Micronas restructures after slump in demand – Consumer division to close; talks ongoing with potential buyers of subunits (PR0901)
Zurich, February 5, 2009 - Micronas experienced a very variable year in 2008. The restructuring process initiated in autumn 2007 was largely concluded in 2008, bringing the intended economies on the cost side, however sales did not meet expectations. Euro 2008 and the Beijing Olympics failed to deliver the expected boost to the demand for TV sets and the negative impact of the credit crisis triggered a marked downturn in demand across all sectors in the fourth quarter. Although Micronas generated a profit in the third quarter and was on the way to achieving the desired turnaround, events in the fourth quarter were a strong damper on our business. Consolidated net sales fell to CHF 597.6 million in 2008, 16.1 percent lower than in the previous year. In the fourth quarter alone, sales slumped by 22.6 percent. In view of the extremely uncertain outlook for the current year, with no prospect of an early recovery in the markets, the Board of Directors, together with Management, has decided on an immediate package of economy and restructuring measures which will enable Micronas to remain completely unrestricted in its ability to act. Negotiations for sale of parts of the Consumer business are ongoing with potential buyers who want to retain employees. The rest of the Consumer division will be shut down. In Freiburg, further jobs will be cut in production and administration. The total number of jobs affected worldwide is 800 to 900. The Automotive division will continue and the already promising diversification into new markets such as industrial products and white goods will be pushed.
“Micronas successfully managed the restructuring process connected to the new strategic orientation and the turnaround of the Company targeted for the third quarter was in sight,” explained Micronas CEO Wolfgang Kalsbach. “The marked downturn in demand in all segments during the fourth quarter had a very adverse impact, with the result that further action was demanded without delay.”
Consolidated net sales fell to CHF 597.6 million in 2008, 16.1 percent lower than in the previous year. Operating costs were cut by 29.6 percent to CHF 199.3 million. Operating profit before depreciation and amortization (EBITDA) reached CHF 42.6 million. The operating loss (EBIT) before exceptional items was reduced to CHF 23.2 million, down 68.2 percent on the previous year. As a result of the impairment test performed at the end of 2008, the value of Consumer division assets was adjusted by CHF 29.9 million. This led, after the release of restructuring reserves totaling CHF 3.8 million, to an operating loss (EBIT) of CHF 49.3 million, which represents an improvement of 90.6 percent in the result. The loss for the reporting period totaled CHF 52.5 million, an improvement on the previous year, corresponding to earnings per share of CHF –1.78. At the end of 2008, Micronas had net cash of CHF 303.1 million, 4.9 percent more than in the previous year, and shareholders’ equity of CHF 301.4 million (CHF 380.7 million). The equity ratio at the end of 2008 was 54.3 percent (54.9 percent).
The abrupt downturn in the automotive market in the fourth quarter had a negative impact on the Automotive division. While the oil price trend in early 2008 put a damper on demand for fuel-hungry vehicles, the effects of the financial crisis led to general restraint on demand for all types of vehicles. Vehicle manufacturers significantly scaled back their sales forecasts, leading to falling orders starting in the third quarter.
Automotive division sales fell 5.9 percent compared with 2007 to CHF 201.6 million. Sales in constant currency decreased by 3.1 percent on the previous year. Fourth quarter sales were down by 18.7 percent on the previous quarter. Operating profit (EBIT) declined from CHF 57.0 million to CHF 45.0 million due to the selective increase in spending on research, marketing and sales. The EBIT margin for 2008 was 22.3 percent (26.6 percent).
For the Consumer division, 2008 was marked by the restructuring measures adopted in autumn 2007 and almost completed by year-end – reducing the product portfolio and focusing research and development, with the resulting cost savings. The economies achieved exceeded expectations. However, the impact of the financial crisis drove the display market on an increasing downward trend, resulting in lower sales.
As a result of these trends, year-on-year sales in the Consumer division fell by 20.6 percent to CHF 396.0 million, with a fall of 24.6 percent in the fourth quarter. By contrast, the loss at the level of EBIT before exceptional items was reduced from CHF 130.0 million in 2007 to CHF 68.2 million. As a result
of the impairment test performed at the end of 2008, the value of Consumer division assets was adjusted by CHF 29.9 million. This led, after the release of restructuring reserves totaling CHF 3.8 million, to an operating loss (EBIT) of CHF 94.3 million.
“It is most disappointing, but we have to acknowledge that, despite a highly attractive product portfolio and a well-conducted restructuring exercise, we have not achieved the desired turnaround. We have no alternative but to adopt drastic measures,” said Micronas Chairman Thomas Lustenberger.
In Germany, a total of 500 to 600 jobs will be cut in production, administration and in the Consumer division. Furthermore, Micronas GmbH will be shutting down its production from February 16 until March 1, 2009. For parts of the Consumer division, the Group is negotiating with potential buyers who are interested in taking on existing employees. The rest of the Consumer division will be shut down. “This is a deeply regrettable step we have to take, but our analyses have shown that, in light of the economic conditions and in particular also due to the necessary high costs in R&D and marketing as well as the drastic price pressure, it will not be possible to work profitably in the Consumer division in the next few years,” said Wolfgang Kalsbach. In recent months, Micronas has been in intensive talks with possible investors and is optimistic that this will lead to keep running some of the products and respective jobs being saved.
"We believe that with the measures announced today we are creating the structures needed to meet the great challenges ahead. The Automotive Division provides us with the basis for the future development of Micronas," says Thomas Lustenberger.
Zurich, February 5, 2009