Elcoteq SE
Financial Statements Bulletin
March 31, 2010, at 9.00 am (EET)
Elcoteq SE's net sales in 2009 declined about 56.3% on the previous year and
amounted to 1,503.2 million euros (3,443.2 million euros in 2008). Operating
loss totaled -76.5 million euros (-20.4), mainly due to increased restructuring
expenses of 37.0 million euros, excluding which the operating loss was -39.5
million euros (-6.9). The company has been able to offset to a great extent the
effects of the sales decline with the strong cost savings actions carried out
throughout the year. Cash flow after investing activities was clearly positive
at 52.9 million euros (-99.7). Interest-bearing net debt decreased significantly
and was 187.5 million euros (238.5). Net sales declined in the fourth quarter of
2009 by about 20% on the previous quarter and amounted to 265.5 million euros
(331.7 million euros in the third quarter of 2009). Operating loss totaled -23.4
million euros (-11.8) and excluding restructuring expenses it amounted to -2.1
million euros (1.7 in the third quarter of 2009).
Financial Year 2009
- Net sales were 1,503.2 million euros (3,443.2)
- Operating loss was -76.5 million euros (-20.4), excluding restructuring
expenses -39.5 million euros (-6.9)
- Loss before taxes was -117.1 million euros (-52.9)
- Earnings per share (EPS) were -3.22 euros (-2.02)
- Cash flow after investing activities was 52.9 million euros (-99.7)
- Rolling 12-month return on capital employed (ROCE) was -18.9% (-3.1%)
- Interest-bearing net debt amounted to 187.5 million euros (238.5), and gearing
was 5.8 (1.8)
- The Board of Directors proposes that no dividend will be paid for 2009
October-December 2009
- Net sales were 265.5 million euros (889.1 million euros in the fourth quarter
of 2008)
- Operating loss was -23.4 million euros (-11.8). Operating loss includes
restructuring costs amounting to 21.3 million euros (13.5), excluding which the
operating loss was -2.1 million euros (1.7)
- Loss before taxes was -36.4 million euros (-25.2)
- Earnings per share (EPS) were -0.96 euros (-0.89)
- Cash flow after investing activities was -11.3 million euros (46.6)
Major Events After the End of the Financial Year
- Hybrid bond of 29 million euros issued and proceeds from hybrid issue used to
redeem debentures of 105 million euros in January 2010
- Term sheet signed for a 100 million euros committed revolving credit facility
maturing in June 2011
Elcoteq SE's consolidated financial statements for 2009 have been prepared using
IFRS recognition and measurement principles. The comparative figures given in
the body text of this report are the figures for the corresponding period of the
previous year, unless stated otherwise.
Market Review
The estimated total assembly value of the global electronics market declined by
roughly 15 % at the annual level, amounting to 840 billion US dollars in 2009.
The combined value of electronic manufacturing services (EMS) and original
design manufacturing (ODM), including all the electronics segments, was roughly
250 billion US dollars in 2009, according to data from Electronics Trend
Publications (ETP), iSuppli, and InForum. EMS alone was valued at roughly 150
billion US dollars in 2009, with a market decline of approximately 15% from the
previous year. The After Market Services (AMS) market declined roughly 13% in
2009 and was valued at 170 billion US dollars in 2009.
Financial Year 2009
Elcoteq's 2009 net sales declined on the previous year and amounted to 1,503.2
million euros (3,443.2). Operating loss was -76.5 million euros (-20.4),
representing -5.1% (-0.6%) of net sales. Loss before taxes was
-117.1 million euros (-52.9) and net loss was -105.0 million euros (-65.9).
Earnings per share (EPS) amounted to -3.22 euros (-2.02). Earnings include 37.0
million euros (13.5) in restructuring expenses.
Net sales declined in both Consumer Electronics and System Solutions compared to
the previous year. The decline in net sales was due to the combined effect of
the overall decline in electronics equipment demand and the company's weak
balance sheet. From time to time, the EMS business may involve temporary working
capital fluctuations, which the electronics manufacturing service provider is
expected to finance. This lacking financing capacity prevented the company from
absorbing all the business opportunities available in the market.
Operating loss increased in 2009 from the previous year. Results were affected
by non-recurring costs of 37.0 million euros (13.5) arising from the
restructuring actions implemented to mitigate the effects of lower net sales.
The cost savings from restructuring actions mainly became visible in the second
half of 2009 and thus could not fully offset the significant net sales decline
throughout 2009. On an annualized basis, fixed costs were 165 million euros or
48% lower in the last quarter of 2009 compared to the last quarter of 2008.
The company has continued to adjust its operations to lower volumes, but it has
at the same time maintained its excellent operational performance and global
platform to serve customers close to their end markets.Among the
efficiency-boosting actions carried out in 2009 were the streamlining of the
factory network, increasing capacity utilization, aligning the organization to
support the adjusted strategy and decreasing operational costs. The company
closed production sites in St. Petersburg (Russia), in Arad (Romania), in
Richardson (the United States) and in Shenzhen (China).
The Group's net financial expenses amounted to 40.5 million euros (32.4). The
increase was mainly due to a loan receivable write-off of 13.4 million euros.
Fourth-quarter Net Sales and Earnings
Fourth-quarter net sales in 2009 declined compared to the third quarter, as
expected, and amounted to 265.5 million euros (889.1 million euros in the fourth
quarter of 2008 and 331.7 million euros in the third quarter of 2009). Net sales
were affected by the divestment of the majority of operations in Tallinn to
Ericsson at the end of July 2009 and lower demand in Consumer Electronics,
mainly in handsets. Deliveries in home communications products such as flat TVs
and set-top boxes increased significantly from the third quarter of 2009.
Operating loss in the fourth quarter was -23.4 million euros (-11.8 million
euros in the fourth quarter of 2008 and -3.3 in the third quarter of 2009).
Operating income exclusive of restructuring expenses in the fourth quarter was
slightly negative at -2.1 million euros (1.7). Restructuring expenses in the
fourth quarter of 2009 were related mainly to unused asset write-offs. Loss
before taxes was -36.4 million euros (-25.2 million euros in 2008).
Financing and Cash Flow
At the end of December 2009, Elcoteq had cash totaling 87.9 million euros (201.0
million euros in the third quarter of 2009 and 95.1 million euros at the end of
2008). In November 2009, the company used 100 million euros cash to repay part
of its revolving credit facility, of which a total of 200 million euros were
outstanding at the end of the third quarter of 2009.
At the end of 2009, the company had a syndicated, committed credit facility of
100 million euros that was fully utilized. The facility matures on April
30, 2010 and the company signed a committed term sheet with the same bank
syndicate in March 2010 for a new facility maturing at the end of June 2011.
At the end of December, the Group's interest-bearing net debt amounted to 187.5
million euros (238.5). The solvency ratio was 6.3% (14.2%) and gearing was 5.8
(1.8). Elcoteq had no sold accounts receivable at the end of December 2009
(101.1 million euros at the end of 2008). Rolling 12-month return on capital
employed (ROCE) was -18.9% (-3.1%).
Cash flow after investing activities in 2009 was 52.9 million euros (-99.7)
while it was -11.3 million euros negative in the fourth quarter due to an
increase in working capital.
Capital Expenditures
The Group's gross capital expenditures on fixed assets in 2009 amounted to 6.4
million euros (71.4), or 0.5% of net sales. Depreciation was 60.1 million euros
(78.9), representing 4.0% of net sales. Investments were primarily earmarked for
production machinery and test equipment. In 2009, investment activity was
reduced to a minimum in order to increase the capacity utilization of existing
assets. In the fourth quarter, investments amounted to 1.8 million euros (9.9).
No new operating lease contracts were made in 2009 (and in 2008).
Personnel
At the end of December, the Group employed 10,101 (18,830) people: 139 (217) in
Finland and 9,963 (18,613) elsewhere. The geographical distribution of the
workforce was as follows: Europe 3,940 (8,607), Asia-Pacific 2,664 (5,027) and
the Americas 3,497 (5,196). The average number of Elcoteq employees on the
company's direct payroll in 2009 was 11,271 (17,401).
Wages, salaries and other personnel expenses in 2009 amounted to 126.3 million
euros (193.0).
Corporate Responsibility
Elcoteq's corporate responsibility includes economic, social and environmental
aspects. The company's environmental management system corresponds with the
requirements of the ISO 14001:2004 standard. All Elcoteq units operate within a
multisite certificate for quality and environmental management. In 2009, Elcoteq
continued systematic group-level internal audits of environmental, social
accountability as well as occupational health and safety standards. Further
details on Elcoteq's corporate responsibility activities will be presented in
the Corporate Responsibility Report, which will be published as a part of the
Annual Report 2009 during the week commencing on April 5, 2010.
Research and Development
Elcoteq's research and development costs in 2009 totaled approximately 0.9
million euros (1.8), or 0.06% of net sales. The company's R&D activities cover,
among other things, equipment and process development for production and
production testing needs as well as development related to the platforms,
software, electronics, mechanics and testing of mobile phones.
Strategic Business Units
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 of 2009,
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 the 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.
In 2009, Elcoteq's largest customers (in alphabetical order) were EADS,
Ericsson, Funai, Huawei, Humax, Nokia Devices, Nokia Siemens Networks, Philips,
Research in Motion (RIM) and Sony Ericsson.
Consumer Electronics
Net sales of the Consumer Electronics SBU in 2009 were 1,127.3 million euros
(2,739.5), contributing 75% of the Group's net sales. The segment's operating
loss was -38.2 million euros (15.0), and -13.9 million euros excluding
restructuring costs (23.1). Fourth-quarter net sales in 2009 amounted to 211.1
million euros (684.0). The segment's operating loss amounted to -11.2 million
euros (2.7). Excluding restructuring costs the operating profit was 4.4 million
euros (10.8)
In the Consumer Electronics SBU, 2009 was characterized by drastically lower
orders from its high-volume mobile phone customers. The flat TV manufacturing
business acquired in Juarez, Mexico in 2008 was transformed in early 2009 from a
turnkey (TV panel owned by Elcoteq) to a consigned material (TV panel owned by
the customer) business model, which also impacted on net sales. In the EMS
market, the decline in customer demand and excess capacity also led to greater
competition among EMS companies.
Lower customer volumes impacted the profitability of the segment. Significant
cost reduction activities were implemented in 2009 but those could not yet fully
offset the significant sales decline. Restructuring costs arising from capacity
adjustments also had a negative effect on profitability.
However, at the same time Elcoteq made strong progress in growing its service
content in the Consumer Electronics business, especially in increasing its after
sales services business. The company was also successful in acquiring new
customers in the Consumer Electronics business. These new customers include
Emporia, a special-purpose mobile phone manufacturer, Cinterion, a wireless
module manufacturer, TCL, a leading Chinese consumer electronics company, and
Philips Lighting, a leading provider of solutions and applications for both
professional and consumer markets.
System Solutions
Net sales of the System Solutions SBU in 2009 were 375.9 million euros (703.7),
contributing 25% of the Group's net sales. The segment's operating loss was -2.0
million euros (1.6), and excluding restructuring costs its operating income was
9.9 million euros (7.0). Fourth-quarter net sales in 2009 amounted to 54.5
million euros (205.2). The segment's operating loss amounted to -0.1 million
euros (-5.1). Excluding restructuring costs the operating profit was 5.6 million
euros (0.3).
The decline in net sales was mainly due to the sale of the majority of
operations in Tallinn to Ericsson in July 2009. Despite the decline in net
sales, System Solutions was able to improve its efficiency and further reduce
costs to offset the volume decline. However, its operating income was negative.
During 2009, growth in the outsourcing of communications equipment
underperformed forecast. The top key players in traditional communications
network technology infrastructure were in-sourcing their business, thereby
decreasing the share of business accounted for by outsourcing. The overall
market for System Solutions nevertheless showed slight growth.
System Solutions was also successful in alluring new customers. In Tallinn, the
remaining manufacturing capacity has been in utilization and the SBU has managed
to gain new customers for its specialized business operations. Elcoteq's plant
in India also attracted new customers and expanded its operations pipeline.
Furthermore, one of the SBU's major customers successfully relocated its
manufacturing of communications network equipment to central Europe and
proceeded to ramp up its business to a significantly higher level in accordance
with the plan agreed with Elcoteq.
Geographical Areas
Elcoteq has three geographical areas: Europe, Asia-Pacific and the Americas.
Elcoteq's net sales in 2009 were derived from these areas as follows: Europe
47% (48%), Asia-Pacific 14% (22%) and the Americas 38% (30%).
Decisions of the Annual General Meeting
Elcoteq SE's Annual General Meeting took place on March 23, 2009, in Luxembourg.
The Meeting confirmed the consolidated and parent company's income statements
and balance sheets for the financial year 2008 and discharged the members of the
Board of Directors and the statutory auditor from liability for the financial
year. The Meeting approved the Board's proposal that no dividend will be
distributed for the financial year January 1 - December 31, 2008.
The Meeting re-elected the following persons to the Board of Directors:
President Martti Ahtisaari; Mr. Eero Kasanen, Executive Dean of Aalto University
School of Economics; Mr. Heikki Horstia, B.Sc.; Mr. François Pauly, General
Manager of Sal. Oppenheim jr. & Cie S.C.A; Mr. Antti Piippo, principal
shareholder of Elcoteq SE; Mr. Henry Sjöman, founder-shareholder of Elcoteq SE;
Mr. Juha Toivola, M.Sc.; and Mr. Jorma Vanhanen, founder-shareholder of Elcoteq
SE. President Ahtisaari, Mr. Horstia, Mr. Kasanen, Mr. Pauly and Mr. Toivola are
independent Board members, and they represent more than half of the Board's
members.
The Meeting approved the proposal of the Audit Committee of the Board of
Directors to appoint the firm of authorized public accountants KPMG Audit
S.à.r.l under the supervision of Mr. Philippe Meyer as the company's auditors
for the financial year ending on December 31, 2009. The fees of the auditors
will be paid as per the appropriate invoice.
Convening after the Annual General Meeting in Luxembourg, the Board of Directors
elected Mr. Antti Piippo as its Chairman and Mr. Juha Toivola as the Deputy
Chairman. Mr. Piippo was elected Chairman of the Nomination Committee and the
Working Committee and Mr. Henry Sjöman, Mr. Juha Toivola and Mr. Jorma Vanhanen
as members of these committees. Mr. Toivola was elected Chairman of the
Compensation Committee and the Audit Committee and President Martti Ahtisaari,
Mr. Heikki Horstia, Mr. Eero Kasanen and Mr. Pauly as members of these
committees.
Balance Sheet Strengthening
In January, the company commenced a project to strengthen its balance sheet by
means of an equity investment. In July, the company announced the signing of a
conditional letter of intent for an equity increase with Shenzhen Kaifa
Technology Limited, a Chinese industrial company, but after a mutual
re-assessment the negotiations ended in September. In October, Elcoteq announced
that it had signed a non-binding letter of intent with Videocon Industries Ltd,
an Indian company. The negotiations with Videocon were terminated in March
2010.
Another integral part of this balance sheet strengthening is the restructuring
of the company's interest-bearing debt. As a part of this project, Elcoteq
announced in October its plan to collect irrevocable, voluntary selling
commitments from the holders of its subordinated debenture bonds. In January
2010, the company proceeded to exercise these selling commitments by issuing
hybrid securities valued at 29 million euros and using the proceeds directly to
repay outstanding debenture bonds with a nominal amount of 105 million euros.
After redeeming the debentures of 105 million euros at a price of 25% of the
nominal value, reversing the relevant deferred tax assets and recognizing the
29 million euro hybrid securities as equity according to IFRS, the Company's
equity increases approximately by 85 million euros.
In November, Elcoteq signed a new agreement to replace the revolving credit
facility of 230 million euros signed five years ago. The new credit facility was
agreed with the same bank syndicate and it is for 100 million euros. The loan
will mature at the end of April 2010 and the company has signed in March 2010 a
committed term sheet with the same lender group to extend the 100 million euro
facility until the end of June 2011.
Restructuring Plan
Elcoteq has reduced its manufacturing capacity through the Restructuring Plan
launched in January 2009 to adapt to the radical changes in the market
situation. The restructuring actions have proceeded according to the plan. The
plan consists of a number of measures such as closing several plants and
reducing personnel globally. During the year, Elcoteq closed down its plants in
Arad (Romania), Richardson (USA) and St. Petersburg (Russia). The plant in
Shenzhen (China) was consolidated into the plant in Beijing.
A further step in this process was taken on June 17, when Elcoteq and Ericsson
concluded an agreement whereby Elcoteq sold the majority of the machinery,
equipment and materials of its Tallinn manufacturing operations to Ericsson.
Cost-saving measures have continued at other factories as well.
Shares and Shareholders
At the end of 2009, the company had altogether 128,132,185 shares divided into
22,362,185 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 10,213 registered shareholders on December 31, 2009. There were a
total of 5,307,833 foreign and nominee registered shares, representing some
4.14% of the votes.
Incentive Schemes
The company has had a share subscription plan from 2007 that allows the company
to issue shares to key personnel on the basis of the set operational targets.
Based on the target achievement in 2008 the actual number of shares issued on
November 12, 2009 for this share subscription plan was 336,266.
The company also has a fairly similar share subscription plan from 2009, where
the potential reward is based on reaching the targets regarding consolidated
income before taxes for the first and second half of 2009. Based on the achieved
targets, the company would issue a maximum of 1,500,000 new series A shares, of
which 50% would be issued during June 2010 and the remaining 50% during January
2011. Based on the actual results for 2009, the targets for the first and second
half of 2009 have not been met and thus no shares will be issued.
In October 2009, the Board of Directors amended the 2009 Share Subscription
Plan. The amendments concerned 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. Neither of these
cases occurred during the second half of 2009.
Changes in Elcoteq's Management
As of August 27, 2009, and as a result of the changes in the organization, the
Elcoteq 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 (until March 31, 2010)
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
Events After the Financial Year
In December 2009, Elcoteq decided to convene an Extraordinary General Meeting
(EGM) of shareholders to decide on actions supporting the execution of balance
sheet restructuring and the equity investment project. The first EGM took place
on January 22, 2010, in Luxembourg. Since the quorum requirement (at least half
of the series A shares and half of the series K shares need to be present or
represented in the meeting) was not met at this first meeting, the company
convened a second EGM that was held on February 23, 2010.
The EGM held on February 23, 2010, rejected the Board's proposals to decrease
the share capital of the company from its current amount of EUR 8,944,874 and to
decrease the current par value of series A shares (EUR 0.40) and series K shares
(EUR 0.04). The Board of Directors made its proposal to the EGM prior to the
recent positive development in the company's equity. In light of the stronger
balance sheet, the EGM deemed that the size of the proposed authorization to
increase the share capital up to EUR 200,000,000 was too high and it is not
necessary to decrease the par value of shares.
The EGM decided to increase the authorized share capital of the company from its
current amount of twenty million euros (EUR 20,000,000) up to forty million
euros (EUR 40,000,000). The EGM authorized the Board of Directors to issue new
shares and convertible debt instruments within the authorized share capital of
the company without reserving preferential subscription rights for the existing
shareholders, up to an amount of twelve million euros (EUR 12,000,000) of the
authorized share capital, corresponding to a maximum of 30,000,000 new series A
shares. The EGM also authorized the Board of Directors to issue new shares and
convertible debt instruments within the remainder of the authorized share
capital of nineteen million fifty-five thousand one hundred and twenty-six euros
(EUR 19,055,126), respecting the existing shareholders' preferential
subscription rights. A maximum of approximately 47,000,000 new series A shares
can be issued under this authorization.
The EGM deleted from the company's Articles of Association the right of a
shareholder to request a redemption of shares in case a change or changes in the
ownership of the company result in a shareholder holding more than thirty-three
and one third (33 1/3) percent or, as the case may be, fifty (50) percent of the
shares in the company. Finally, the EGM changed the date of the Annual General
Meeting of the shareholders from 23 March to 28 April each year. The company's
Articles of Association were reworded in order to reflect these changes voted
upon at the EGM of the shareholders of the company.
On January 27, 2010, Elcoteq issued EUR 29 million in hybrid securities in a
private placement as a part of its previously announced balance sheet
restructuring. The proceeds from the hybrid securities issue were used directly
to repay Elcoteq's outstanding debenture bonds with a nominal amount of 105
million euros. As a result of this transaction, the company estimates that it
will recognize a one-time gain of approximately EUR 75 million in the first
quarter of 2010. The announced restructuring will significantly improve the
company's indebtedness and solidity. If this transaction had taken place on
December 31, 2009, the company's solvency would have been 23.7%, gearing 0.7 and
net debt 82.1 million euros.
On January 27, 2010, Elcoteq and Nokia Corporation signed an agreement that
qualifies Elcoteq as a partner to provide Nokia's customers with After Market
Services for their Nokia devices. It is expected that Elcoteq will start these
operations gradually during the second quarter of 2010. The companies also
intend to explore other opportunities for cooperation.
On March 1, 2010, Elcoteq commenced statutory personnel negotiations regarding
possible temporary lay-offs or the termination of employee contracts in the
operations of Elcoteq SE Finnish Branch, Elcoteq Finland Oy and Elcoteq Design
Center Oy on production or financial grounds. As a result of these negotiations
the companies decided to make altogether seven persons redundant and temporarily
lay off seven persons on March 16, 2010.
On March 4, 2010, Mr. Markus Kivimäki, member of the Elcoteq Management Team and
Senior Vice President of Group Legal Affairs, announced that he will pursue his
career outside Elcoteq. Mr. Jari Hakkarainen, Legal Counsel at Elcoteq will be
heading the legal function as of April 1, 2010.
On March 15, 2010, Elcoteq announced that Philips Lighting has chosen Elcoteq as
a global growth partner for its Solid-State Lighting (SSL) business. Under the
agreement, Elcoteq will provide Philips Lighting with global manufacturing
services and related sourcing and supply chain management as well as product
development services. Elcoteq has already started the production of SSL products
at its factory in Dongguan, China. Production will expand to other Elcoteq
locations including Mexico and Hungary during 2010.
On March 30, 2010, Elcoteq and the lenders of its EUR 100 million revolving
credit facility agreed on extending the facility from April 30, 2010 until June
30, 2011. The parties have signed a committed term sheet for the extended
facility and aim at finalizing the loan documentation during April 2010.
On March 30, 2010, Elcoteq and Videocon Industries Limited (Videocon) decided
after mutual re-assessment to terminate the negotiations started in September
2009 regarding a major equity investment which would have made Videocon a major
single shareholder in Elcoteq.
In addition, to enhance possibilities for further balance sheet strengthening,
the three founder shareholders of the company, Mr. Antti Piippo, Mr. Henry
Sjöman and Mr. Jorma Vanhanen, have informed the Board of Directors that they
will exercise their right to convert all of their series K founders´ shares to
series A shares after which the company will have only one series of shares, A
shares.
At the same time Mr. Antti Piippo and Mr. Henry Sjöman, the founder shareholders
and board members of Elcoteq as well as Mr. Juha Toivola, an independent board
member of Elcoteq have announced that they will not be available for re-election
as Board Members. Mr. Jorma Vanhanen, the third founder shareholder, and all
other independent board members (Mr. Martti Ahtisaari, Mr. Heikki Horstia, Mr.
Eero Kasanen and Mr. François Pauly) have announced their availability for
re-election to the Board. In addition, the Board will be strengthened by two
independent board members to be proposed to the Annual General Meeting.
The Company continues to explore further ways to strengthen its balance sheet
through equity and long-term financing arrangements. Furthermore, the Company
will arrange a rights issue during 2010. The three founder shareholders have
undertaken to support such balance sheet strengthening arrangements in
shareholders' meetings.
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 financing and ability to stabilize the
financing structure, including the strengthening of shareholders' equity and to
increase financial flexibility.
The company's key short-term operative challenges are to increase sales,
proactively manage fixed costs according to sales fluctuations, significantly
improve profitability as well as avoid generating excess working capital to
preserve cash reserves. The Company has significant part of its purchases and
sales in other currencies than euro and the inability to fully or partly hedge
the foreign currency exposure can result to deviations from business plan.
Ability to offer the right service offering to customers is a key element in
keeping existing customers and winning new customers. Under the changing market
conditions the failure to identify and respond to the customer requirements may
prevent the Company from achieving the strategic objectives and the above
operative targets.
Prospects
The total assembly value of the global electronics market is expected to
increase again in 2010 and reach the 1,000 billion US dollar milestone in 2011.
According to industry research data providers, the EMS market is expected to
grow approximately 6 percent and After Market Services (AMS) spending roughly
14 percent in 2010. The operator and OEM revenue streams are increasingly coming
from various services where usage is highly dependent on well functioning
devices. Therefore, the uninterrupted usage of the devices becomes more
important, creating more demand for After Market Services.
Within the Consumer Electronics market, handset production amounted to
approximately 1.1 billion units in 2009 and is expected to increase slightly in
2010. In spite of the global economy worries, the set-top box (STB) and flat TV
markets (FTV) are expected to see further growth in the coming years, STB
approximately 7 percent annually during the next five years and FTV even higher.
System Solutions' electronics assembly market amounted to 150 billion US dollars
in 2009 and is expected to increase only slightly in 2010 according to the
industry research data providers.
First-quarter net sales are expected to be somewhat lower than the fourth
quarter of 2009. Company expects that the operating income in the first half of
2010 remains negative. Based on the impact of implemented cost reduction
actions, the stabilization of underlying business and the contribution of
recently won new customer contracts the Company expects the operating profit to
turn positive for the second half of 2010. Due to the restructuring of
subordinated debt in January 2010, the net income for 2010 will be clearly
positive.
The company's key operational focus area for 2010 is to generate positive cash
from operations by further significantly improving factory utilization ratio
through reduced cost base and gaining new customer contracts. It is the focus of
the Board and operative management to further strengthen the balance sheet
through equity related transactions and long-term financing arrangements.
Company seeks to further reduce tied-up capital through fixed asset divestments,
working capital financing arrangements and operational improvements in inventory
management.
Board's Dividend Proposal
The Board of Directors proposes to the Annual General Meeting to be held on
April 28, 2010, that no dividend will be paid for the financial year 2009.
Annual General Meeting 2010
Elcoteq's Annual General Meeting will be held in Luxembourg on April 28, 2010. A
separate Shareholder Information Meeting will be held before the Annual General
Meeting in Helsinki, on April 20, 2010.
March 30, 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, March 31, in the Bulsa-Freda room at
Scandic Hotel Simonkenttä (address: Simonkatu 9, Helsinki, Finland).
To participate via a conference call, please dial in 5-10 minutes before the
beginning of the event: +44 (0)20 7162 0025 (Europe) or +1 334 323 6201 (USA).
When dialing in, the participants should quote 855863 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 March 31, 2010.
Elcoteq will publish its Interim Report for January-March 2010 at 9.00 am (EET)
on Wednesday, May 19, 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 Segment reporting
6 Personnel
7 Formulas for the calculation of key figures
8 Key figures for five years
9 Restructuring expenses
10 Assets and liabilities classified as held for sale
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 has impacted the
presentation of segment information.
- Revised IAS 23 Borrowing Costs. The adoption of the standard causes a change
in the accounting principles used in the consolidated financial statements. The
adoption of the standard does not currently have a material impact on the Group.
- Revised IAS 1 Presentation of Financial Statements. The change of the standard
has an impact on the presentation of the Statement of Comprehensive Income and
the Statement of Changes in Equity.
-IFRS 2 Share-based Payments. The change of the standard does not currently have
a material impact on the Group.
Other new interpretations or amendments to standards effective as of January
1, 2009 have not been relevant to the Group.
- IFRS 1 First-Time Adoption
- IFRIC 15 Agreements for the Construction of Real Estate
APPENDIX 1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Jan. 1 - Jan. 1 -
EUR 1,000 Dec. 31, 2009 Dec. 31, 2008
------------------------------------------------------------------------------
NET SALES 1,503,205 3,443,199
Change in work in progress
and finished goods -44,420 -35,516
Other operating income 13,337 11,182
Production materials and services -1,225,529 -2,989,012
Personnel expenses -126,328 -192,982
Depreciation and amortization -60,143 -78,921
Restructuring expenses -37,049 -13,496
Other operating expenses -99,620 -164,851
------------------------------------------------------------------------------
OPERATING LOSS -76,545 -20,399
Financial income, total 3,322 6,381
Financial expenses, total -43,813 -38,784
Share of the losses of associated companies (net
of income tax) -68 -105
------------------------------------------------------------------------------
LOSS BEFORE TAXES -117,105 -52,908
Income taxes 8,139 -11,109
------------------------------------------------------------------------------
NET LOSS -108,966 -64,017
Other comprehensive income
Effective portion of changes in fair value of
cash flow hedges 3,465 -2,492
Net gain/loss on hedges of net
investments in foreign operations 2,988 -4,654
Foreign currency translation
differences for foreign operations 1,149 9,479
Income tax relating to components of
other comprehensive income -405 400
------------------------------------------------------------------------------
Other comprehensive income for the
period, net of tax 7,197 2,733
TOTAL COMPREHENSIVE LOSS
FOR THE YEAR -101,769 -61,284
LOSS FOR THE YEAR ATTRIBUTABLE TO:
Owners of the parent company * -105,045 -65,872
Non-controlling interests -3,920 1,856
------------------------------------------------------------------------------
-108,966 -64,017
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
Owners of the parent company -98,434 -64,730
Non-controlling interests -3,335 3,447
------------------------------------------------------------------------------
-101,769 -61,284
Earnings per share calculated on loss attributable
to owners of the parent company
Basic and diluted earnings per share (EPS), A
shares EUR -3.22 -2.02
Basic and diluted earnings per share (EPS), K
founders' shares EUR -0.32 -0.20
* Net loss reported by the company.
APPENDIX 2
CONSOLIDATED BALANCE SHEET
EUR 1,000 Dec. 31, 2009 Dec. 31, 2008
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets
Goodwill 21,510 21,510
Other intangible assets 3,882 6,134
--------------------------------------------------------------------------------
25,392 27,644
Tangible assets
Land 772 742
Buildings 33,063 37,522
Machinery and equipment 45,744 128,484
Advance payments and
construction in progress 1,375 1,017
--------------------------------------------------------------------------------
80,954 167,765
Investments
Investments in associated companies 77 1,637
Receivables from associated companies 87 87
Available-for-sale financial assets 511 513
--------------------------------------------------------------------------------
676 2,238
Long-term receivables
Deferred tax assets 41,906 32,943
Loans receivable 0 13,408
--------------------------------------------------------------------------------
41,906 46,352
Non-current assets, total 148,928 243,999
--------------------------------------------------------------------------------
Current assets
Inventories
Raw materials 64,675 205,524
Work in progress 693 10,593
Finished goods 4,062 40,038
Advance payments 0 1
--------------------------------------------------------------------------------
69,431 256,157
Current receivables
Accounts receivable 155,280 306,107
Other receivables 24,773 17,270
Prepaid expenses and accruals 9,864 12,048
Current tax assets 3 851
--------------------------------------------------------------------------------
189,919 336,276
Cash and cash equivalents 87,941 95,099
Current assets, total 347,291 687,532
--------------------------------------------------------------------------------
Assets classified as held for sale 19,049 23,898
ASSETS, TOTAL 515,268 955,429
EUR 1,000 Dec. 31, 2009 Dec. 31, 2008
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
company
Share capital *) 13,176 13,041
Additional paid-in capital 225,011 225,011
Other reserves 8,224 5,163
Translation differences 6,779 3,227
Retained earnings -123,372 -58,086
Net loss for the year -105,045 -65,872
--------------------------------------------------------------------------------
Equity attributable to owners of the parent
company, total 24,772 122,484
Non-controlling interests 7,832 12,728
--------------------------------------------------------------------------------
Total equity 32,603 135,212
Liabilities
Non-current liabilities
Subordinated notes 139,794 139,517
Medium-term notes 19,986 19,980
Loans from pension plans - 210
Other debt 287 376
Deferred tax liability 2,496 5,253
--------------------------------------------------------------------------------
162,563 165,336
Payments due within one year -50,015 -386
--------------------------------------------------------------------------------
Non-current liabilities, total 112,548 164,951
Current liabilities
Loans from financial institutions 115,429 173,647
Subordinated notes 49,925 -
Loans from pension plans - 210
Advances received 174 780
Accounts payable 165,207 422,892
Other current liabilities 8,063 11,556
Accrued expenses 26,454 37,278
Current tax liabilities 151 1,415
Provisions 4,713 7,488
--------------------------------------------------------------------------------
Current liabilities, total 370,117 655,266
Liabilities, total 482,664 820,217
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES, TOTAL 515,268 955,429
*) Share capital includes both A shares listed in Nasdaq OMX Helsinki Exchange
and K founders' shares.
APPENDIX 3
CONSOLIDATED CASH FLOW STATEMENT
Jan. 1 - Jan. 1 -
EUR 1,000 Dec. 31, 2009 Dec. 31, 2008
--------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss -108,966 -64,017
Adjustments:
Depreciation, amortization and impairments 60,143 78,921
Unrealized foreign exchange gains and losses 4,104 10
Other non-cash income and expenses 14,161 631
Financial income and expenses 35,056 39,859
Income taxes -8,139 11,109
Other adjustments 17,631 5,343
--------------------------------------------------------------------------------
Cash flow before change in working capital 13,989 71,857
Change in working capital :
Change in non-interest bearing current
receivables 136,328 20,798
Change in inventories 184,431 128,867
Change in non-interest bearing current
liabilities -270,219 -209,864
--------------------------------------------------------------------------------
Cash flow from operating activities before
financial items and taxes 64,528 11,658
Interest and other financial expenses -23,819 -28,825
Operations-related interest income 707 1,240
Income taxes paid -1,060 -6,127
--------------------------------------------------------------------------------
Cash flow from operating activities 40,356 -22,054
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of tangible and intangible assets -4,357 -61,849
Proceeds from disposal of tangible and
intangible assets 16,644 7,846
Acquisitions of subsidiaries, net of cash
acquired 253 -23,941
Repayment of loans receivable - 279
--------------------------------------------------------------------------------
Cash flow from investing activities 12,541 -77,665
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from the revolving credit facility 100,000 160,000
Loan transactions costs -3,000 -
Repayment of current debt (including loans from
the revolving credit facility) -153,137 -40,304
Repayment of non-current debt - -20,420
Dividends paid -2,442 -2,025
--------------------------------------------------------------------------------
Cash flow from financing activities -58,580 97,251
CHANGE IN CASH AND CASH EQUIVALENTS -5,683 -2,469
Cash and cash equivalents on January 1 95,099 92,691
Effect of exchange rate changes on cash held -1,475 4,877
--------------------------------------------------------------------------------
Cash and cash equivalents on December 31 87,941 95,099
APPENDIX 4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
con-
Attributable to equity holders of the parent trol-
ling
inter- Total
ests equity
Re-
ser-
Addi- ve
tional Hed- Trans- for Retai-
Share paid- Other ging lation own ned
ca- in reser- re- re- sha- ear-
EUR
1,000 pital capital ves serve serve res nings Total
--------------------------------------------------------------------------------
BALANCE
AT
JAN.
1, 2009 13041 225011 8369 -3139 3227 -68 -123958 122484 12728 135212
Share
issue 135 1 -135 1 1
Other
compre-
hensive
income 3060 3552 -105045 -98433 -3335 -101768
Share-
based
payments 720 720 720
Divi-
dends -2442 -2442
Divest-
ment
of non-
control
ling
interest 880 880
--------------------------------------------------------------------------------
BALANCE
AT
DEC.
31, 2009 13176 225011 8369 -78 6779 -67 -228418 24772 7832 32603
--------------------------------------------------------------------------------
Non-
con-
troll-
ing
inter- Total
Attributable to equity holders of the parent ests equity
Re-
Addi ser-
tio ve
nal Other Hedg- Trans- for Re
Share paid- re- ing lation own tained
ca- in ser- reser- reser- sha earn-
EUR
1,000 pital capital ves ve ve res ings Total
--------------------------------------------------------------------------------
BALANCE
AT
JAN.
1, 2008 13041 225011 8369 -1047 -7 -68 -58717 186584 11307 197891
Other
compre-
hensive
income -2092 3234 -65872 -64730 3447 -61283
Share-
based
payments 631 631 631
Divi-
dends -2025 -2025
--------------------------------------------------------------------------------
BALANCE
AT
DEC.
31, 2008 13041 225011 8369 -3139 3227 -68 -123958 122484 12728 135212
--------------------------------------------------------------------------------
APPENDIX 5
SEGMENT REPORTING
Since the beginning of 2008, Elcoteq has had three Business Areas: Personal
Communications, Home Communications and Communications Networks. Personal
Communications and Home Communications Business Areas were combined during the
third quarter of 2009 under a new Strategic Business Unit, Consumer Electronics.
Communications Networks Business Area has been changed into a new Strategic
Business Unit, System Solutions. At the end of 2009 the Group 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.
From 2009, Elcoteq has applied IFRS 8 Operating Segments in its segment
reporting. The comparative information of 2008 has been changed to correspond to
the new reporting structure. The presented segment information is based on the
information provided to the Group's management.
Accounting Principles
There are no sales between the segments.
The items shown for the segments are those that are either directly attributable
to the segments or that can be reasonably allocated to them.
The segment's interest income and interest expenses are reported as net
financial charges.
Income taxes are not allocated to the segments.
The segment's assets comprise of intangible and tangible assets, investments in
associated companies, inventories, accounts receivable and allocatable prepaid
expenses and accruals.
The segment's liabilities include accounts payable and accrued expenses
allocated to them.
Non-Allocated Items
Non-allocated expenses in the income statement consist of the expenses of the
Group office.
Non-allocated assets consist mainly of cash and bank receivables as well as
prepaid expenses and accruals not allocated to the segments.
Non-allocated liabilities are mainly interest-bearing liabilities, deferred tax
liabilities and accrued expenses not allocated to the segments.
Investments in associated companies that cannot be allocated to the segments are
entered under non-allocated assets.
Strategic Business Units
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.
STRATEGIC Total
BUSINESS UNITS System reportable Group
IN 2009, MEUR ConsumerElectronics Solutions segments Non-Allocated total
--------------------------------------------------------------------------------
Net sales 1,127.3 375.9 1,503.2 - 1,503.2
Depreciation
and
amortisation -48.5 -9.8 -58.3 -1.9 -60.1
Operating
income/loss -38.2 -2.0 -40.2 -36.3 -76.5
Restructuring
expenses* -24.3 -11.9 -36.2 -0.8 -37.0
Financial
charges -21.4 -8.8 -30.2 -10.3 -40.5
Share of
associated
companies'
results - -0.1 -0.1 0.0 -0.1
Income before
taxes -59.6 -10.8 -70.4 -46.7 -117.1
Assets** 273.4 93.6 367.0 148.3 515.3
Investments
in associated
companies*** - 0.1 0.1 0.0 0.1
Capital
expenditures 3.9 1.6 5.5 0.9 6.4
Liabilities 116.1 65.4 181.6 301.1 482.7
*) A total of 28.0 million euros in restructuring expenses with no cash flow
effect have been recognized, of which 19.5 million euros are included in the
restructuring expenses of the Consumer Electronics Strategic Business Unit, 8.5
million euros in the restructuring expenses of the System Solutions Strategic
Business Unit and 0.1 million euros in the restructuring expenses of the Group's
non-allocated costs.
**) The assets of the segments include a total of 19.0 million euros assets
classified as held for sale, of which 12.9 million are allocated to the Consumer
Electronics Strategic Business Unit and 6.2 million to the System Solutions
Strategic Business Unit.
***) Included also in the segment's assets.
Total
STRATEGIC BUSINESS Consumer System reportable
UNITS IN 2008, MEUR Electronics Solutions segments Non-Allocated Group total
--------------------------------------------------------------------------------
Net sales 2,739.5 703.7 3,443.2 - 3,443.2
Depreciation and
amortization -58.7 -17.8 -76.5 -2.4 -78.9
Operating
income/loss 15.0 1.6 16.6 -37.0 -20.4
Restructuring
expenses* -8.1 -5.4 -13.5 - -13.5
Financial charges -19.4 -12.1 -31.4 -1.0 -32.4
Share of associated
companies' results - -0.1 -0.1 0.0 -0.1
Income before taxes -4.3 -10.5 -14.8 -38.1 -52.9
Assets** 553.4 248.3 801.7 153.7 955.4
Investments in
associated
companies*** - 1.6 1.6 0.0 1.6
Capital
expenditures 63.4 6.7 70.1 1.3 71.4
Liabilities 324.5 133.0 457.5 362.7 820.2
Sold accounts
receivable**** 36.9 64.1 101.1 - 101.1
*) A total of 9.2 million euros in restructuring expenses with no cash flow
effect have been recognized, of which 4.3 million euros are included in the
restructuring expenses of the Consumer Electronics Strategic Business Unit and
5.0 million euros in the restructuring expenses of the System Solutions
Strategic Business Unit.
**) The assets of the segments include a total of 23.9 million euros assets
classified as held for sale, of which 2.2 million are allocated to the Consumer
Electronics Strategic Business Unit and 21.7 million to the System Solutions
Strategic Business Unit.
***) Included also in the segment's assets.
****) Not included in the segment's assets.
Geographical Areas
Consumer Electronics and System Solutions segments are managed on a worldwide
basis. Elcoteq's service network covers countries in Europe, Asia-Pacific and
Americas. It includes high-volume manufacturing plants, units specializing in
smaller series, as well as product development units and new product
introduction (NPI) centers. All of the company's high-volume plants are located
close to the main end-markets of customers' products and in low-cost countries:
in Hungary, Estonia, China, Mexico, India and Brazil.
In presenting information on the basis of geographical segments, segment revenue
and non-current assets are based on the geographical location of the
manufacturing unit.
Net sales by countries are presented according to geographical location of the
manufacturing unit under "Breakdown of net sales by country".
Group has no non-current assets in its country of domicile in Luxembourg.
GEOGRAPHICAL AREAS IN
2009, MEUR Europe Asia-Pacific Americas Non-Allocated Group total
--------------------------------------------------------------------------------
Net sales 710.4 217.7 575.1 - 1,503.2
Non-current assets 51.3 31.3 15.7 8.7 107.0
GEOGRAPHICAL AREAS IN
2008, MEUR Europe Asia-Pacific Americas Non-Allocated Group total
--------------------------------------------------------------------------------
Net sales 1,665.0 755.1 1,023.2 - 3,443.2
Non-current assets 78.8 71.2 43.9 17.1 211.1
Major customers
Revenues from customer X of Consumer Electronics segment represents
approximately 45% (39% in 2008) and customer Y 18% (12% in 2008) of the Group's
total revenues. Revenues from customer Z of System Solutions segment represent
approximately 18% (12% in 2008) of the Group's total revenues.
BREAKDOWN OF NET SALES BY COUNTRY
MEUR 2009 2008
--------------------------------------------
Hungary 578.7 1,335.1
Mexico 521.5 966.8
Estonia 129.4 305.1
China 125.3 698.9
India 92.5 56.2
Brazil 50.7 39.9
Luxembourg 0.0 0.0
Other countries 5.1 41.1
--------------------------------------------
1,503.2 3,443.2
APPENDIX 6
PERSONNEL
The Group had on average 11,271 (17,401) employees during the year,
distributed geographically as follows.
At Dec. 31 At Jan. 1 Change Average
----------------------------------------------------------------------------
Brazil 861 790 71 797
China 2,046 4,086 -2,040 2,750
Estonia 165 1,992 -1,827 1,118
Finland 139 220 -81 168
Germany 4 4 0 4
Hong Kong 30 50 -20 39
Hungary 2,056 2,991 -935 2,492
India 583 885 -302 721
Japan 4 3 1 4
Luxembourg 5 4 1 5
Mexico 2,529 3,633 -1,104 2,892
Romania 0 301 -301 66
Russia 20 384 -364 134
Sweden 4 7 -3 5
Switzerland 8 10 -2 9
USA 35 133 -98 67
----------------------------------------------------------------------------
Total 8,489 15,493 -7,004 11,271
On December 31, 2009 the Group employed 10,101 people, of whom 8,489 were
on Elcoteq's payroll.
APPENDIX 7
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 (2005-2007) =
Equity attributable to equity holders of the parent company
---------------------------------------------------------
Adjusted average number of shares outstanding end of the
period
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 share, diluted, A shares (EPS) =
Net income attributable to equity holders of the parent, A shares
----------------------------------------------
Adjusted average number of A shares outstanding during the
Period + effect of dilution on the number of shares
Earnings per shares, K shares (EPS) (2005-2007) =
Net income attributable to equity holders of the parent,
K shares
----------------------------------------
Adjusted average number of K 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
Dividend per share =
Dividends paid for the fiscal year
--------------------------------------------------------------
Adjusted average number of shares outstanding end of the period
Payout ratio =
Dividend per share x 100
--------------------------------------
Earnings per share
Dividend yield =
Dividend per share x 100
------------------------------------------------------
Average share price at the end of the period
P/E ratio=
Average share price at the end of the period
-----------------------------------------------------------
Earnings per share (EPS)
Operating income before depreciation
and amortization (EBITDA) =
Operating income/loss +
Depreciation, amortization and impairment
APPENDIX 8
KEY FIGURES FOR FIVE YEARS
2009 2008 2007 2006 2005
OPERA
TIONS
Net sales MEUR 1,503.2 3,443.2 4,042.9 4,284.3 4,169.0
of which
outside
Finland % 97.9 95.2 93.9 89.7 81.4
Gross capital expenditures MEUR 6.4 71.4 67.2 116.9 123.6
(does not
include
operating
leases)
Employees, average 11,271 17,401 19,131 16,651 15,242
PROFITA
BILITY
Operating income before
depreciation
and amortization (EBITDA) MEUR -16.4 58.5 -16.6 126.6 155.0
Operating income MEUR -76.5 -20.4 -96.3 43.9 76.5
% of net
sales % -5.1 -0.6 -2.4 1.0 1.8
Income before taxes MEUR -117.1 -52.9 -122.8 19.2 59.3
% of net
sales % -7.8 -1.5 -3.0 0.4 1.4
Net income MEUR -105.0 -65.9 -108.4 12.1 41.3
% of net
sales % -7.0 -1.9 -2.7 0.3 1.0
Return on equity (ROE) % -129.9 -38.4 -42.5 4.8 14.1
Return on investment
(ROCE/ROI) % -18.9 -3.1 -19.6 9.1 17.6
FINANCIAL RATIOS
Current
ratio 1.0 1.1 1.1 1.2 1.2
Solvency % 6.3 14.2 18.1 26.1 26.0
Gearing 5.8 1.8 0.7 0.4 0.3
Interest-bearing
liabilities MEUR 275.4 333.6 237.2 210.3 191.7
Interest-bearing net debt MEUR 187.5 238.5 144.5 128.0 90.3
PER SHARE
DATA
Earnings per share A
shares (EPS) EUR -3.22 -2.02 -3.37 0.38 1.34
Earnings per share K
shares (EPS) EUR - - -3.37 0.38 1.34
Earnings per share K
founders' shares (EPS)** EUR -0.32 -0.20 - - -
Diluted earnings per
share, A shares (EPS) EUR - - -3.37 0.37 1.28
Shareholders' equity per
share EUR 0.75 3.76 5.72 9.31 9.55
Share price at the end of
the year EUR 0.91 1.21 4.06 9.78 20.15
Dividend per share * EUR 0.00 0.00 0.00 0.20 0.66
Payout ratio * % 0.0 0.0 0.0 52.3 49.7
Dividend yield* % 0.0 0.0 0.0 2.0 3.3
P/E ratio -0.3 -0.6 -1.2 25.7 15.0
Adjusted weighted average
number of
shares in issue during the
period
A shares 22071983 22017819 21601081 20761611 20187705
K founders' shares** 105770000 105770000 10577000 10577000 10577000
Adjusted number of shares
in issue
at the end of the period
A shares 22352684 22017819 22017819 20962327 20526577
K founders' shares 105770000 105770000 10577000 10577000 10577000
* The dividend in 2009 is the proposal of the Board of Directors to the Annual
General Meeting.
** In the transfer of domicile on January 1, 2008 the company K shares were
converted into K founders' shares and their number increased ten-fold while at
the same time reducing their par value to one-tenth of the par value of the A
shares.
Financial ratios for 2009 assuming that the January 27, 2010 transactions
(repayment of the debenture loans
and receipt of the hybrid loans) had taken place on
Dec. 31st, 2009
2009
Solvency*** % 23.7
Gearing*** 0.7
Interest-bearing
liabilities*** MEUR 170.1
Interest-bearing net
debt*** MEUR 82.1
*** The December 31, 2009 balance sheet is adjusted by using the
following assumptions:
- In January 2010, debenture loans were repurchased with balance
sheet values of
105.3 million euros. The after tax income is included in equity.
- The Hybrid securities of EUR 28.7 million, issued in January
2010, is included in equity.
APPENDIX 9
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 was
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 Group'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 merge 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 Group has reduced other operating costs.
In August 2009 Elcoteq announced further organizational changes and decided to
consolidate the Personal Communications and Home Communications Business Areas
under Consumer Electronics Strategic Business Unit. 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. Addtionally Elcoteq has booked a non-cash impairment charge of
25,109 thousand euros from various assets at the end of 2009.
The Group´s restructuring expenses, 37,049 thousand euros, comprise the
following items:
EUR 1,000 2009 2008
------------------------------------------------------
Personnel expenses 9,401 2,722
Impairments 25,109 6,074
Production materials and services 1,107 3,170
Gains on the disposals of fixed assets -1,418 -
Other operating expenses 2,849 1,530
------------------------------------------------------
Restructuring expenses, total 37,049 13,496
Impairments of non-current assets:
EUR 1,000 2009 2008
------------------------------------------------------
Goodwill - 248
Buildings 1,244 1,837
Machinery and equipment 22,396 3,871
Computer software 31 118
Investments in associated companies 1,438 -
------------------------------------------------------
Impairments, total 25,109 6,074
Impairments of goodwill in 2008 are related to the closing of the Richardson
plant. Impairments of buildings as well as machinery and equipment are primarily
due to plant closures.
APPENDIX 10
ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Assets classified as held for sale amounting to 19,049 thousand 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 11
ASSETS PLEDGED AND CONTINGENT LIABILITIES
EUR 1,000 2009 2008
----------------------------------------------------------------------------
BUSINESS MORTGAGES 100,000 -
PLEDGED OTHER RECEIVABLE 3,000 -
PLEDGED CASH AND CASH EQUIVALENTS 56,158 -
PLEDGED ACCOUNTS RECEIVABLE - 26,901
PLEDGED LOAN RECEIVABLES 81 764
ON BEHALF OF OTHERS
Guarantees 1,008 1,008
LEASE COMMITMENTS
Operating leases, production machinery (excl. VAT) 1,244 9,014
Operating leases, real-estate (excl. VAT) 12,262 15,386
Operating leases, others (excl. VAT) 919 1,854
DERIVATIVE CONTRACTS
Currency forward contracts, transaction risk,
hedge accounting not applied
Nominal value, open 43,222 118,315
Nominal value, closed 130,136 -
Fair value 38 -224
Currency forward contracts, transaction risk,
hedge accounting applied
Nominal value, open 70,632 69,389
Nominal value, closed 11,400 -
Fair value -74 -3,539
Currency option contracts, transaction risk,
hedge accounting applied, bought options
Nominal value - 17,000
Fair value - 341
Currency forward contracts, translation risk
Nominal value - 20,243
Fair value - -819
Currency forward contracts, financial risk
Nominal value 110,689 172,329
Fair value -239 -3,116
Interest rate and foreign exchange swap contracts
Nominal value - 1,500
Fair value - 225
The derivative contracts are measured using the market prices and the exchange
reference rates of the European Central Bank on the balance sheet date.
Group has pledged part of its assets for syndicated credit facility and for
arbitration. Assets pledged for syndicated credit facility are in the free use
of the company. Assets pledged for arbitration can be freely used by the Company
immediately after it has terminated the contract with the service provider.
APPENDIX 12
QUARTELY FIGURES (Unaudited)
Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
INCOME STATEMENT, MEUR 2009 2009 2009 2009 2008 2008 2008 2008
--------------------------------------------------------------------------------
NET SALES 265.5 331.7 436.0 470.0 889.1 740.5 904.8 908.7
Change in work in
progress
and finished
goods -9.9 -8.2 -4.4 -21.9 -23.9 -4.4 -10.1 2.9
Other operating
income 4.2 5.5 1.4 2.3 2.2 4.4 3.1 1.6
Operating
expenses -250.2 -317.2 -428.0 -456.1 -842.6 -719.7 -878.9 -905.6
Restruc- -21.3
turing expenses -1.7 -0.4 -13.6 -13.5 - - -
Depre-
ciation and
impair-
ments -11.7 -13.5 -16.0 -18.9 -23.2 -20.5 -18.2 -17.1
--------------------------------------------------------------------------------
OPERATING
INCOME -23.4 -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5
% of net sales -8.8 -1.0 -2.6 -8.2 -1.3 0.0 0.1 -1.0
Financial income and
expenses -12.9 -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0
Share of profits and
losses of associates 0,0 -0.1 0.0 0.0 0.0 -0.1 - -
--------------------------------------------------------------------------------
INCOME BEFORE TAXES -36.4 -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4
Income taxes 2.2 0.7 1.5 3.7 -4.0 -4.0 -7.3 4.2
--------------------------------------------------------------------------------
NET INCOME FOR
THE PERIOD -34.2 -6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3
ATTRIBUTABLE TO:
Equity holders of the
parent company -31.3 -6.3 -21.8 -45.6 -29.1 -11.5 -13.7 -11.6
Minority
interests -2.9 -0.5 0.0 -0.5 -0.1 0.8 0.9 0.3
--------------------------------------------------------------------------------
-34.2 -6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3
BA- Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
LANCE SHEET, MEUR 2009 2009 2009 2009 2008 2008 2008 2008
--------------------------------------------------------------------------------
ASSETS
Non-
Cur-
rent
assets
Intan-
gible assets 25.4 25.9 26.6 27.4 27.6 28.4 28.5 29.5
Tan-
gible assets 81.0 110.3 129.8 149.7 167.8 190.0 184.0 182.0
In-
vest-
ments 0.7 2.1 2.2 2.3 2.2 2.2 2.1 2.1
Long-
term re-
ceiv-
ables 41.9 46.8 45.8 53.0 46.4 49.2 48.5 47.3
--------------------------------------------------------------------------------
Non-
cur-
rent
assets,
total 148.9 185.1 204.3 232.4 244.0 269.8 263.2 260.9
Cur-
rent
assets
Inven-
tories 69.4 101.1 113.7 174.2 256.2 358.2 322.5 321.7
Cur-
rent re-
ceiv-
ables 189.9 193.4 221.4 221.9 336.3 326.4 320.0 271.7
Cash and equi-
va-
lents 87.9 201.0 154.8 98.0 95.1 59.5 50.5 91.9
--------------------------------------------------------------------------------
Cur-
rent
assets, total 347.3 495.5 489.8 494.1 687.5 744.0 692.9 685.3
Assets classi-
fied as
held for
sale 19.0 21.0 41.0 20.7 23.9 28.7 30.5 30.2
--------------------------------------------------------------------------------
ASSETS,
TOTAL 515.3 701.6 735.1 747.1 955.4 1042.6 986.6 976.4
SHARE-
HOLDERS' EQUITY AND LIABI-
LITIES
Equity attri-
butable to equity holders of the parent company
Share capital 13.2 13.0 13.0 13.0 13.0 13.0 13.0 13.0
Other share-
hol-
ders´ equity 11.6 43.5 48.7 64.5 109.4 139.7 152.4 162.8
--------------------------------------------------------------------------------
Equity attri-
butable to equity holders
of the parent com-
pany, total 24.8 56.6 61.8 77.5 122.5 152.8 165.4 175.9
Mino-
rity inte-
rests 7.8 11.1 12.0 12.8 12.7 13.4 12.5 11.3
--------------------------------------------------------------------------------
Total equity 32.6 67.7 73.7 90.3 135.2 166.2 177.9 187.2
Long-
term liabi-
lities
Long-
term loans 109.8 110.1 159.6 158.9 159.3 159.4 159.3 159.4
Other long-
term debt 2.8 2.8 5.7 6.7 5.6 5.5 5.2 5.0
--------------------------------------------------------------------------------
Long-
term liabi-
lities, total 112.5 113.0 165.2 165.6 165.0 164.9 164.5 164.4
Cur-
rent liabi-
lities
Cur-
rent loans 165.4 263.8 210.7 225.4 173.9 187.2 111.2 75.7
Other cur-
rent liabi-
lities 200.0 250.2 279.0 257.4 473.9 519.9 526.8 544.7
Provi-
sions 4.7 6.9 5.7 8.4 7.5 4.4 4.8 3.7
--------------------------------------------------------------------------------
Cur-
rent liabi-
lities, total 370.1 520.9 495.4 491.2 655.3 711.5 642.8 624.1
Liabi-
lities classi-
fied as held
for sale 0.0 0.0 0.8 - - - 1.4 0.7
--------------------------------------------------------------------------------
SHARE-
HOL-
DERS' EQUITY
AND LIABI-
LITIES, TOTAL 515.3 701.6 735.1 747.1 955.4 1042.6 986.6 976.4
Person-
nel on ave-
rage during the period 8882 9877 11693 14446 17050 17304 17543 17894
Gross capi-
tal expen-
ditures, MEUR 1.8 1.1 1.5 2.0 9.9 17.2 16.6 27.7
ROI/
ROCE from 12 prece-
ding months, % -18.9 -14.4 -14.4 -11.3 -3.1 -5.6 -6.2 -10.7
Ear-
nings per share (EPS),
A-shares, EUR -0.96 -0.19 -0.67 -1.40 -0.89 -0.35 -0.42 -0.35
Sol-
vency, % 6.3 9.7 10.0 12.1 14.2 15.9 18.0 19.2
CONSOLIDATED CASH FLOW STATEMENT,
MEUR
Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2009 2008 2008 2008 2008
--------------------------------------------------------------------------------
Cash flow before change in
working capital 20.5 7.0 -6.4 -7.1 21.5 32.8 16.2 1.3
Change in working capital -25.8 34.1 81.1 -38.8 46.6 -65.2 -66.3 24.7
Financial items and taxes -9.5 -5.0 -3.9 -5.8 -13.0 -7.6 -5.6 -7.5
--------------------------------------------------------------------------------
Cash flow from operating
activities -14.8 36.1 70.7 -51.7 55.2 -39.9 -55.8 18.4
Purchases of non-current
assets -0.8 -1.1 -0.4 -2.1 -4.4 -12.8 -24.6 -20.0
Acquisitions 0.3 - - - -8.4 -15.5 - -
Disposals of non-current
assets 3.9 7.8 1.8 3.1 4.1 1.5 1.8 0.5
--------------------------------------------------------------------------------
Cash flow before financing
activities -11.3 42.7 72.2 -50.7 46.6 -66.7 -78.5 -1.1
--------------------------------------------------------------------------------
Change in current debt -100.5 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 -2.4 - - - -1.0 -1.0 - -
--------------------------------------------------------------------------------
Cash flow from financing
activities -103.0 5.2 -12.2 51.4 -12.3 71.1 36.1 2.4
Change in cash and
equivalents -114.3 48.0 59.9 0.7 34.2 4.4 -42.4 1.3
Cash and equivalents at the
beginning of the period 201.0 154.8 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 1.1 -1.7 -3.1 2.2 1.4 4.6 0.9 -1.9
Cash and equivalents at the
end of period 87.9 201.0 154.8 98.0 95.1 59.5 50.5 91.9
STRATEGIC BUSINESS UNITS, MEUR
Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2009 2008 2008 2008 2008
--------------------------------------------------------------------------------
Net sales
Con-
sumer Elec-
tronics 211.1 243.5 328.1 344.6 684.0 564.2 721.5 769.8
Sys
tem Solu-
tions 54.5 88.2 107.9 125.3 205.2 176.3 183.3 139.0
--------------------------------------------------------------------------------
Net sales, total 265.5 331.7 436.0 470.0 889.1 740.5 904.8 908.7
Ope-
rating income
Con-
sumer Elec-
tronics -11.2 -2.3 -4.6 -20.1 2.7 1.0 6.5 4.8
System Solu-
tions -0.1 6.9 1.5 -10.3 -5.1 7.6 3.3 -4.2
Group's non-
allo
cated expen-
ses/ income
Ge-
neral & Admi-
nis-
tra-
tive ex-
pen-
ses -12.1 -7.6 -8.2 -7.2 -9.5 -8.3 -9.2 -10.1
Other ex-
pen-
ses 0.0 -0.3 -0.1 -0.7 0.2 -0.1 - -
--------------------------------------------------------------------------------
Opera-
ting inco-
me, total -23.4 -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5
Restructuring expenses recognized in segment's operating income
Con
sumer Elec-
tronics -15.6 -1.5 0.0 -7.2 -8.1 - - -
Sys-
tem Solu-
tions -5.7 0.0 -0.4 -5.8 -5.4 - - -
Group's non-
allo
cated expen-
ses/ income 0.0 -0.2 0.0 -0.6 - - - -
--------------------------------------------------------------------------------
Restruc-
turing expen-
ses, total -21.3 -1.7 -0.4 -13.6 -13.5 - - -
Finan-
cial income and ex-
penses -12.9 -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0
Share of profits and losses of
asso-
ciates 0.0 -0.1 0.0 0.0 0.0 -0.1 - -
--------------------------------------------------------------------------------
Income before taxes -36.4 -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4
[HUG#1399548]
Elcoteq SE's Financial Statements Bulletin January - December 2009 (Audited)
| Source: Elcoteq
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