Market-related decrease in revenues and margins (PR0704)
Key data for fourth quarter of 2006 and for year overall
Fiscal 2006 was a difficult year for the Micronas Group. The Consumer division, which accounts for three-quarters of Group sales, faced an unstable market situation. Nevertheless, Micronas managed to keep the sales loss within bounds, recording a decrease of 3.8 percent for the year. The Group achieved this performance thanks to a successful product policy as well as great innovative strength. Net sales over the twelve-month period reached CHF 812.6 million; the figure for the fourth quarter was CHF 178.4 million.
Price competition in the market, which could not be offset by internal cost-reduction measures, and the launch costs for new products led to a decrease in the gross margin. The 2006 figure of barely 32 percent was markedly lower than the 37 percent achieved the previous year. Operating profit before depreciation and amortization (EBITDA) for the year overall amounted to CHF 93.5 million, 49.4 percent lower than in 2005. The EBITDA for the fourth quarter of 2006 amounted to CHF 13.2 million. The operating result before interest and taxes (EBIT) was a loss of CHF 17.0 million, compared with an operating profit of CHF 75.5 million in 2005. The operating loss for the fourth quarter of 2006 was CHF 11.3 million.
Below the line, the Group recorded a loss for the reporting year of CHF 1.6 million; the loss for the fourth quarter was CHF 2.4 million. Earnings per share showed a loss of CHF 0.05 for the year as a whole and CHF 0.09 for the fourth quarter.
No economies were made in development projects, which Micronas considers strategic. The Group wants to ensure that it can continue to offer customers attractive products over the medium and long term in a dynamic market environment, thus laying the basis for future success and innovation leadership. In keeping with these goals, Micronas spent CHF 175.7 million (2005: CHF 148.9 million) in research and development. Developments in the Consumer division focused on new systems to improve picture and sound quality, higher system integration, as well as new applications in the area of digital TV and IPTV; while in Automotive, the focus was on the development of new controllers and sensors.
The market situation for the Consumer division was very unstable. There was a sharp fall in demand for chips destined for traditional CRT TVs, as well as aggressive price competition among manufacturers of semiconductors for video processors in the flat-panel TV segment. The situation was made even more difficult by unusually strong seasonal fluctuations. Manufacturers of television equipment had made over-optimistic sales projections in the runup to the football world cup, which led to marked inventory adjustments in the second half of the year.
Over the year as a whole, the market for flat-panel screens was increasingly dynamic. Micronas is among the front-runners in this segment and achieved year-on-year growth in excess of 50 percent. The reporting year saw the successful launch of numerous new products.
The Automotive division developed very satisfactorily in 2006. Sales grew by 15 percent, well above the market average. Hall sensors in particular contributed to this encouraging progress.
Following the retirement of Mr. Alfred M. Niederer due to the age requirement and the resignation of Dr. Franz Betschon last year the Board of Directors shall be reinforced. The Company expresses its thanks to both persons for their services rendered. The Board of Directors of Micronas Semiconductor Holding AG proposes to the 12th ordinary Shareholders' Meeting the election as new members of the Board of Directors of Mr. Christoph Brand (1969), Swiss citizen and since 2006 CEO of Sunrise TDC Switzerland AG, Zurich as well as Mr. Moshe Lichtman (1957), Israeli and US-American citizen and Corporate Vice President and Head of R&D Israel for Microsoft, Tel Aviv, since 2006.
De-stocking at consumer customers will continue to affect the performance in the first quarter of 2007. We therefore expect a sequential decline in sales for the Consumer division between 15 and 20 percent. The Automotive division, by contrast, is projected to increase sales by 15 to 20 percent. This will result in a net fall in overall Group sales of between 7 and 12 percent compared with the last quarter of 2006. This decline combined with a market-related drop in the gross margin will result in a loss of CHF 15 to 18 million for the first quarter of 2007.
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.