Review of strategic options (PR0710)
Losses in Consumer business; Automotive positive
The Micronas Group recorded a drop in net sales and an operating loss for the second quarter of 2007. This downturn was due to cost pressure affecting the Consumer division. Consolidated net sales for the quarter amounted to CHF 171.2 million, a fall of 5.5 percent on the first quarter. Sales and operating profit in the Automotive division were on a par with the previous quarter. In view of the persistence of the adverse trading conditions facing the Consumer business, all the strategic options available to secure the Group's future will be reviewed in the coming months.
Consolidated net sales for the first half-year amounted to CHF 352.3 million. The slump in prices in the consumer market and the resulting cost pressures led to an operating loss before interest and taxes (EBIT) of CHF 23.4 million for the second quarter. The Consumer division contributed CHF 36.6 million to the operating loss for the period, on sales of CHF 118.1 million. The Automotive division, by contrast, generated an operating profit of CHF 16.6 million for the period, on sales of CHF 53.1 million. For the Group as a whole, the second quarter resulted in a loss of CHF 11.1 million; the operating loss for the first half of 2007 amounted to CHF 21.1 million.
The Consumer division was hit by the marked slump in prices in the key TV market. In the growing worldwide market for flat-panel screens, three trends are asserting themselves: bigger screens, higher resolution and a growing market share of digital TVs. As a result, there are increasing demands on sound and picture quality. Micronas is addressing these requirements with its truD (picture) and meloD (sound) technologies. Micronas offers two further platforms which cover the most important specifications in demand. One is a single-chip family called VCTP, which is used primarily in equipment in the lower price range; the other is VGC, a two-channel video and graphics controller which provides good picture quality on LCD and plasma screens, and is suitable for the higher price segment as well as larger screen diagonals. Micronas also offers TV functionality for PCs and laptops as integrated packages. During the quarter under report, Micronas presented the latest building block aimed at this segment. This makes it possible to receive analog and digital television in Europe and America.
In the second quarter, the Automotive division developed in line with expectations. To meet the growing need for electronics in cars, Micronas presented two new Hall sensors designed to take account of the increasingly rigorous guidelines on exhaust emissions and thus contributing to a reduction in pollutant emissions. Micronas is working continually to increase its presence and activities in key manufacturing economies such as China and India, through its own marketing offices and the operation of development laboratories with local partners.
In the third quarter of 2007, we reckon with net sales for the Group as a whole in the region of CHF 165 to 175 million and an operating loss (EBIT) of around CHF 36 to 40 million. The contribution to sales by the Consumer division will be between CHF 112 and 117 million, with an operating loss of CHF 45 and 47 million. We expect the Automotive division to deliver sales of between CHF 53 and 58 million and an operating profit of between CHF 10 and 12 million.
In view of the adverse market conditions that the core Consumer business is continuing to face, the Board of Directors and Management of the Micronas Group have decided to undertake a detailed review of the Company's positioning during the months ahead. All the strategic options to secure the Group's future will be evaluated. In addition to maintaining the current strategy and/or restructuring the Group, the review will assess all alternative courses of action likely to lead to success. The results of the strategic review will be made known in due course.
The Micronas Group is a leading independent supplier of innovative application-specific semiconductor solutions for consumer and automotive electronics. Its shares are listed on the SWX Swiss Exchange in Zurich.
