Restructuring largely complete (PR5)

March 19, 1999 - Micronas Semiconductor Holding AG

During the 1998 financial year, the Micronas Group carried out a refocusing of its business and thus laid the foundations for a sustained positive performance. The refocusing entailed a concentration on the two core businesses, consumer goods and automotive products, and a rescaling of capacities in the Telecommunications Division. The comprehensive modernization of the Group's manufacturing operations in Freiburg im Breisgau progressed according to plan. Consolidated net sales for the year reached CHF 280.7 million. After inclusion of one-off restructuring costs, losses remained within the forecast range at CHF 44.6 million. The Group enjoys a sound market position in what continues to be a difficult business environment.

"Micronas was even more thoroughly rehabilitated than planned. The predictions for the future which we made a year ago have turned out to be realistic." These are the words with which Chairman of the Board Dr. Franz Betschon characterized the current situation of the Micronas Group when he spoke at the annual results press conference in Zurich on March 19, 1999.

Strong sales trends

Sales growth during the year under review was decisively influenced by the integration of Micronas Intermetall of Freiburg im Breisgau (Germany) in the autumn of 1997. The Micronas Group's net sales for 1998 came to CHF 280.7 million. The Consumer Goods Division made the strongest contribution to sales with a total of CHF 193.8 million. This is equivalent to 69.0 % of the Group's overall sales. The Automotive Division also put in a positive performance with sales of CHF 55.8 million, equivalent to 19.9 % of total Group sales. Sales trended downwards in the Telecommunications Division owing to the targeted reduction of production capacity. In the 1998 financial year, Telecommunications generated CHF 31.1 million of sales, or 11.1 % of the group total.

Unsatisfactory earnings situation

The group's earnings situation for the year under review was, as expected, heavily affected by the one-off costs and provisions for restructuring associated with the closure of the factory at Bevaix (Switzerland) and the development offices at Neufahrn (Germany) and Tampere (Finland). The 1998 results include all the costs generated by the management buyout of Micronas Oy in Espoo (Finland). These measures generated a charge of CHF 43.5 million against the 1998 accounts. Operational activities resulted in an operating loss of CHF 12.9 million. This amount also includes the operating losses, excluding restructuring costs, of the Bevaix and Espoo units.

Overall, the Group suffered a loss of CHF 44.6 million for the 1998 financial year. This figure falls within the range which had been forecast at the Annual General Meeting of May 1998.

State-of-the-art semiconductor plant

Production capacity is being expanded by about half at the semiconductor plant in Freiburg im Breisgau. This newly created capacity, which will be used to develop future generations of semiconductor technology, makes the Freiburg plant one of the most advanced of its type in Europe. By the end of 1998, half of the plant's production had been switched, as originally planned, to the new 6-inch line. By the middle of 1999, this conversion will be complete. Total investment in the new factory amounts to CHF 180 million.

Strategic reorientation

During the 1998 financial year, the Board of Directors was strengthened and a new management team was assembled under the leadership of Dr. Wolfgang Kalsbach. Over the year under review, the Board and the management team have vigorously implemented a series of far-reaching measures aimed at securing future success:

• Reduction of capacity in the Telecommunications Division through the closure of the Swiss manufacturing plant at Bevaix/Neuchâtel and the development offices in Neufahrn (Germany) and Tampere (Finland). Twenty jobs were saved here thanks to a management buyout.
• Ramping up as planned of the new semiconductor factory in Freiburg.
• Transfer of the Espoo plant in Finland to local management, a move which brought the Group's comprehensive strategic reorientation more or less to a close.

Streamlining of the Board of Directors

Franz Betschon, Chairman of the Board of Directors, announced that the Board would become smaller when three members step down at this year's AGM, to be held on April 20, 1999. These members are Tony R. Reis, Chief Executive Officer of Swisscom, Tuomo O. Alamäki, Vice President of Nokia, and Jürg Stahl, one of the co-founders of Micronas.

Ready to compete

The Micronas Group is now facing the future with cautious optimism. This confidence is underpinned by a series of promising initiatives, new product launches and the fact that capacity expansion is running according to plan. As has already been announced, the company is considering carrying out a capital increase to strengthen its equity base. This is linked to a possible listing of Micronas shares on the new market in Germany.