Kontron AG expects business recovery from second quarter of 2010

  • Weak economy and components shortage burden revenue (EUR 98 million) and earnings (EUR 3 million) in first quarter
  • Kontron refrains from pursuing low-margin ODM business, and streamlines Profit Improvement Program
  • Order book rises from EUR 306 million to EUR 314 million

Eching, Munich, April 26, 2010. Kontron AG, listed on the TecDAX index, achieved sales of EUR 98 million in the first quarter of 2010, compared with EUR 107 million in the prior-year comparable period. The decline was mainly due to shortages on the components markets, which prevented the on time delivery of orders valued at some EUR 8 million. Kontron also started to gradually reduce its low-margin volume business arising from its activity as an original design manufacturer (ODM), particularly in Asia. Instead, the company will focus in the future on high-end products in the classic embedded computer area. Revenues in markets that have been shaken by the crisis, such as automation and infotainment, remained weak. Consequently, Kontron is feeling the deep economic crisis with a time delay. Business in sectors that are somewhat less correlated with the business cycle such as security/safety, medical engineering and telecommunications proved unable to fully compensate for the declines. Operating earnings (EBIT) amounted to almost EUR 3 million in the first quarter, compared with EUR 7 million in the prior-year period. First-quarter net income declined correspondingly from EUR 5 million to EUR 2 million. This is the result of lower revenue and shortages on the components market. Delivery times extending over months necessitated at times the procurement of additional available stocks as far as possible, which was reflected in an increase in inventories from EUR 87 million in the fourth quarter of 2009 to currently EUR 95 million.

One-off costs for the restructuring measures that had been accelerated had an impact on earnings: the Profit Improvement Program that was launched some years ago will now be concluded before the end of 2010, rather than in 2011 as originally planned. As a result, the personnel base declined from 2,487 employees to 2,546, already in the first three months of the year.

The order book position reflected highly gratifying growth: in the first quarter of 2010, the order book amounted to EUR 314 million, which is significantly above the previous year's first quarter level, as well as the level as of December 31, 2009 (EUR 306 million in each case). Design wins, as the most important indicator of medium- and long-term growth, were up to EUR 79 million, compared with EUR 74 million in the fourth quarter of 2009. Following the prior-year period's exceptional level of design wins (EUR 117 million), this figure represents the second-highest level of the last five years.

Shortages on the components market resulted in higher inventories. At the same time, prepayments were also required to cover supplies. This exerted a negative impact on operating cash flow, which amounted to EUR - 7.7 million (previous-year period: EUR 10.1 million). With a net cash position of EUR 43 million, Kontron AG continues to enjoy highly solid asset backing enabling acquisitions that strengthen the Group both geographically and strategically. Kontron AG is confident that significant revenue and earnings growth can be achieved in the second quarter of 2010 thanks to the high order book position. The Kontron Management Board anticipates a marked upturn in the second half of the year. Kontron confirms the 2010 full-year forecast that was formulated at the start of the year and envisages a relatively flat business trend with no major shifts to either the upside or the downside.

Investor Relations:

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

For further information:
Dr. Udo Nimsdorf
Engel & Zimmermann AG
Agentur für Wirtschaftskommunikation
Am Schlosspark 15,
82131 Gauting
Tel. 089-89 35 633, Fax: 089-89 39 84 29

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