Kontron AG advances market position

Sales up by 14 percent to EUR 215 million in 2002 / Gross margin climbs to 38.8 percent / Operating cash flow attains record level at EUR 22.4 million / EUR 1.6 million EBIT / EUR 0.7 million profit for the year after deduction of special burdens / Liquidity stands at EUR 70 million / Forecast for 2003: Moderate sales growth and considerable increase in earnings strength / Outsourcing trend and new markets in Russia, China and the Pacific Region are generating growth impulses.

Munich, March 28, 2003. Operating in a very difficult general environment, Kontron AG was able to hold its own during the 2002 business year and succeeded in substantially expanding the Group´s international market position. The merger with JUMPtec Industrielle Computer Technik AG (consolidated as of July 3, 2002) has created a corporation now ranking as the world´s largest provider of embedded computer technology (ECT) by a wide margin. Moreover, the new corporation is the first of its kind to cover the entire product and value creation chain in this market. In spite of the persistently weak world economy and recessive tendences throughout technology sectors, Group sales pointed north – primarily due to consolidation – and increased by 14 percent over 2001 from EUR 189 to EUR 215. Orders at hand jumped from EUR 53 million at the end of 2001 to EUR 94 million in 2002 – mainly as a result of consolidation. By systematically advancing the technology and engineering share of Kontron products, the gross operating result of sales advanced from EUR 70.7 million in 2001 to more than EUR 83 million in 2002. This tranlates as a gross margin increase of 1.3 percent to 38.8 percent. In view of the extremely difficult market and general conditions the chairman of the Kontron AG managing board, Hannes Niederhauser, speaking at the press conference on finanical statements in Munich, referred to the key performance figures as "satisfactory." On EBIT of EUR 1.6 million (previous year: EUR 8.5 million) profit for the year came in at EUR 0.7 million (previous year: EUR 3.7 million). Company performance was burdened in particular by EUR 3.9 million special write-offs on financial assets, EUR 0.8 million resulting from currency losses, as well as one-time restructuring costs totaling EUR 2.9 million. Hannes Niederhauser continued: "The cost savings program initiated in the past year will result in a considerable enhancement of earnings strength in the 2003 business year." The Kontron managing board anticipates moderate sales growth and an EBIT margin of between 3 and 5 percent.

Currency swings impact sales growth

According to Kontron, sales growth is mainly attributable to the consolidation of JUMPtec around the middle of the year, although sales were also lost by the deconsolidation of the Canadian telecommunications division (management buy out) as well as the German JUMPtec subsidiary IBR. Moreover, the considerable depreciation of the US dollar over the euro – approximately 17 percent in the course of the 2002 business year – had a decided impact on sales as well as on performance, given that Kontron invoices around 60 percent of orders in US dollars. As Kontron managing board member Hannes Niederhauser points out, however, the quantative growth generated by the merger of the two companies is not as essential as the qualitative criteria involved. In its new, top ranking position Kontron has unmistakably claimed global technology leadership. In a phase of weaker growth the company continued, against the cycle, to further extend engineering resources and strengthened research and development activities in the area of basic technologies.

Solid financial and assets position: Liquidity stands at EUR 70 million, operating cash flow of EUR 22.4 million

According to Hannes Niederhauser Kontron AG enjoys a very good financial and assets position: in the past business year Group assets climbed by EUR 15 million to EUR 304. Liquid funds at hand was r

ecorded at EUR 46 million. In connection with various credit lines the liquidity of the Kontron Group exceeds EUR 70 million. After deduction of funds due to banks the net cash position was considerably strengthened from a previous EUR 11 million to EUR 18 million in 2002. Increase in the net cash position is primarily due to the positive operating cash flow of EUR 22.4 million (previous year: EUR 15.5 million) that attained a record level and was mainly used to reduce indebtedness to banks. The Group´s equity position increased – mainly due to the merger with JUMPtec – by EUR 32 million to a total of EUR 221. The equity share of the balacne sheet total of EUR 304 climbed from 66 percent to 73 percent. "All in all, the Kontrol Group commands a strong financial position and sufficient reserves to secure the realization of corporate objectives over the next years - also in a challenging financial and market environment," explained Hannes Niederhauser.

Successful integration of Kontron and JUMPtec

As Hannes Niederhauser stated, “the integration of Kontron and JUMPtec proceeded smoothly and was wrapped up in a very short period of time. Among other activities, more than 50 legal entitieis were reduced to 27, mainly through convergence within the Group. The bundling of sales channels in the United States and Europe has now been completed. The entire production and logistics activities have been grouped and concentrated as three local units in the United States/Montreal, Europe/Munich and Asia/Taipeh. And finally, the “Kontron” brand name has been established worldwide at all subsidiaries. Niederhauser outlined: “Within the context of the merger we have been able to realize considerable synergy effects and cost savings potentials in 2002. We have created lean and efficient organization structures within a very short period of time. There has hardly been a comparable merger in recent years that has so rapidly and extensively resulted in a sustained enhancement of competitive strength.”

Broad diversification, growing customer base and higher value creation

In the 2002 business year Kontron AG made very substantial advances in diversifying the product range and stepping up the technology share of company products in order to boost value creation. In 2002, the sales shares accounted for by the crisis-hit telecommunication, automation and measurement technology markets were in particular offset by growth rates in the areas of gaming (amusement industry), military technologies, mobile applications and rail vehicle technology. According to Kontron, the dependence on individual customers has also been successfully reduced: drawing on a basis of more than 4,000 clients from a wide range of different branches, there is currently no single customer accounting for more than 3 percent of total Group sales. The top ten clients add up to a total share of just over 13 percent. Thanks to the company´s engineering share that has been significantly ramped up over the past year (approximately 50 percent in the hardware and software areas), customer loyalization has been strengthened and value creation increased.

Outlook: Enhancing earnings strength in a difficult market environment

Hannes Niederhauser does not perceive any indications of positive changes in the global economy for the year 2003 – especially in the light of the ongoing war in Iraq. Consequently, markets for embedded computer systems will remain difficult. In spite of this Kontron AG anticipates achieving moderate growth in Group sales. Kontron will be putting increasing emphasis on the so-called emerging markets, the prospering regions in China, East Europe and Russia, as well as the Pacific region. The aim is almost double the sales share these "new" regions contribute from the current 9 percent to 15 percent. In achieving these objectives Kontron will be focusing on joint ventures with local partners as have already been forged at the beginning of 2003 in Russia an

d China. A Kontron branch will soon become operational in Australia. Hannes Niederhauser regards the increasing trend towards outsourcing as a second key factor that will be driving the additional growth of the Kontron Group. The shift to assigning previous "make and not buy" activities to external ECT specialists such as Kontron holds "tremendous future potential" that the newly listed TecDAX corporation is striving to systematically develop. As Hannes Niederhauser added: "Our engineering resources are unique throughout branch and represent Kontron´s backbone. When the ecconomic upswing sets in these strong capabilities will come into play as a decisive competitive advantage." At Kontron today engineer staff are accounting for more than one third of the workforce of around 1,480 employees (previous year: 1,220 employees). On the performance side of the picture, Hannes Niederhauser points out that the integration, restructuring and consolidation measures that have been initiated and largely realized in the 2002 business year are already bearing fruit. Consequently, the Kontron Group anticipates posting considerably enhanced earnings in the ongoing business year.

Investor Relations:
Gaby Moldan
Kontron AG
Oskar-von-Miller-Str. 1
85386 Eching
Tel: 08165/77212, Fax 08165/77222
Email: Gaby.Moldan@kontron.com

Further information is available from:
Dr. Udo Nimsdorf
Engel & Zimmermann AG
Agentur für Wirtschaftskommunikation
Schloss Fußberg, Am Schlosspark 15
82131 Gauting
Tel: 089-89 35 633, Fax: 089-89 39 84 29
Email: info@engel-zimmermann.de

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