options 2006A in the spring of 2006. The share subscription
period with stock options 2006A is from May 1, 2008 to May 31, 2010
and with stock options 2006B from May 1, 2009 to May 31, 2011.
The share subscription price with stock options 2006B is EUR 0.84
(average share turnover-weighted price on the Helsinki Stock Exchange
in April 2007). The subscription price with stock options 2006A
changed due to the share issue carried out in March-April 2007 such
that with stock options 2006A the subscription price of shares is EUR
2.47 and a total of 1.387 shares in the company can be subscribed for
with one stock option. When shares are subscribed for, the total
number of shares will be rounded down to a full number. The total
subscription price will be calculated using the rounded number of
shares. After this change, a maximum of 429,970 shares in the company
can be subscribed for with stock options 2006A, instead of 310,000
shares, and the company's share capital can rise by a maximum of EUR
429,970, instead of EUR 310,000. Annual dividends paid are deducted
from the subscription price.
PERSONNEL
During the review period, the Aspocomp Group had an average of 2,417
employees (3,336). The personnel count on September 30, 2007 was
2,224 (3,335). Of them, 1,510 (2,364) were non-salaried and 714 (971)
salaried employees. 2,202 (3,311) personnel worked in PCB production
and 22 (24) in Group administration.
Personnel by region, average
1-9/2007 change, % 1-9/2006
Europe 525 -24.2 693
Asia 1,892 -28.4 2,643
Total 2,417 -27.5 3,336
The personnel reduction in Asia was mainly attributable to the sale
of the older technology plant in China. The HR development process
that was adopted last year to achieve consistency in operating
methods and documentation in different countries focused on Asia. In
addition, the Group's recruiting processes were unified.
Management was restructured in Thailand and new management was
appointed for the Chinese plant due to the new focus on HDI PCB
production.
On May 4, 2007, Aspocomp issued a notice on statutory labor
co-determination negotiations in Finland. The negotiations concerned
about 350 employees at Aspocomp Group Oyj and Aspocomp Oy, excluding
personnel at the Oulu production unit. The negotiations were
concluded on June 15, 2007. As a result, a total of 237 personnel,
consisting of 183 non-salaried and 54 salaried employees, were made
redundant. Production at the Group's Salo plant was closed down on
July 14, 2007, and employment of its 215 personnel will be terminated
during 2007.
On June 26, 2007, The Executive Committee of Aspocomp Group Oyj was
renewed. The primary focus of operations is in Asia and all
customer-related functions are centralized under sales and marketing.
After Isto Hantila followed Maija-Liisa Friman as the Group's
President and CEO on November 9, 2007, the Executive Committee
consists of Isto Hantila, President and CEO; Harry Gilchrist, Chief
Operating Officer; Rami Raulas, Senior Vice President, Sales and
Marketing; and Maire Laitinen, Group General Counsel. In addition,
Pertti Vuorinen joined the Executive Committee as Chief Financial
Officer on November 1, 2007, after the resignation of previous CFO
Tapio Engström. Vuorinen was formerly CFO Asia-Pacific and the
Group's CFO from 1999 to 2006.
BOARD OF DIRECTORS AND AUDITORS
The Annual General Meeting of May 10, 2007 decided that the number of
Board members is seven and re-elected members of the Board: Aimo
Eloholma, Johan Hammarén, Tapio Hintikka, Tuomo Lähdesmäki, Yoshiki
Sasaki, Anssi Soila and Kari Vuorialho. The meeting re-elected
PricewaterhouseCoopers Oy as the company's auditor for the 2007
financial year.
In addition, the meeting decided that the remunerations of the
members of the Board will remain the same as in 2006. An annual
remuneration of EUR 35,000 will be paid to the chairman of the Board,
EUR 25,000 to the deputy chairman and EUR 15,000 to the members. The
annual remuneration will be paid such that 60 percent is paid in cash
and the remaining 40 percent is, according to the authorization of
the annual general meeting, used to buy shares in the company for
conveyance to Board members after the release of the Group's second
quarter results. EUR 1,500 per meeting will be paid to the chairman
and EUR 1,000 per meeting to the other members. EUR 1,500 per meeting
will be paid to the members of the Board of Directors residing
abroad. EUR 500 will be paid for each committee meeting. The members
of the Board residing outside of the Greater Helsinki Area are
reimbursed for reasonable travel and lodging costs. The auditor will
be paid according to invoice.
At its organization meeting held on May 10, 2007, the Board of
Directors of Aspocomp Group Oyj re-elected Tuomo Lähdesmäki as
Chairman of the Board and Yoshiki Sasaki as Vice Chairman. The Board
of Directors appointed Aimo Eloholma, Tapio Hintikka, Tuomo
Lähdesmäki and Kari Vuorialho as members to the Compensation and
Nomination Committees. Johan Hammarén, Yoshiki Sasaki and Anssi Soila
were elected as members of the Audit Committee.
On August 20, 2007 Tapio Hintikka gave a notice of resignation from
the Board. The resignation took effect immediately.
GROUP RESTRUCTURINGS
On April 17, 2007, Aspocomp announced that the technology development
of Imbera Electronics Oy, the R&D joint venture of Aspocomp Group Oyj
and Elcoteq SE, has reached the industrialization and
commercialization stage. The companies signed and closed a
transaction to broaden Imbera's ownership base, extend its exposure
to the market and secure its financing. Imbera's new financiers and
major owners are funds managed by Index Ventures, Northzone Ventures
and Conor Venture Partners. The funds made investments in Imbera
Electronics Inc, a new US-based parent company of Imbera Electronics
Oy that was incorporated for this investment.
Aspocomp and Elcoteq remain Imbera's minority shareholders through a
share exchange with Imbera Electronics Inc. After the arrangement,
Aspocomp and Elcoteq each own approximately 15 percent of Imbera's
share capital. Imbera's operative management remained unaffected and
gained a minority holding in the company.
Aspocomp signed a 10-year worldwide manufacturing license agreement
for the current Imbera technology. The ownership arrangement will
have no impact on Aspocomp's financial result. Imbera Electronics Oy
was set up jointly by Aspocomp and Elcoteq in 2002 to develop
Integrated Module Board assembly technology.
The Board of Directors of Aspocomp Group Oyj decided on May 10, 2007
to merge the subsidiary Aspocomp Oy with its parent company. The
merger plan was entered into the Finnish Trade Register on June 5,
2007 and the planned registration date for the implementation of the
merger was September 30, 2007. On September 19, 2007,
Sampo Bank plc announced that it opposes the planned merger.
EXPANSION IN ASIA
On February 15, 2007, Aspocomp announced that the total investment in
the minority acquisition and product capacity expansion related to
the Chinese subsidiary as well as in the India plant project is
estimated to amount to about EUR 170 million. According to the
estimates released on March 15, 2007, the investment in India will
amount to about EUR 100 million, of which about EUR 80 million is
earmarked for building and machinery and EUR 20 million for working
capital, interest and start-up costs.
On March 16, 2007, Aspocomp entered into an agreement to acquire the
49 percent minority interest in ACP Electronics Ltd, Aspocomp's
Suzhou, China based joint venture, from the Group's Taiwanese partner
Chin-Poon Holdings. The net purchase price was EUR 37.8 million. The
gross transaction price of EUR 44.6 million was reduced by
Chin-Poon's equipment purchase from ACP Electronics, valued at EUR
6.8 million. Since the equipment was not suitable for HDI technology
production, Aspocomp was unable to use it. As the Group aims to
increase HDI printed circuit board production capacity in China, the
plant facility is scheduled to be upgraded into an HDI PCB plant
during 2008.
On March 21, 2007, Aspocomp agreed on a EUR 40 million credit
facility with Standard Chartered Bank (Hong Kong) Limited to purchase
the 49 percent minority share in ACP Electronics Ltd. The loan was
drawn down in full in connection with the minority share purchase,
finalized on April 4, 2007, and it has an 18-month term with an
option for the lender to extend it by another 18 months. The maximum
effective annual interest of the loan, calculated at the reference
interest rate of April 4, is 12.9 percent including interest, related
structuring fee and a possible additional fee of up to EUR 2 million,
described below. As part of the arrangement, Aspocomp granted
Standard Chartered Bank 4 million warrants that entitle the bank to
subscribe for 4 million shares in Aspocomp. Depending on the Aspocomp
share price, the company may have an obligation at the end of the
loan period to pay Standard Chartered Bank a fee of up to EUR 2
million.
ASPOCOMP S.A.S.
With its decisions of June 19, 2007, the French Supreme Court upheld
the former decisions of the Rouen appellate court, announced in March
2005, in the legal case initiated by Aspocomp S.A.S's former
employees against Aspocomp Group Oyj. The case relates to the closing
of the heavily unprofitable Aspocomp S.A.S. in 2002 and the
dismissals that ensued.
According to the decisions of the Rouen appellate court, Aspocomp
Group Oyj was ordered to pay EUR 10.1 million, plus by annual
interest of about 7 per cent, to 388 former employees of Aspocomp
S.A.S. To date, the interest amounts to approximately EUR 2.3
million.
A French bank, Credit Industriel et Commercial, had earlier given a
performance bond guarantee to the former employees for payment
according to the decision of the Supreme Court. Nordea Bank Finland
Plc had given the French bank an on-demand bank guarantee for the
same sum, which sum Aspocomp had undertaken to indemnify.
The counter obligation of Aspocomp to Nordea has been converted into
a bank loan. The interest rate of the loan is based on the monthly
Euribor interest rate and will initially be 6.2 percent annually. The
decision of the French Supreme Court will thus not essentially weaken
Aspocomp's immediate liquidity.
NEGATIVE SHARE CAPITAL OF ASPOCOMP GROUP OYJ'S SUBSIDIARY ASPOCOMP OY
On August 9, 2007, the Board of Directors of Aspocomp Group Oyj
confirmed the write-offs that resulted from the closing down of the
Salo plant in the bookkeeping of Aspocomp Group Oyj's subsidiary
Aspocomp Oy. As a result, the equity of Aspocomp Oy was estimated at
EUR -18.1 million. A notice regarding the loss of equity was entered
into the Finnish Trade Register.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
Due to the new Companies Act, the Extraordinary General Meeting of
January 19, 2007, decided to amend the Articles of Association such
that Article 3, which concerns the minimum and maximum share capital,
Article 4, which concerns the number of shares, and Article 16, which
concerns the redemption obligation, were deleted. In addition, the
numbering of Articles 5, 9, 13 and 15 of the Articles of Association
was changed. The Articles were amended as specified in the invitation
to the company's Extraordinary General Meeting, published as a stock
exchange release on December 22, 2006.
DIVIDEND POLICY
The Board of Directors of Aspocomp Group Oyj defined a new long-term
dividend policy for the company on March 15, 2007. According to the
policy, Aspocomp aims to pay dividends amounting to no less than 30
percent of the profit for each financial year once the company's
profitability has been restored and it has reached its gearing and
equity ratio goals. It is likely that the Board will not propose
dividend payments in the near future. The Annual General meeting of
May 10, 2007, decided not to pay dividends for 2006.
EVENTS AFTER THE FINANCIAL PERIOD
Aspocomp agreed on a standstill arrangement with its Finnish bank
creditors on October 5, 2007, in order to stabilize its financial
position during the pending partner negotiations. The standstill
arrangement is in force until November 30, 2007 unless terminated
earlier by the banks for a material reason.
On October 23, 2007 Aspocomp announced that statutory labor
co-determination negotiations will commence on October 30 at Aspocomp
Group Oyj and Aspocomp Oy with a view to increasing
cost-effectiveness. The planned measures would concern all the
functions of the companies, excluding the CAD design unit. If
implemented, the planned measures would lead to organizational
rearrangements as well as redundancies of no more than 15 employees
at Aspocomp Group Oyj and 15 employees at Aspocomp Oy. The
negotiations do not affect Aspocomp Oulu Oy.
On October 31, 2007, Aspocomp Group Oyj's Chief Financial Officer
Tapio Engström resigned and Pertti Vuorinen, previously CFO
Asia-Pacific, was appointed as new CFO with effect from November 1,
2007. Vuorinen held the same position from 1999 to 2006.
On November 8, 2007, Aspocomp signed an agreement whereby it will
sell its shareholdings in its subsidiaries in China and India as well
as certain equipment from its Salo plant to a new holding company. 80
percent of the shares of the holding company will be sold to
Meadville Holdings Limited, the Hong Kong listed parent company of
the Meadville Group. Aspocomp will remain a minority owner with 20
percent ownership.
The assets to be transferred to the joint venture by Aspocomp are
valued at about EUR 77 million. Meadville will pay about EUR 61
million for its 80 percent holding in the joint venture. Aspocomp
will use about EUR 40 million of this consideration to repay its loan
to Standard Chartered Bank in full and about EUR 8 million to repay
the working capital facilities of its Chinese subsidiary. The balance
of the consideration will be used to partially repay Aspocomp's
interest bearing liabilities in Finland and to improve its liquidity.
The parties have agreed that they may either list the joint venture
in 2012 at the earliest, or alternatively the parties may exercise
mutual put and call option rights concerning Aspocomp's 20 percent
shareholding in 2013 at the earliest. In addition, the parties have
agreed on the pricing principles to be used to value the put and call
option rights for Aspocomp's 20 percent holding. The pricing will be
based on the highest of the following figures: either 5.5 times
EBITDA less net debt, or the net asset value of the joint venture, or
the agreed minimum price. The agreed minimum price is the initial
value of Aspocomp's 20 percent holding in the joint venture.
As part of the agreement, Meadville will also acquire 10 percent
stake in Aspocomp's subsidiary in Oulu, Finland. Aspocomp's holding
in its Thai subsidiary will remain unaffected.
Following the negotiated transaction, Aspocomp's assets would
comprise a holding of 20 percent in the new joint venture, a holding
of 90 percent in Aspocomp's Oulu subsidiary, a holding of about 87
percent in Aspocomp's Thai subsidiary, a holding of about 15 percent
in Imbera Inc and real estate in Salo and Oulu. The transaction does
not have significant impact on the Group's equity.
The agreement with Meadville is subject to the approval of the
Extraordinary General Meeting of Aspocomp. The companies expect to
finalize the transaction by the end of November 2007.
Aspocomp informed Financial Supervision and OMX Nordic Exchange
Helsinki Oy on October 29, 2007 of its decision to postpone the
release of certain information falling in the scope of its ongoing
disclosure requirements. This information concerned the summons
against Aspocomp Group Oyj's subsidiary, ACPE Electronics, in China.
The plaintiff had applied for the attachment of the company's assets
and made a claim for the repayment of USD 5 million with interest.
The company's bank account and some other property were consequently
frozen. The reason for the postponement of the release of said
information was that it could have jeopardized the finalization of
the partnership negotiations. It was since agreed that the injunction
against Aspocomp's subsidiary ACPE Electronics would be withdrawn per
the Settlement Agreement signed on November 8, 2007. Aspocomp
announced the above matter on November 9, 2007.
On November 9, 2007, Maija-Liisa Friman resigned from her position as
the company's CEO. It was agreed with the company's Board of
Directors that she will be available in an advisory role. Isto
Hantila (49), M.Sc. (Eng.), was appointed new CEO of Aspocomp Group
Oyj with effect from November 9. Mr. Hantila is currently Chairman of
the Board of Efore Plc and Selmic Oy. He has previously worked as the
CEO of Perlos Corporation from 2004 to 2006, in various management
roles at the Swiss company Ascom Group from 1991 to 2003, his latest
role being a member of the Executive Management Team, and before this
in several management roles at Fiskars Power System from 1983 to
1991. Provided the agreements with Meadville Holdings Limited are
carried out, most of Aspocomp's business will be transferred to the
joint venture owned by Aspocomp and Meadville. Consequently, Mr.
Hantila's primary task will be to plan and complete the related
structural changes in the Aspocomp Group.
OUTLOOK FOR THE FUTURE
Aspocomp's main priority towards the end of 2007 is the restructuring
of the Group and the successful closing of the transaction with
Meadville Holdings Limited. This enables the company to develop its
market position and competitiveness, serve the main global customers
and increase cost-effectiveness through the joint venture with
Meadville. In addition, the transaction is expected to strengthen the
liquidity of the Aspocomp Group; however, the liquidity will remain
weak.
The full-year net sales of the Aspocomp Group from continuing
operations and excluding the sold plant in China are forecast to
decrease compared to the previous year. Profitability, excluding
one-off items, is anticipated to remain on a par with 2006 and the
full-year 2007 result is expected to be markedly unprofitable.
Aspocomp estimates that the Group's consolidated cash flow from
continuing operations is not likely to reach break-even during the
last quarter of this year. The cash flow of the operative
subsidiaries Aspocomp Oulu Oy in Finland and ACP Electronics Ltd. in
China is expected to stay positive.
RISKS AND UNCERTAINTIES RELATED TO THE BUSINESS OF ASPOCOMP
In addition to the normal business risks as well as the risks
announced in the annual report 2006 and the offering memorandum of
the rights issue of March 2007, the company's short-term risks are
mainly related to Aspocomp Group Oyj's financing and liquidity as
well as finalizing the negotiated transaction with Meadville.
ACCOUNTING POLICIES
This interim report has been prepared in accordance with IAS 34. The
current accounting policies are consistent with the financial
statements for 2006.
INCOME STATEMENT,
JULY-SEPTEMBER 7-9/07 7-9/06
MEUR % MEUR %
NET SALES 24.4 100.0 37.7 100.0
Other operating income 1.4 5.9 1.0 2.7
Materials and services -15.3 -62.6 -21.7 -57.6
Personnel expenses -5.7 -23.2 -8.4 -22.3
Other operating expenses -7.1 -29.0 -8.5 -22.1
Depreciation and amortization -4.1 -16.7 -4.4 -11.7
OPERATING PROFIT -6.3 -25.7 -4.3 -11.5
Financial income and expenses -3.1 -20.0 -0.5 -11.4
PROFIT ON CONTINUING
OPERATIONS BEFORE TAX -9.4 -45.7 -4.9 -12.9
Taxes -0.1 -9.4 0.0 0.0
PROFIT ON CONTINUING
OPERATIONS -9.5 -54.7 -4.9 -13.0
Profit on discontinuing
operations 0.0 0.0 0.4 1.0
PROFIT FOR THE PERIOD -9.5 -54.7 -4.5 -12.0
Profit attributable to
minority interests 0.0 0.0 0.7 1.9
equity shareholders -9.5 -54.7 -5.2 -13.8
Earnings per share, adjusted -0.19 -0.20
INCOME STATEMENT,
JANUARY-SEPTEMBER 1-9/07 1-9/06 1-12/06 MEUR % MEUR % MEUR %
NET SALES 76.1 100.0 110.7 100.0 148.9 100.0
Other operating income 2.8 3.7 2.1 1.9 3.3 2.2
Materials and services -41.7 -54.8 -59.7 -53.9 -80.0 -53.8
Personnel expenses -21.8 -28.6 -26.6 -24.0 -36.5 -24.5
Other operating expenses -34.2 -44.9 -26.6 -24.0 -41.0 -27.6
Depreciation and amortization -28.4 -37.3 -12.9 -11.7 -18.1 -12.1
OPERATING PROFIT -47.2 -62.1 -13.0 -11.7 -23.3 -15.7
Financial income and expenses -7.4 -9.8 -1.1 -1.0 -1.9 -1.3
PROFIT ON CONTINUING
OPERATIONS BEFORE TAX -54.6 -71.8 -14.1 -12.7 -25.2 -16.9
Taxes -2.5 -3.2 0.0 0.0 -2.2 -1.5
PROFIT ON CONTINUING
OPERATIONS -57.1 -75.1 -14.1 -12.7 -27.4 -18.4
Profit on discontinuing
operations 0.0 0.0 0.2 0.0 0.2 0.1
PROFIT FOR THE PERIOD -57.1 -75.1 -13.9 -12.6 -27.2 -18.3
Profit attributable to
minority interests 0.4 0.5 2.7 2.4 4.1 2.8
equity shareholders -57.5 -75.6 -16.6 -15.0 -31.3 -21.0
Earnings per share, adjusted -1.36 -0.6 -1.15
CONSOLIDATED BALANCE SHEET
9/07 9/06 Change 12/06
ASSETS MEUR MEUR % MEUR
NON-CURRENT ASSETS
Intangible assets 24.6 5.0 395.9 4.5
Tangible assets 67.6 96.7 -30.1 95.0
Investments in
associated companies 0.2 -100.0 0.2
Investment property 2.7 3.4 -21.5 3.4
Available for sale
investments 0.6 0.4 36.1 0.3
Deferred income tax assets 1.1 0.2 338.1 1.3
Other long-term receivables 1.8 8.1 -78.3 6.5
TOTAL NON-CURRENT ASSETS 98.3 114.1 -13.9 114.9
CURRENT ASSETS
Inventories 11.6 19.4 -40.0 20.9
Short-term receivables 20.9 39.3 -46.8 30.0
Available for sale
investments
Restricted cash 5.3
Cash and bank deposits 11.5 15.5 -26.1 22.7
Assets held for sale 0.6 -100.0
TOTAL CURRENT ASSETS 49.3 74.9 -34.1 73.6
TOTAL ASSETS 147.7 189.0 -21.9 184.8
SHAREHOLDERS' EQUITY
AND LIABILITIES
Share capital 20.1 20.1 0.0 20.1
Share premium fund 27.9 27.9 0.0 27.9
Treasury shares -0.8 -0.8 0.0 -0.8
Special reserve fund 46.0 46.0 0.0 46.0
Revaluation and other funds
Funds for investments for
non-restricted equity 27.3
Retained earnings -110.3 -35.2 214.0 -48.6
Equity attributable
to shareholders 10.2 58.1 -82.4 44.6
Minority interest 0.0 27.9 -100.0 23.7
TOTAL EQUITY 10.2 86.0 -88.1 68.3
Long-term borrowings 60.1 18.3 227.5 29.7
Provisions 0.6 1.4 -54.4 1.1
Short-term borrowings 41.2 42.8 -3.8 43.9
Trade and other payables 35.5 39.7 -11.0 41.8
Liabilities held for sale 0.7 -100.0
TOTAL LIABILITIES 137.4 102.9 30.5 116.5
TOTAL SHAREHOLDERS'
EQUITY AND LIABILITIES 147.7 189.0 -21.9 184.8
CONSOLIDATED CHANGES IN EQUITY,
JANUARY-SEPTEMBER
Funds
for
in-
vest-
Re- ments Trans-
Spe- valu- of lation
Share cial ation non- Trea- dif- Ret- Mino-
Share pre- re- and rest- sury fer- ained rity Total
capi- mium serve other ricted sha- en- earn- inte- equi-
tal fund fund funds equity res ces ings rests ty
Balance
at
31.12.06 20.1 27.9 46.0 0.0 1.9 -0.8 -4.8 -45.7 23.7 68.3
Share
issue 22.0 22.0
Trans-
lation
differ-
ences -1.7 -1.7
Net
profit -57.5 -57.5
Other
items 3.4 -0.6 2.8
Purchase
of mino-
rity
interest -23.7 -23.7
Balance
at
30.9.07 20.1 27.9 46.0 0.0 23.9 -0.8 -6.5 -103.8 0.0 10.2
CONSOLIDATED CHANGES IN EQUITY,
JANUARY-SEPTEMBER 2006
Funds
for
in-
vest-
Re- ments Trans-
Spe- valu- of lation
Share cial ation non- Trea- dif- Ret- Mino-
Share pre- re- and rest- sury fer- ained rity Total
capi- mium serve other ricted sha- en- earn- inte- equi-
tal fund fund funds equity res ces ings rests ty
Balance
at
31.12.05 20.1 27.9 46.0 0.1 -0.8 -2.2 -14.8 30.9 107.2
Share
issue
Trans-
lation
differ-
ences -1.9 -1.7 -3.7
Net
profit -16.6 2.7 -13.9
Other
items -0.1 0.4 0.4
Reduce
of
subsidiary
equity -3.9 -3.9
Balance
at
30.9.06 20.1 27.9 46.0 0.0 -0.8 -4.2 -31.0 28.0 86.0
CONSOLIDATED CASH FLOW STATEMENT, 1-9/07 1-9/06 1-12/06
JANUARY-SEPTEMBER MEUR MEUR MEUR
Cash flow from operations -17.8 0.8 1.9
Cash flow from investments -41.7 -16.2 -20.1
Cash flow before financial items -59.4 -15.4 -18.3
Change in long-term and short-term financing 31.5 19.4 34.3
Share issue 22.0
Return of subsidiary equity to minority -4.0 -8.7
Cash flow from financing 53.5 15.4 25.7
Change in cash and cash equivalents -5.9 -0.6 7.4
Cash and cash equivalents
at the end of period 16.8 15.5 22.7
KEY FINANCIAL INDICATORS 9/07 9/06
Return on investment (ROI), % -36.0 -11.6
Return on equity (ROE), % -139.1 -19.2
Equity per share, EUR 0.21 2.92
Equity ratio, % 7.0 45.5
Gearing, % 826.2 53.0
Gross investments, MEUR 46.6 17.9
Average number of personnel 2 417 3 336
CONTINGENT LIABILITIES 9/07 9/06
MEUR MEUR
Mortgages given for
security for liabilities 10.6 11.8
Operating lease liabilities 0.1 0.1
Other liabilities 0.3 12.0
Total 11.0 23.9
All figures are unaudited.
Helsinki, November 15, 2007
ASPOCOMP GROUP OYJ
Board of Directors
For further information, please contact CFO Pertti Vuorinen, tel.
+358 9 7597 0715.
Distribution:
The Nordic Exchange
Major media
www.aspocomp.com
Some statements in this stock exchange release are forecasts and
actual results may differ materially from those stated. Statements in
this stock exchange release relating to matters that are not
historical facts are forecasts. All forecasts involve known and
unknown risks, uncertainties and other factors, which may cause the
actual results, performances or achievements of the Aspocomp Group to
be materially different from any future results, performances or
achievements expressed or implied by such forecasts. Such factors
include general economic and business conditions, fluctuations in
currency exchange rates, increases and changes in PCB industry
capacity and competition, and the ability of the company to implement
its investment program and to continue to expand its business outside
the European market.
