Elcoteq SE's Financial Statements Bulletin January - December 2010 (Audited)
(Thomson Reuters ONE) -
Elcoteq SE
Financial Statements Bulletin
March 29, 2011, at 1:20 pm (EET)
The operating result improved significantly to -18.1 million euros (-76.5),
mainly due to improved sales margin levels and substantially lower cost
structure. Operating result excluding restructuring expenses was -7.1 million
euros (-39.5). Cash flow after investing activities was positive at 39.3 million
euros (52.9). Interest-bearing net debt decreased materially and was 12.6
million euros (187.5). Elcoteq SE's net sales in 2010 declined about 29% on the
previous year and amounted to 1069.9 million euros (1,503.2 million euros in
2009).
Net sales increased in the fourth quarter of 2010 by about 6% on the previous
quarter and amounted to 266.3 million euros (250.7 million euros in the third
quarter of 2010). Operating profit for the fourth quarter totaled 4.2 million
euros (-2.5 in the third quarter of 2010) and excluding restructuring expenses
amounted to 5.4 million euros (1.3 in the third quarter of 2010).
Financial Year 2010
- Net sales were 1,069.9 million euros (1,503.2)
- Operating loss was -18.1 million euros (-76.5) and -7.1 million euros (-39.5)
excluding restructuring expenses
- Profit before taxes was 43.7 million euros (-117.1)
- Earnings per share (EPS) were 0.45 euros (- 3.22)
- Cash flow after investing activities was 39.3 million euros (52.9)
- Rolling 12-month return on capital employed (ROCE) was 30.4 % (-18.9%)
- Interest-bearing net debt amounted to 12.6 million euros (187.5), and gearing
was 0.1 (5.8)
- The Board of Directors proposes that no dividend will be paid for 2010
October-December 2010
- Net sales were 266.3 million euros (265.5 million euros in the fourth quarter
of 2009)
- Operating income was 4.2 million euros (-23.4). Operating income includes
restructuring costs amounting to 1.2 million euros (21.3), excluding which the
operating income was 5.4 million euros (-2.1)
- Loss before taxes was -0.8 million euros (-36.4)
- Earnings per share (EPS) were 0.01 euros (-0.96)
- Cash flow after investing activities was 9.4 million euros (-11.3)
Major Events After the End of the Financial Year
On March 24, 2011 the Company was informed that the Board of Directors of a
Hungarian Bank has made a positive decision to grant via their subsidiary bank a
5 year export financing revolving credit facility to the Hungarian subsidiary of
the Company. The formal decision will be taken and disclosed on or soon after
March 30, 2011. The amount of the credit facility is 100 million euros and its
utilization dependent on the export volumes of the company's subsidiary in
Hungary.
Elcoteq SE's consolidated financial statements for 2010 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
According to the industry research company New Venture Research (NVR), the
global electronics assembly market declined to slightly over 800 billion US
dollars in 2009 but grew again in 2010 to more than 900 billion US dollars. In
2010 approximately 30% of the electronics assembly value was outsourced to
electronic manufacturing service (EMS) providers and original design
manufacturers (ODMs). Also, the AMS spending development is affected by overall
electronics market value. According to the Company's own estimate, based on
selected industry analyst reports on the total electronics market, overall AMS
spending covering various services for original electronic manufacturers (OEMs)
was sized at close to USD 200 billion in 2010. The estimated market size covers
AMS spending through OEMs, either indirectly or directly. Other AMS spending,
such as out-of-warranty, extended-warranty or end-of-life services, which are
not managed by the OEMs, increase the size of the addressable market. The AMS
market remains relatively immature, with the majority of AMS activities still
conducted either in-house or by small local repair shops, thus bringing several
growth opportunities for outsourcing.
As a part of the re-financing preparations a very comprehensive analysis of
Elcoteq's new strategy and business plan, competences, reputation and market
positioning was conducted during June-October, 2010, by an independent and
reputable London based management consultancy company. The analysis was relying
on company data and management interviews backed up by market studies, reviews
of competition, factory visits and numerous interviews of existing, former and
potential customers as well as discussions with other industry related sources.
The overall results were very positive and encouraging and clearly demonstrated
that the company's competences and strategic direction are well aligned and the
customers' only major concern with Elcoteq has been and still is the uncertainty
related to the long-term financing of the business.
Financial Year 2010
Elcoteq's 2010 net sales declined on the previous year and amounted to 1,069.9
million euros (1,503.2). Operating loss was -18.1 million euros (-76.5),
representing -1.7% (-5.1%) of net sales. Profit before taxes was 43.7 million
euros (-117.1) and net profit was 15.8 million euros (-109.0). Earnings per
share (EPS) amounted to 0.45 euros (-3.22). Earnings include 11.1 million euros
(37.0) restructuring expenses.
Net sales grew in the AMS Business Segment and declined in the EMS Business
Segment compared to the previous year. The decline in EMS net sales was mainly
due to the volume decrease of one major customer and the sale of Elcoteq's
Tallinn factory of which net sales still affected the year 2009 but not 2010.
Various new customers were won during the year but a lack of financing capacity
prevented the Company from absorbing all the business opportunities available in
the market. On the other hand the AMS business does not require the same level
of financing and grew according to expectations.
Operating loss decreased significantly in 2010 from the previous year and the
second half of the year was profitable. 2010 results were affected by non-
recurring costs of 11.1 million euros (37.0) arising from restructuring actions
implemented to mitigate the effects of lower net sales. The cost structure of
the Company is now materially leaner than in previous years.
In 2010 the Company focused on implementing its revised strategy and
strengthening its balance sheet and long-term financing. The strategy has been
well received by customers and the Company has been able to win new customers
and strengthen its position among existing customers. The Company continued to
adjust its operations to lower volumes, at the same time maintaining its
excellent services and global network to serve customers close to their end
markets. The efficiency-boosting actions continued in 2010 as in 2009:
increasing capacity utilization, aligning the organization to support the
adjusted strategy, and decreasing operational costs. The Company sold its'
subsidiary in St. Petersburg, Russia and closed an office in Kista, Sweden. The
Elcoteq group organization was also streamlined and simplified.
The Group's net financial income amounted to 61.8 million euros (-40.5).
Financial income was mainly attributable to one-time gains of approximately 79
million euros related to debenture repayment and hybrid securities transaction
executed in January 2010.
Fourth-quarter Net Sales and Earnings
Fourth-quarter net sales in 2010 increased compared to the third quarter and
amounted to 266.3 million euros (265.5 million euros in the fourth quarter of
2009 and 250.7 million euros in the third quarter of 2010). The level of net
sales has stabilized towards the end of 2010, also indicating the positive
change in the market environment.
Operating income in the fourth quarter was 4.2 million euros (-23.4 million
euros in the fourth quarter of 2009 and -2.5 in the third quarter of 2010).
Operating income exclusive of restructuring expenses in the fourth quarter was
5.4 million euros (-2.1). Restructuring expenses in the fourth quarter of 2010
were related mainly to unused asset write-offs and personnel lay-offs in Brazil
and to Group functions. Loss before taxes was -0.8 million euros (-36.4 million
euros in 2009).
Financing and Cash Flow
At the end of December 2010, Elcoteq had cash totaling 90.9 million euros (84.9
million euros in the third quarter of 2010 and 87.9 million euros at the end of
2009). The Company has reduced the 100 million euro syndicated committed credit
facility signed in April 2010 to 73.5 million euros. The credit facility was
fully utilized. The credit facility matures on June 30, 2011. The Company
continues negotiations for long term financing with various credit institutions
and investors.
At the end of December, the Group's interest-bearing net debt amounted to 12.6
million euros (187.5). The solvency ratio was 20.8% (6.3%) and gearing was 0.1
(5.8). The Group had 93.3 million euros in sold accounts receivable without
recourse at the end of December 2010 (0.0 million euros at the end of 2009).
Rolling 12-month return on capital employed (ROCE) was 30.4% (-18.9%).
Cash flow after investing activities in 2010 was 39.3 million euros (52.9), with
9.4 million euros in the fourth quarter due to improved profitability and a
decrease in working capital.
Going Concern
The current 73.5 million euro syndicated committed credit facility of the
company matures on June 30, 2011. The negotiations for refinancing are on-going
with the current bank syndicate, other financial institutions and equity
investors. On March 24, 2011 the Company was informed that the Board of
Directors of a Hungarian Bank has made a positive decision to grant via their
subsidiary bank a 5 year export financing revolving credit facility to the
Hungarian subsidiary of the Company. The formal decision will be taken and
disclosed on or soon after March 30, 2011. The amount of the credit facility is
100 million euros and its utilization dependent on the export volumes of the
company's subsidiary in Hungary.
The Board of Directors expects that due to positive decision on the above credit
facility the parallel negotiations of other financial agreements will continue
consisting of new revolving credit facility and new equity or equivalent
investment. These negotiations will be finalized by the end of June 2011.The
main business risks which may impact adversely the financing negotiations relate
to a sudden loss of a key customer or unforeseen large negative fluctuation in
working capital affecting the size of needed financing.
Even if the above negotiations have not yet been fully completed, agreements
closed and long term financing is not fully in place on the publishing date of
these consolidated financial statements, the Board of Directors have, after
making proper enquiries and studies of the present situation and especially
considering carefully the issues described above, concluded that they have a
reasonable expectation that the Company has and will have all needed resources
to continue its' operations and operational existence for the foreseeable
future. The Company therefore continues to adopt the going concern basis in
preparing its consolidated financial statements.
Capital Expenditures
The Group's gross capital expenditures on fixed assets in 2010 amounted to 10.5
million euros (6.4), or 1.0% of net sales. Depreciation was 32.3 million euros
(60.1), representing 3.0% of net sales. Investments were primarily made for
assembly machinery and test equipment. In 2010, investment activity was reduced
to a minimum in order to increase the capacity utilization of existing assets.
In the fourth quarter, investments amounted to 2.3 million euros (1.8). No new
operating lease contracts were made in 2010 (and in 2009).
Personnel
At the end of 2010, Elcoteq employed 7,899 (10,101) people: 106 (139) in Finland
and 7,793 (9,963) elsewhere. The geographical distribution of the workforce was
as follows: Europe 3,793 (3,940), Asia-Pacific 1,662 (2,664) and the Americas
2,444 (3,497). The average number of Elcoteq employees on the Company's direct
payroll in 2010 was 7,850 (11,271).
Wages, salaries and other personnel expenses in 2010 amounted to 106.4 million
euros (126.3).
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 under a
multisite certificate for quality and environmental management. In 2010, Elcoteq
continued 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 part of the Annual Report
2010 during the week commencing April 11, 2011.
Research and Development
Elcoteq's research and development costs in 2010 totaled approximately 3.2
million euros (0.9), or 0.3 percent 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 product platforms
in focus segments.
Strategic Business Segments
In the new organization, Elcoteq's business is divided into two Business
Segments - EMS (Electronics Manufacturing Services) and AMS (After Market
Services). Elcoteq's Electronics Manufacturing Services (EMS) Business Segment
provides its customers globally with engineering, configuring as well as demand
and supply services. Elcoteq's After Market Services (AMS) Business Segment is
providing its customers in the communications and consumer electronics
industries with high volume depot repair, refurbishment, recycling, reverse
logistics and related customer support services as well as with AMS-specific
engineering, sourcing and salvaging solutions.
This strategic change streamlines the organization by bringing manufacturing and
related services under one segment. With consolidated manufacturing services
Elcoteq is able to improve efficiency and the overall utilization of
manufacturing facilities, thus giving customers cost benefits through efficiency
and improved competencies. Further, by concentrating EMS and AMS services in
their own segments Elcoteq is better able to serve customers' short- and long-
term needs and further develop the Company's customer-oriented service offering.
In the EMS segment, Elcoteq configures and supplies products for well known
products' brands that are integrated into industrial or commercial systems or
used daily at homes and by industrial companies in their everyday business.
These products range from control and security, communication infrastructure and
lighting solutions to special purpose mobile device and home entertainment
systems.
The EMS segment offers wide range of services from design and component sourcing
to end customer delivery, including logistics and hub services. Different
customers demand different services: Elcoteq offers customer-tailored services
that aim for higher value-add content. Service providers, product design houses
and brand owners typically require the full range of services as they do not
have their own sourcing, manufacturing or logistics organizations. The world's
largest OEMs on the other hand usually require more specific services as they
need to complement their own capabilities with specific skills or capacity, or
complement their own offering within a specific geographical area.
The AMS Business Segment offers integrated global after market services
solutions to its customers in communications and consumer electronics segments
including OEMs, operators, retailers and insurance companies. For several years,
leading brands and network operators have been relying on Elcoteq as a trusted
AMS service provider with strong product knowledge. Consumer products providing
the focus for the AMS Business Segment include smart phones, flat panel TVs,
set-top boxes, gaming and personal navigation devices.
Elcoteq's global service center network enables AMS support in all key markets,
in Europe, Asia and Americas. The Company's entire high-volume depot repair
capacity is located in countries that offer superior cost competitiveness - in
Europe in Hungary and Estonia; in Asia in India and China and in Americas in
Mexico. All the AMS services are supported by reliable and industrialized repair
processes built on Elcoteq's long-term experience in electronics high volume
repair, refurbishment and configuring of sophisticated electronics devices.
As a response to increasing customer demand for further improvement in turn-
around time (TAT) and customer service, Elcoteq is setting up Front-End Service
Centers in selected logistics hubs located in Europe and the US. These Front-End
Service Centers can either be operated by Elcoteq or by selected service
partners and provide customers with reverse logistics and quick turn-around
repair services. For more complex repairs the defect products are shipped to
Elcoteq's regionally centralized Depot Repair Sites, which carry out more
detailed troubleshooting and high-volume repair in low cost environment.
In 2010, Elcoteq's largest customers (in alphabetical order) were EADS, Funai,
Huawei, Humax, Inmarsat, Nokia, Philips, RIM, Sharp, Sony Ericsson and
Technicolor.
EMS Business Segment
Net sales of the EMS segment started to pick-up and stabilize at the current
level during 2010. Although total annual net sales of the EMS segment declined,
the EMS segment showed more stable sales and improved profitability. Net sales
of the Electronics Manufacturing Services (EMS) Business Segment in 2010 were
962.9 million euros (1,413.1), contributing 90% of the Group's net sales. The
segment's operating result was at -5.5 million euros (-60.2), and at 5.2 million
euros, excluding restructuring costs (-24.0). Fourth quarter net sales in 2010
amounted to 240.8 million euros (240.0). The segment's operating profit in the
fourth quarter amounted to 5.5 million euros (-18.5 in the fourth quarter of
2009). Excluding restructuring costs the operating profit was 6.5 million euros
(2.8).
EMS profitability improved quarter by quarter during 2010 reaching positive
results in Q4 2010. This positive development was driven by successful
implementation of cost-reduction projects during the year and achievements in
the customer-portfolio improvement. Various new customers were won during
2010, thanks to the segments competitive service offering and proven track
record in the industry.
AMS Business Segment
Net sales of the After Market Services (AMS) Business Segment in 2010 were
107.0 million euros (90.1), contributing 10% of the Group's net sales. The
segment's operating profit was 12.5 million euros (11.4), and the segment did
not have any restructuring costs in 2010 or 2009. Fourth quarter net sales in
2010 amounted to 25.5 million euros (25.5 in the fourth quarter of 2009). The
segment's operating profit amounted to 2.9 million euros (4.5).
Forming the new AMS Business Segment effective as of October 2010 has resulted
in a more focused management and development of Elcoteq's after market services
business. Proactive development of Elcoteq's AMS offering is enabling us to
serve our customers' evolving needs with competitive global AMS solutions.
Geographical Areas
Elcoteq has three geographical areas: Europe, Asia-Pacific and the Americas.
Elcoteq's net sales in 2010 were derived from these areas as follows: Europe
66% (47%), Asia-Pacific 10% (14%) and the Americas 24% (38%).
Decisions of the Annual General Meeting
Elcoteq SE's Annual General Meeting took place on April 28, 2010, in Luxembourg.
The Meeting approved the consolidated and parent company's financial statements
for the financial year 2009 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 would be distributed for the
financial year January 1 - December 31, 2009.
The Meeting re-elected the following persons to the Board of Directors:
President Martti Ahtisaari; Mr. Heikki Horstia, BSc (Econ.); Mr. Eero Kasanen,
Executive Dean, Aalto University School of Economics; Mr. François Pauly, and
Mr. Jorma Vanhanen, founder-shareholder of Elcoteq SE. Mr. Pauli Aalto-Setälä,
Managing Director of Aller Media Oy, and Dr. Sándor Csányi, Chairman and CEO of
OTP Bank, were elected as new members to the Board of Directors.
The Meeting approved the Nomination Committee's proposal to pay to each member
of the Board of Directors an annual fee of 60,000 euros, of which 60% would be
paid in money and 40% in Elcoteq shares, the necessary shares to be acquired
during May 20 - June 3, 2010. The shares would not be transferred before the
next Annual General Meeting, unless the person's membership in the Board of
Directors ended prior to that.
The Meeting also decided that the Chairman of the Board of Directors would be
paid a fee of 45,000 euros per month and the Deputy Chairman of the Board of
Directors a fee of 10,000 euros per month.
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 December 31, 2010, the auditors fee to be paid as
per the appropriate invoice.
Decisions of the Extraordinary General Meeting
The Extraordinary General Meetings were convened to decide on actions and
authorizations supporting the execution of balance sheet restructuring and the
equity project.
The First EGM on October 12, 2010 validly deliberated and resolved that both
Mr. Hannu Krogerus and Mr. Paul Paukku are nominated to the Board of Directors
of Elcoteq SE. Hence, as of October 12, 2010, Elcoteq SE`s Board of Directors
consist of eight (8) persons and the composition is as follows: Mr. Pauli Aalto-
Setälä, President Martti Ahtisaari, Mr. Heikki Horstia, Mr. Eero Kasanen, Mr.
Hannu Krogerus, Mr. Paul Paukku, Mr. François Pauly and Mr. Jorma Vanhanen. Dr.
Sándor Csányi resigned from the Board of Directors of Elcoteq SE in June 2010.
The First EGM did not reach the quorum requirement for deciding on the actions
and authorizations supporting the execution of balance sheet restructuring and
the equity project, hence the shareholders were invited to attend a second EGM
of shareholders of the Company scheduled to take place on 11 November, 2010.
The Extraordinary General Meeting (EGM) of the shareholders of Elcoteq SE was
held on November 11, 2010 in Luxembourg. Among other items on the agenda, were,
Board of Directors proposals for increasing the authorized share capital.
The EGM decisions were as follows:
To increase the maximum limit of the authorized share capital of the Company,
which includes the issued share capital, from its current amount of forty
million euros (EUR 40,000,000) up to ninety-five million euros (EUR 95,000,000)
and accordingly to amend the current article 21 of the Articles of Association
of the Company;
To authorize the Board of Directors to issue new shares and convertible debt
instruments within the authorized share capital of the Company without reserving
the existing shareholders a preferential subscription right, up to an amount of
forty million euros (EUR 40,000,000) of the authorized share capital
corresponding to a maximum of 100,000,000 new A-shares. This authorization is
divided as follows: up to twenty-eight million euros (EUR 28,000,000) for an
authorization period of one year, starting on the day of the EGM, and the
remaining twelve million euros (EUR 12,000,000) for an authorization period of
five years, starting on the day of the EGM;
To authorize the Board of Directors to issue new shares and convertible debt
instruments within the remainder of the authorized share capital of forty-one
million eight hundred twenty-four thousand three hundred twenty-six euros (EUR
41,824,326) for an authorization period of five years respecting the existing
shareholders' preferential subscription right, corresponding to a maximum of
104,560,815 new A shares, and to amend the current article 22 of the Articles of
Association accordingly;
To delete from the Company's Articles of Association all references to previous
K shares;
To change the administrative language of the Company from German into French and
to amend the current article 44 of the Articles of Association accordingly; and
To restate the Company's Articles of Association in order to reflect the changes
voted upon at the EGM of the shareholders of the Company. The restatement
implies a renumbering of the Company's Articles of Association.
Balance Sheet Strengthening
On January 27, 2010 Elcoteq announced its decision to issue hybrid securities
with a nominal value of 29 million euros in a private placement. The proceeds
from the hybrid securities issue were used directly to redeem the 105 million
euros nominal amount of Elcoteq's existing outstanding debenture bonds at a
price of 25% of the nominal value. On May 11, 2010 the Company completed an
offer made on April 16, 2010 to the holders of its then remaining outstanding
debentures to exchange their debenture bonds for a combination of hybrid bonds
and Warrants. As a result, the holders of debentures valued at approximately
21.5 million euros tendered their debentures and Elcoteq issued hybrid bonds in
corresponding value and 4,350,138 Warrants. Each Warrant entitles its holder to
subscribe for one new A Share in Elcoteq.
As a result of the above transactions, reversing the related deferred tax assets
and recognizing the hybrid securities as equity in Elcoteq's balance sheet, the
Company's equity increased by approximately 108.4 million euros.
On April 30, 2010 the Company entered into loan documentation with its senior
lenders with respect to a new revolving credit facility ("RCF") in the amount of
100 euros million on the basis of a committed term sheet on March, 2010.
Pursuant to the loan documentation, the RCF, which will mature on 30 June 2011,
shall be reduced to 67 million euros by March 31, 2011. Due to the Company's
financial situation and the current market conditions, the total cost of
financing under the RCF is substantial.
The Company sold all the shares in ZAO Elcoteq, its Russian subsidiary with
operations in St Petersburg, including its premises and employees but excluding
any customer contracts, to Optogan CJSC on May 19, 2010. The sales proceeds of
16.5 million euros were used to repay part of the RCF. The Company has further
repaid the RCF in an amount of 10 million euros.
On December 3, 2010, Elcoteq decided to apply for the listing of the 4,350,138
warrants issued by the Company on May 11, 2010 in connection with the Exchange
Offer made earlier in spring 2010 in order for the warrants to be traded on
NASDAQ OMX Helsinki Ltd. Trading of the warrants commenced on December 7, 2010.
Negotiations on the comprehensive and long-term refinancing of the company
continued at the end of 2010. Due to the status and structure of the refinancing
negotiations it was inadvisable to arrange a separate share issue in the middle
of the process. A directed share or a rights issue or any combination of these
two was therefore postponed in 2010 and is being planned for 2011 as a part of
the new financing structure.
Restructuring Plan
Elcoteq has continued the Restructuring Plan originally launched in January
2009 to adapt to the radical changes in the market situation and in order to
execute further cost-saving potential.
In 2010 Elcoteq sold its' subsidiary in St. Petersburg, Russia and closed an
office in Kista, Sweden. The Elcoteq group organization was also streamlined and
simplified to improve cost efficiency. As a result of this organizational
change, the Company conducted personnel reductions in Group supporting
functions. Cost-saving measures have continued at most of the factories as well.
Shares and Shareholders
At the end of 2010, Elcoteq's share capital altogether consisted of 32,939,185 A
shares. The par value of each Series A share is 0.40 euros. The Company's
registered share capital on December 31, 2010 totaled 13,175,674 euros.
In 2010, a total of 105,770,000 Elcoteq SE Series K shares were converted into
Series A shares at the ratio of ten Series K shares to one Series A share, i.e.
the total number of Series A shares is now 32,939,185. The conversion was
registered in the Luxembourg Trade Register on July 29, 2010. Trading in the new
Series A shares commenced on August 2, 2010.
All of the shares carry one vote at general shareholders' meetings. Elcoteq
shares confer financial rights in proportion to their par value.
Elcoteq had 10,065 registered shareholders at the end of 2010. There were a
total of 3,778,192 nominee-registered or foreign-registered A shares,
representing some 11.47 percent of the total number of shares and 11.47 percent
of the votes outstanding.
Incentive Schemes
Share Subscription Plan 2009
The Company had an incentive plan based on the results for 2009 for the
motivation and commitment of the Company's key personnel by means of a share
subscription plan. The targets for 2009 were not met and thus no shares were
issued during 2010.
Changes in Elcoteq's Management
As of December 31, 2010 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, After Market Services
Mr. Tommi Pettersson, Senior Vice President, Electronics Manufacturing Services
Mr. Tomi Saario, Senior Vice President, New Sales and Business Development
Mr. Markus Skrabb, Senior Vice President, Legal Affairs (as of February 1, 2011)
Mr. Roger Taylor, Senior Vice President, Group Operations and Sourcing
Mr. Olli-Pekka Vanhanen, Vice President, Business Control and Accounting (as of
January 1, 2011)
Events After the Financial Year
On March 2, 2011 Elcoteq SE, through its U.S. subsidiary, acquired 100 % of the
shares of BroadTech Inc, a company based in Lewisville, Texas providing After
Market Services (AMS). BroadTech is offering reverse logistics, repair,
refurbishment and related information management services to the wireless and
consumer electronics industries. The acquisition of BroadTech further
strengthens Elcoteq's AMS offering in the U.S. and will serve as a global
platform in developing Elcoteq's reverse logistics and quick turn-around repair
services.
On March 24, 2011 the Company was informed that the Board of Directors of a
Hungarian Bank has made a positive decision to grant via their subsidiary bank a
5 year export financing revolving credit facility to the Hungarian subsidiary of
the Company. The formal decision will be taken and disclosed on or soon after
March 30, 2011. The amount of the credit facility is 100 million euros and its
utilization dependent on the export volumes of the company's subsidiary in
Hungary.
Short-Term Risks and Uncertainty Factors
The Company operates in a working-capital-intensive business environment where
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 debt financing, better control of working
capital and cash pooling as well as the ability to stabilize the financing
structure, including the strengthening of shareholders' equity under volatile
market conditions.
The Company bases component purchases and resource commitments on customers'
forecasts. Sudden changes in customers' demand may cause the company to have
excess inventories which are under customers' liability but which the Company
may have to finance for a certain period of time. The Company makes a
significant part of its purchases and sales in currencies other than the euro
and currency fluctuations may result in deviations from business plans. The
ability to provide 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.
The Company's key short-term operative challenges are to increase sales,
proactively manage fixed costs according to sales fluctuations and significantly
improve profitability. Further the Company's ability to arrange adequate long-
term financing is a short-term risk.
The natural disaster in Japan affects on the Company's component supplies and
therefore causes volume and profitability risk in short and medium term.
Market Outlook
The electronics industry market will grow over the next few years. Overall, the
EMS market is driven by growth in end-user demand and the companies' outsourcing
rates. EMS market is highly competitive where market shares are divided among
both large EMS providers and small and medium-sized service providers. The
combination of technical knowledge and customer-oriented service offering has
become an important factor for many customers in choosing the best-fit EMS
partner.
The AMS market is expected to grow in the future reflecting the growth of the
electronics market. Increasing failure rates in electronics, caused by higher
product complexity, price pressures and shortening life cycles across the
electronics industry, are key drivers for AMS market growth. In addition,
network operators and carriers, emphasize repair services and fast turn-around-
time in order to retain customer satisfaction and maximize their own revenues.
The AMS market remains relatively immature, with the majority of AMS activities
still conducted either in-house or by small local repair shops, thus bringing
several growth opportunities for outsourcing.
Outlook 2011
Elcoteq's net sales are estimated to stay at the same level as in 2010. The
operating income is expected to be positive for the whole year although the
first quarter result will be clearly negative due to lower volumes.
Board's Dividend Proposal
The Board of Directors proposes to the Annual General Meeting to be held on
April 28, 2011, that no dividend would be paid for the financial year 2010.
Annual General Meeting 2011
Elcoteq's Annual General Meeting will be held in Luxembourg on April 28, 2011. A
separate Shareholder Information Meeting will be held in Helsinki before the
Annual General Meeting, on April 20, 2011.
March 28, 2011
Board of Directors
Further information:
Jouni Hartikainen, President and CEO, +358 10 413 11
Olli-Pekka Vanhanen, Vice President, Business Control and Accounting, +
358 10 413 11
Press Conference and Webcast
Elcoteq will hold a combined press conference, conference call and webcast in
English at 2.00 pm (EET) on Tuesday, March 29, in the Tapiola 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: +44 203 043 24 36 (Europe), +1 866 458 40 87 (USA) or +
358 9 23 101 527 (FI). 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 29, 2011.
Elcoteq will publish its Interim Report for January-March 2011 at 9.00 am (EET)
on Wednesday, May 4, 2011.
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 Definition of key indicators
8 Key indicators
9 Restructuring expenses
10 The Hybrid Bonds and warrants
11 Assets pledged and contingent liabilities
12 Quarterly figures
Standards and Interpretations Applied as from January 1, 2010
The Group adopted the following standards and interpretations on January
1, 2010:
-Revised IFRS 3 Business combinations. The revised standard maintains the
requirement to apply the acquisition method to business combinations but with
some significant changes, such as expensing of transaction costs. In addition,
all payments to purchase a business are to be recorded at fair value at the
acquisition date, with some contingent payments subsequently remeasured at fair
value through profit or loss. There is a choice on an acquisition-by-acquisition
basis to measure the non-controlling interest in the acquiree either at fair
value or at the non-controlling interest's proportionate share of the acquiree's
net assets. The revised standard has not had any impact on the financial
position or performance of the Group.
-Revised IAS 27 Consolidated and Separate Financial Statements requires the
effects of all transactions with non-controlling interests to be recorded in
equity if there is no change in control and these transactions will no longer
result in goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in the entity is
remeasured to fair value, and a gain or loss is recognized in the profit or
loss. The revised standard has not had any material impact on the Group.
Other new interpretations or amendments to standards effective as of January
1, 2010 have not been relevant to the Group.
- Amendment to IAS 39 Financial instruments: Recognition and measurement -
Designation of items as hedged items
- IFRIC 16 Hedges of net investment in a foreign operation
- IFRIC 17 Distributions of non-cash assets to owners
- IFRIC 18 Transfers of assets from customers
- Amendment to IFRS 2 Share-based payment - Intra-group cash-settled, share-
based payment transaction
Appendix 1
Consolidated statement of comprehensive income
Jan. 1 - Jan. 1 -
Dec. 31, Dec. 31,
EUR 1,000 2010 2009
--------------------------------------------------------------------------------
NET SALES 1,069,887 1,503,205
Change in work in progress
and finished goods -202 -44,420
Other operating income 19,631 13,337
Production materials and services -885,658 -1,225,529
Personnel expenses -106,387 -126,328
Depreciation and amortization -32,262 -60,143
Restructuring expenses -11,071 -37,049
Other operating expenses -72,077 -99,620
--------------------------------------------------------------------------------
OPERATING LOSS -18,139 -76,545
Financial income, total 95,645 3,322
Financial expenses, total -33,831 -43,813
Share of the profit/losses of associated companies
(net of income tax) 27 -68
--------------------------------------------------------------------------------
PROFIT/LOSS BEFORE TAXES 43,702 -117,105
Income taxes -27,877 8,139
--------------------------------------------------------------------------------
NET PROFIT/LOSS 15,825 -108,966
Other comprehensive income
Effective portion of changes in fair value of cash
flow hedges 286 3,465
Net gain/loss on hedges of net
investments in foreign operations -591 2,988
Foreign currency translation
differences for foreign operations 572 1,149
Income tax relating to components of
other comprehensive income -30 -405
--------------------------------------------------------------------------------
Other comprehensive income for the
period, net of tax 237 7,197
TOTAL COMPREHENSIVE INCOME/LOSS
FOR THE YEAR 16,062 -101,769
PROFIT/LOSS FOR THE YEAR ATTRIBUTABLE TO:
Owners of the parent company * 14,755 -105,045
Non-controlling interests - Hybrid capital investors 3,319 -
Non-controlling interests - others -2,250 -3,920
--------------------------------------------------------------------------------
15,825 -108,966
TOTAL COMPREHENSIVE INCOME/LOSS ATTRIBUTABLE TO:
Owners of the parent company 14,129 -98,434
Non-controlling interests - Hybrid capital investors 3,319 -
Non-controlling interests - others -1,387 -3,335
--------------------------------------------------------------------------------
16,062 -101,769
Earnings per share calculated on profit/loss
attributable
to owners of the parent company
Basic earnings per share (EUR) 0.45 -3.22
Diluted earnings per share (EUR) 0.42 -
* Net profit/loss reported by the company.
Appendix 2
Consolidated Balance Sheet
EUR 1,000 Dec. 31, 2010 Dec. 31, 2009
----------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets
Goodwill 21,510 21,510
Other intangible assets 5,074 3,882
----------------------------------------------------------------------------
26,584 25,392
Property, plant and equipment
Land 772 772
Buildings 29,814 33,063
Machinery and equipment 28,820 45,744
Advance payments and
construction in progress 1,415 1,375
----------------------------------------------------------------------------
60,821 80,954
Investments
Investments in associated companies 81 77
Available-for-sale financial assets 485 511
----------------------------------------------------------------------------
566 588
Non-current receivables
Loans receivable - 0
Receivables from associated companies 87 87
Deferred tax assets 15,499 41,906
----------------------------------------------------------------------------
Non-current assets, total 103,557 148,928
----------------------------------------------------------------------------
Current assets
Inventories
Raw materials 86,649 64,675
Work in progress 1,128 693
Finished goods 4,072 4,062
----------------------------------------------------------------------------
91,849 69,431
Current receivables
Accounts receivable 166,104 155,280
Other receivables 14,980 24,773
Prepaid expenses and accruals 7,034 9,864
Current tax assets 873 3
----------------------------------------------------------------------------
188,991 189,919
Cash and cash equivalents 90,923 87,941
Assets classified as held for sale - 19,049
Current assets, total 371,762 366,340
----------------------------------------------------------------------------
ASSETS, TOTAL 475,319 515,268
EUR 1,000 Dec. 31, 2010 Dec. 31, 2009
----------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to owners of the
parent company
Share capital 13,176 13,176
Additional paid-in capital 231,754 225,011
Other reserves 8,548 8,224
Translation differences 5,897 6,779
Retained earnings -213,663 -228,418
----------------------------------------------------------------------------
Equity attributable to owners of the
parent company, total 45,712 24,772
Non-controlling interests - Hybrid
capital investors 46,733 -
Non-controlling interests - others 6,445 7,832
Total equity 98,890 32,603
Liabilities
Non-current liabilities
Subordinated notes - 89,869
Medium-term notes 19,992 19,986
Other debt 259 197
Deferred tax liability 1,516 2,496
----------------------------------------------------------------------------
Non-current liabilities, total 21,766 112,548
Current liabilities
Loans from financial institutions 75,219 115,429
Subordinated notes 8,067 49,925
Advances received 155 174
Accounts payable 223,930 165,207
Other current liabilities 19,078 8,063
Accrued expenses 25,667 26,454
Current tax liabilities 780 151
Provisions 1,767 4,713
----------------------------------------------------------------------------
Current liabilities, total 354,663 370,117
Liabilities, total 376,429 482,664
----------------------------------------------------------------------------
EQUITY AND LIABILITIES, TOTAL 475,319 515,268
Appendix 3
Consolidated Cash Flow Statement
Jan. 1 - Jan. 1 -
Dec. 31,
EUR 1,000 2010 Dec. 31, 2009
--------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
Net profit/loss 15,825 -108,966
Adjustments:
Depreciation and amortization 32,262 60,143
Net finance costs -61,814 40,492
Gain on sale of property, plant
and equipment -3,341 -3,499
Unrealized foreign exchange gains
and
losses on operating activities 4,526 1,033
Goverment grants -488 -1,175
Impairment losses and reversal of
impairment losses on assets 7,913 13,417
Income taxes 27,877 -8,139
Other adjustments 8,893 20,684
--------------------------------------------------------------------------------
Cash flow before change in working
capital 31,653 13,989
Change in working capital :
Change in non-interest bearing
current receivables -11,557 136,328
Change in inventories -20,135 184,431
Change in non-interest bearing
current liabilities 55,560 -270,219
--------------------------------------------------------------------------------
Cash flow from operating activities
before financial items and taxes 55,521 64,528
Interest paid -25,786 -23,819
Interest received 704 707
Income taxes paid -1,547 -1,060
--------------------------------------------------------------------------------
Net cash from operating activities 28,893 40,356
CASH FLOW FROM INVESTING ACTIVITIES**
Purchases of property, plant and
equipment and intangible assets -13,612 -4,357
Proceeds from sale of property,
plant and equipment and intangible
assets 7,683 16,644
Acquisitions of subsidiaries, net
of cash acquired - 253
Disposal of subsidiaries, net of
cash disposed of 16,327 -
--------------------------------------------------------------------------------
Net cash from investing activities 10,400 12,541
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from hybrid capital loan 28,650 -
Proceeds from the revolving credit
facility - 100,000
Loan transaction costs - -3,000
Proceeds from current debt 5,075 -
Repayment of current debt (incl.
loans from the revolving credit
facility) -56,141 -153,137
Repayment of non-current debt -19,956 -
Dividends paid 0 -2,442
--------------------------------------------------------------------------------
Net cash used in financing activities -42,372 -58,580
NET DECREASE IN CASH AND CASH
EQUIVALENTS -3,079 -5,683
Cash and cash equivalents at January
1 87,941 95,099
Effect of exchange rate changes on
cash held 6,061 -1,475
--------------------------------------------------------------------------------
Cash and cash equivalents at December
31* 90,923 87,941
* Part of the cash and cash equivalents is not available for use
by the group. See note 22
** Financing activities include non-monetary transactions that are
excluded from the cash flow statement.
See note 11.
Appendix 4 (a)
Consolidated statement of changes in equity
2010
Attributable to equity holders of the parent
Additional Reserve
Share paid-in Other Hedging Translation for own
EUR 1,000 capital capital reserves reserve reserve shares
-----------------------------------------------------------------------
BALANCE AT
JAN. 1 2010 13176 225011 8369 -78 6779 -67
Total
comprehensive
income 256 -882
-----------------------------------------------------------------------
Total comprehensive income 256 -882
-----------------------------------------------------------------------
Transactions
with owners
Hybrid capital
loans granted
Option rights
issued 6743
Granted own
shares 67
-----------------------------------------------------------------------
Transactions with
owners 6743 67
-----------------------------------------------------------------------
BALANCE AT
DEC. 31, 2010 13176 231754 8369 179 5897 0
-----------------------------------------------------------------------
2009
Additional Reserve
Share paid-in Other Hedging Translation for own
EUR 1,000 capital capital reserves reserve reserve shares
-----------------------------------------------------------------------
BALANCE AT
JAN. 1, 2009 13041 225011 8369 -3139 3227 -68
Total
comprehensive
income 3060 3552
-----------------------------------------------------------------------
Total comprehensive income 3060 3552
-----------------------------------------------------------------------
Transactions
with owners
Share issue 135 1
Share-based payments
Dividends
-----------------------------------------------------------------------
Transactions
with owners 135 1
-----------------------------------------------------------------------
Divestment of
non-controlling
interest
BALANCE AT
DEC. 31, 2009 13176 225011 8369 -78 6779 -67
-----------------------------------------------------------------------
Appendix 4 (b)
Consolidated statement of changes in equity
2010
Attributable to equity holders of the parent
Non-
controlling
interests - Non-
Hybrid controlling
Retained capital interests - Total
EUR 1,000 earnings Total investors others equity
---------------------------------------------------------------------------
BALANCE AT
JAN. 1 2010 -228418 24772 0 7832 32603
Total
comprehensive
income 14755 14129 3319 -1387 16061
---------------------------------------------------------------------------
14755 14129 3319 -1387 16061
---------------------------------------------------------------------------
Transactions
with owners
Hybrid capital
loans granted 0 43414 43414
Option rights
issued 6743 6743
Granted own
shares 67 67
---------------------------------------------------------------------------
6810 43414 5022
Unternehmensinformation / Kurzprofil:
Datum: 29.03.2011 - 12:21 Uhr
Sprache: Deutsch
News-ID 52906
Anzahl Zeichen: 65620
contact information:
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