Reduction of loss thanks to restructuring in Consumer division

(PresseBox) ( Zurich, )
Micronas started the 2008 business year in line with expectations. The restructuring process, begun in autumn 2007, made more rapid progress in the first quarter of 2008 than originally planned. Consolidated net sales for the first quarter of 2008 amounted to CHF 169.6 million, 2.4 percent lower than in the fourth quarter of 2007. The operating profit before depreciation and amortization (EBITDA) was CHF 12.8 million. The operating loss before exceptional items decreased by 62.0 percent to CHF 3.8 million, despite a 340 base point reduction in the margin compared with the previous quarter. The restructuring measures resulted in a reduction in operating costs of CHF 10.0 million in the first quarter, 15 percent of the costs for the previous quarter. The operating loss (EBIT) was CHF 3.8 million, compared with CHF 69.5 million in the previous quarter. The loss for the reporting period was CHF 7.8 million, which equates to earnings per share of CHF -0.26.

The Automotive division made a somewhat subdued start to the new year owing to currency translation factors. Sales of CHF 53.7 million came in 2.9 percent lower than in the previous quarter. As previously announced, it was not possible to maintain the extremely high EBIT margin of 27.3 percent achieved in the previous quarter; however, it was still a respectable 24.8 percent in the first quarter, corresponding to an operating profit (EBIT) of CHF 13.3 million.

At the "embedded world" trade show in Nuremberg in February, Micronas unveiled its easyLIN product line for smart sensor and actuator applications, developed specially for LIN bus applications. Modern cars and trucks have several LIN bus modules which combine intelligent sensors and control actuators for window lifters, windshield wipers and many other functions. The Micronas product lines simplify the development and reduce the costs of LIN bus modules by integrating all logic functions, peripheral modules, interfaces and a LIN bus interface in a single component.

Also newly launched, the HAL 28xy special Hall-effect sensor family for automotive and mechatronic applications has a microcontroller, a temperature sensor, more advanced on-chip compensation and a digital interface. The HAL 28xy sensor family is destined for price-sensitive applications such as systems for determining the seat position or the fuel status. The demand for high-performance controllers and sensors will grow significantly in the coming years because sophisticated engine and gearbox management will be essential to meeting future requirements regarding exhaust emission limits. Manufacturers have to optimize every single component, and will replace more and more mechanical sensors through contactless ones. The continuing high demand for intelligent, lightweight and low-cost electronic components will give further impetus to the Automotive division. Inquiries about new projects, also from previously reticent customers, indicate that Micronas is well-positioned in the international market.

The Consumer division is still greatly affected by the restructuring process. Sales in the first quarter of 2008 totaled CHF 115.9 million, some 2.2 percent down on the previous quarter. The operating loss before impairment and restructuring decreased by 31.9 percent to CHF 17.1 million. The restructuring program initiated in autumn 2007 is proceeding successfully; significant cost reductions were already apparent in the first quarter of 2008. Our new products were well-received by customers, which is promising in terms of gaining further market share. The refocusing of the research and development activities and the streamlining of the sales organization are in the implementation phase and ahead of schedule. Micronas has discontinued its IPTV set-top box activities for telecoms applications; most of the employees working in this sector have now left the Company. The crisis in the financial markets has prompted the first uncertainties in the market regarding the general growth prospects for 2008. Incoming orders in the Consumer division during March were disappointing, and this will have a negative impact on the course of business in the second quarter.

The Consumer division continues to operate under the influence of a highly competitive market environment. In the area of flat-panel screens, technology eliminating film judder and motion blur is rapidly gaining acceptance. Both effects are covered by the Micronas product FRC-M, the fourth generation of the Micronas truD technology.

A number of manufacturers have launched full-HD TV sets with LCD displays, based on the Micronas VCT product family. These single-chip solutions offer manufacturers all the necessary system components in a single package.

Following the announcement by Toshiba, in February 2008, that it was ending production and further development of HD-DVD technology and equipment, the Blu-ray Disc is effectively the winner of the format war for the digital optical disc storage medium. The decision in favor of the Blu-ray standard finally ends the uncertainty for consumers and should lead to increased demand for HD TVs and related equipment. This development also opens up interesting possibilities for Micronas, particularly in the area of products for perfect home-cinema sound, with the Micronas MSP audio platform.

Utilization of installed machine capacity at the Freiburg waferfab facility averaged 95 percent in the reporting period. Technology-related demand was covered by external wafer foundries. A priority in relation to ongoing projects was cost reduction, for example by improving yields and optimizing process flows.

For the second quarter of 2008, Micronas expects sales of between CHF 130 and 140 million and an operating loss (EBIT) between CHF 20 and CHF 25 million. The Consumer division will contribute sales of between CHF 75 and 85 million. Micronas expects the Automotive division to generate sales of around CHF 55 million.
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