DGAP-News: Kontron AG remains sustainably profitable
(firmenpresse) - Kontron AG / Final Results
24.03.2010 07:59
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Slight revenue decline of 6 percent to just under EUR 470 million / Margins
cut earnings to EUR 30.1 million / Traditionally strong fourth quarter /
Design wins at historic record level (EUR 361 million), order book climbs
to EUR 306 million / Tax-free dividend of 20 cents per share proposed /
Operating costs down by EUR 11 million / High net cash position of EUR 80
million / Consolidation expected
Eching, Munich, March 24, 2010. Despite the ongoing challenges posed by
economic conditions, TecDAX-listed Kontron AG reached the target of
continuous profitability that it had set itself at the start of 2009. The
company is the world's leading provider of embedded computer technology,
and employs around 2,500 members of staff. Amidst a global financial and
economic crisis that above all affected Kontron's important industrial
automation sales market, and with it mechanical engineering in particular,
a slight revenue decline from EUR 496.7 million to EUR 468.9 million was
reported compared with the previous year. The company's diversification
with regard to technologies, regions and vertical markets, which it has
initiated over recent years, exerted a stabilizing effect. Consistent cost
management and a solid financial and capital cushion enabled a further
strategic strengthening in the important future markets of transportation,
medical and government, as well as in terms of the product range. EBIT
earnings were exposed to greater margin pressure, and fell from EUR 46.9
million to EUR 30.1 million, mainly due to weakness in the high-margin
automation market, and the sharp decline in the still lower-margin original
design manufacturer (ODM) business in Asia. Earnings per share amounted to
41 cents compared with 67 cents in 2008. Depending on global economic
trends, the company anticipates stabilization or slight growth for the 2010
financial year. Management Board and Supervisory Board have decided to
recommend the Annual Shareholder Meeting on June 9, 2010 as in the last two
years the distribution of a dividend of 20 cents per share.
Market developments burden revenue
Kontron AG's revenue in 2009 was around 6 percent below the previous year's
level. This was mainly due to the decline in demand in the wake of the
financial crisis in Europe. Here, the traditionally high-margin business
with modules and systems was hit, particularly in the automation area. The
automation application area contracted by over 20 percent, and declined
from 23 percent of total revenue to 18 percent. Slight drops were also
registered by the gaming/infotainment areas, as well as the energy sector,
due to currency factors. Products in the less economically dependent areas
of transport, government, telecommunications, and medical engineering were
stable or provided a boost to business, but were nevertheless unable to
fully compensate for the declines in the areas mentioned above. Our
business in Asia felt the recession to a lesser extent, although margins
were lower as a rule. China and Russia reported the best rates of growth:
both markets meanwhile constitute a 29 percent share of total revenue.
European share of total revenue, by contrast, fell from 46 percent to 40
percent; our America business remained stable with a meanwhile 31 percent
revenue share. As a consequence, Kontron's broad horizontal and vertical
positioning has had a positive impact on its business development in the
second year of the global economic and financial crisis.
Strong fourth quarter
In the fourth quarter of 2009, Kontron AG achieved revenue of EUR 135
million, and an EBIT operating profit of EUR 10 million. As a consequence,
the last three months of 2009 were, as expected, and as is traditionally
the case, the strongest quarter of the financial year that has just
elapsed. Due to the trends over the course of the full year, however, the
last three months were below the level of the prior-year period (revenue of
EUR 140 million, and EBIT of EUR 13 million). Shortages in the global
components market, and the resultant allocation, had a negative impact:
this allocation policy resulted in supply times that in some cases exceeded
30 weeks, as a result of which Kontron was only able to safeguard its
production for the coming months through massive stock building (EUR 92
million compared with EUR 71 million in the prior-year period). Integration
costs for the Swiss company Digital-Logic AG, a majority of which was
acquired in September, also affected operating cash flow, which amounted to
EUR 6 million in the fourth quarter, and EUR 23.9 million as of the end of
the year (compared with EUR 27.5 million in the previous year).
At EUR 80 million, cash and cash equivalents remained at a high level, and
were significantly ahead of the previous year's figure of EUR 53 million.
Fourth-quarter net income fell correspondingly to EUR 8.2 million, compared
with EUR 9.5 million in the same period of the previous year. By contrast,
design wins, which are of particular importance for Kontron's business
growth outlook, remained stable at a high level - at EUR 74 million, the
volume of design wins was at the level of the fourth quarter of 2008 (EUR
76 million). Large development orders were won in all key regions, and
particularly from the telecommunications, government, energy and
transportation areas.
Expansion of order book position, presence and product range
Our order book position was positive not only in the fourth quarter, but
also on a full-year basis: it rose to EUR 306 million at the end of the
year, compared with EUR 291 million in the previous year. Design wins also
continued to register very good growth: as an important indicator for
medium- and long-term business trends, they reported renewed growth to a
historic record: the number of design wins was up from 428 in 2008 to 447
in 2009, and their monetary volume was up from EUR 317 million to EUR 361
million. Here, Kontron is benefiting from growing cost pressure on the
customer side, and from the ongoing outsourcing trend. Kontron also
strengthened its presence in important markets, including through a new
sales cooperation between Kontron and Emerson Network Power on the Japanese
market, and a new sales and support center in the strategic market of
India. The company has expanded its range of software and services, as well
as its co-operative venture with its important partner, Intel, through a
global sales cooperation with Wind River (an Intel subsidiary since 2009).
The acquisition of Swiss company Digital-Logic AG in September provided a
major boost to the product range, and will enable tangible future growth in
the high margin segments of government, transportation and medical
engineering in the Central European region.
Cost-saving measures continue to make contributions
Operating costs amounted to EUR 101 million in 2009, EUR 11 million lower
than in the previous year. Here, investments in more streamlined processes
and organizational structures have already proved effective. The long-term
Profit Improvement Program also made contributions: the production
relocation to the Group's own cost-effective production location in
Malaysia meant that Asian production now commands a 60 percent share of
total company production. Manufacturing capacities in comparably expensive
locations, such as North America and Europe, have been dismantled further
in favor of the Penang location. In other areas, too, centralization
measures were implemented, and further cost-saving potentials were
achieved. The reduction in the number of employees from 2,536 to 2,487 also
made a contribution to the lower costs achieved: when taking into account
the 107 jobs acquired with Digital-Logic AG, a net total of 156 jobs were
cut.
Financially well hedged
Kontron AG's liquidity position remains highly solid. The year-end cash
position was EUR 80 million (previous year: EUR 53.1 million). This
increase is primarily attributable to the capital increase performed end of
July, whereby new ordinary shares were issued that were subscribed for by
one of the world's leading private equity companies, the Warburg Pincus
Group. This boosted Kontron AG's issued share capital from EUR 50.8 million
to EUR 55.7 million. This strong financial backing allows Kontron to secure
acquisition-related advantages in a strongly consolidating competitive
environment. Total assets amounted to EUR 461 million (previous year: EUR
394.5 million) and the equity ratio stood at 72 percent. Compared with the
previous year, operating cash flow fell from EUR 27.5 million to EUR 23.9
million. This was due to the integration of Digital-Logic AG, and the
requisite stockbuilding in the fourth quarter due to allocation among
suppliers.
Management Board expects year of consolidation
Although it is hardly possible to issue specific forecasts in view of the
economic prospects that are difficult to predict, the Management Board is
anticipating a year of consolidation. 'The enormous cost pressure is
prompting a growing number of companies to outsource extensive and
cost-intensive development and production steps,' commented Ulrich
Gehrmann, Kontron's CEO. 'This is particularly reflected in our strong
growth in design wins and the order book, and will feed through to growth
in the second half of 2010.' Although individual markets, such as the
automation sector in Europe, remained under pressure, Kontron's broad
regional presence and high degree of sector diversification offer a
significant hedge against major risks, Mr. Gehrmann went on to note. He
suggested that comparatively economically independent sectors such as
telecommunications, security (government) and medical engineering would act
as growth-drivers.
Further cost reduction and growth planned
The final steps of the Profit Improvement Program will ensure further
stability and cost-efficiency, including a reduction in research and
development expenses from 12 percent to 11 percent of revenue. Along with
technology and quality leadership, the medium-term objective is also to
achieve production-cost leadership in the embedded computer technology
business segment. This will be assisted by a constant improvement in
purchasing terms (for instance through the central strategic purchasing
operation in Taiwan), and the continuous rise in more cost-effective
production at the Malaysian location in Penang. The aim is that 70 percent
of production will already be realized in Asia by 2010. Where
administration costs are concerned, preparations are currently underway to
make successive and significant savings through centralization, and the
integration of smaller organizational units into larger ones. More
streamlined structures and competence centers will thereby allow greater
performance and revenue to be generated in the future, along with a lower
cost base. Together with its solid financial position, the company's
organizational strength positions it optimally to make further strategic
acquisitions as part of the market consolidation process. 'In terms of
internal organization, we have achieved greater performance levels through
more streamlined processes. At the same time, we have also achieved
sustainable cost reductions, and strengthened sales and proximity to our
customers. We have minimized risks on the sales side during the crisis
through broad vertical and horizontal diversification,' Mr. Gehrmann
commented further. 'We are expanding these activities, and we are
exploiting our technology leadership to grow in 2010 and subsequent years,
accompanied by rising profitability. We are now laying the foundations in
order to achieve our 12 percent EBIT target margin with double-digit
organic growth rates in a normal economic environment.'
Note: previous year's figures following IAS 8.41f adjustment
Investor Relations: Further information:
Gaby Moldan Florian Bergmann
Kontron AG Engel&Zimmermann AG
Oskar-von-Miller-Str. 1, Agentur für Wirtschaftskommunikation
85386 Eching Schloss Fußberg, Am Schlosspark 15,
Tel:+498165/77212,Fax+498165/77222 82131 Gauting
Tel: +4989-89 35 633,
Fax: +4989-89 39 84 29
E-mail: Gaby.Moldan(at)kontron.com E-mailf.bergmann(at)engel-zimmermann.de
24.03.2010 07:59 Ad hoc announcement, Financial News and Media Release distributed by DGAP. Medienarchiv atwww.dgap-medientreff.deandwww.dgap.de---------------------------------------------------------------------------
Language: English
Company: Kontron AG
Oskar-von-Miller-Str. 1
85386 Eching
Deutschland
Phone: 08165-77-225
Fax: 08165-77-222
E-mail: martin.przybyla(at)kontron.com
Internet: www.kontron.com
ISIN: DE0006053952
WKN: 605395
Indices: TecDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, München, Hannover, Düsseldorf, Hamburg, Stuttgart
End of News DGAP News-Service
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