Micronas expects further recovery of its business thanks to concentration on the automotive market (PR1003)

Zurich, February 25, 2010 – In 2009, dramatic negative economic developments on the world markets forced Micronas to take a series of far-reaching measures. Aiming to put the Company in a sustainably profitable position by focusing on its acknowledged strengths in the automotive business, the Board of Directors – in agreement with the Management – decided to give up the loss-making Consumer division in February 2009. Micronas will now concentrate on the Automotive division, which has always maintained stable margins and which boasts two successful product lines: Hall sensors and microcontrollers. Based on its large and competitive range of Hall sensors and microcontrollers for automotive applications, the division has also started to diversify into new markets (industrial products and white goods), and has already scored some initial successes in these areas. The Management and Board of Directors have been renewed in order to facilitate a new start of the Company. In 2009, Micronas Group’s sales fell, in line with expectations, by 59.6 percent to CHF 241.2 million. The loss at EBIT level, including restructuring costs, came to CHF 172 million. Micronas continues to be solidly capitalized. As at the end of 2009, Micronas had shareholders’ equity of CHF 127.0 million and an equity ratio of 36.8 percent, as well as cash and cash equivalents of CHF 188.4 million. Orders on hand and sales both went up in the third and fourth quarter. Micronas expects business to pick up even more in 2010.

The 2009 financial year was heavily influenced by the Company’s restructuring. On May 15, 2009, the American semiconductor firm Trident Microsystems took over three of the Micronas consumer product lines. The remaining unsold parts of the heavily loss-making Consumer division were closed down over the course of the year. These measures resulted in a steep fall in overall sales as well as substantial restructuring costs. Once the restructuring was over, however, incoming orders developed well thanks to a slight recovery in the automotive sector in the third and fourth quarter, when sales started to go up again.

Consolidated net sales for 2009 came to CHF 241.2 million. This is 59.6 percent down on the previous year, which is in line with expectations. The operating loss before exceptional items was higher than the previous year at CHF 66.1 million. Restructuring costs came to CHF 114.6 million, and the partial sale of the Consumer division to Trident Microsystems generated a net gain of CHF 8.7 million. As a result, the loss at the EBIT level came to CHF 172.0 million. Low capacity utilization at the production facility in Freiburg alone took CHF 58.8 million out of the income statement. The loss for the reporting period worsened in 2009 to CHF 179.0 million, leaving earnings per share at CHF –6.08. At the end of 2009, Micronas had cash and cash equivalents of CHF 188.4 million and shareholders’ equity of CHF 127.0 million.

The sharp collapse in the automotive market that began at the end of 2008 continued until the middle of 2009. Micronas was directly affected by the reduction in the number of cars being made. Japanese manufacturers, which were hit particularly hard by the crisis in the USA, cut production to only 30 percent of the previous year's level in some cases. Over the year as a whole, the Company’s sales in Japan and the USA fell to only 70 percent of 2008 levels, and in Europe to around 55 percent.

Thanks to the slight recovery in the automotive sector in the third and fourth quarter, Micronas saw demand and incoming orders start to go up again. However, this was not enough to compensate for the dramatic, crisis-driven falls of the first two quarters. In 2009, the Automotive division's sales fell 37.2 percent on the previous year to CHF 126.7 million. The operating loss (EBIT) came to CHF 18.4 million, following a profit of CHF 45.0 million in the previous year. This loss is entirely due to the excessively low capacity utilization at the production facility in Freiburg.

The Consumer division’s results were heavily affected by the restructuring. Net gain from the sale of the FRC (frame rate converter), demodulator and audio product lines to American semiconductor company Trident Microsystems came to CHF 8.7 million. The other parts of the Consumer division were closed down over the course of the year. Final deliveries to customers will be almost completed by the middle of 2010. Sales by the Consumer division fell accordingly by 71.1 percent year-on-year to CHF 114.5 million. The operating loss before exceptional items was CHF 47.7 million. After taking account of restructuring costs and proceeds from the partial sale of the Consumer division to Trident Microsystems, the operating loss at EBIT level was CHF 153.6 million.

As part of the transition to a leaner new organization, the Company also restructured its production activities in Freiburg. Capacity utilization in wafer manufacturing (frontend) fell to less than 50 percent in the first two quarters, but then rose again in the second half of the year to reach 65 percent in the fourth quarter.

As announced at the start of 2009, the Board of Directors signaled a new start for Micronas by making changes to the Management Board and the Board of Directors itself. At the extraordinary Shareholders' Meeting of November 27, 2009, shareholders elected the following as new members of the Board of Directors for a term lasting until the next ordinary Shareholders' Meeting on March 26, 2010: Klaus Blickle, CEO of automotive supplier Harman Becker Automotive Systems; Lucas A. Grolimund, former CEO of Cicor and Schlatter Holding; Dieter G. Seipler, former CEO of automotive supplier Mann und Hummel Holding; and Stefan Wolf, Chairman of the Board of automotive supplier ElringKlinger. Former members Thomas Lustenberger, Christoph Brand, Rudolf W. Hug and Harald Stanzer stepped down from the Board on November 27, 2009. The Board of Directors appointed Heinrich W. Kreutzer as its new Chairman.

Matthias Bopp took over as CEO of Micronas on January 1, 2010. Mr. Bopp most recently managed the Radio Frequency and Automotive Division of Nasdaq-quoted semiconductor company Atmel in Germany. Günter Hoppe, the former deputy CFO, was appointed as the new CFO and took up this post on December 1, 2009. These two gentlemen replace Wolfgang Kalsbach and Manfred Häner.

"I believe that with a new strategic focus and a new management team of proven industry experts, Micronas is well positioned to take advantage of future growth opportunities," said Chairman of the Board of Directors Heinrich W. Kreutzer.

Incoming orders and net sales in the Automotive division started to rise again in the third and fourth quarter of 2009, and the Board of Directors and Management expect business to continue improving in 2010. "Given that there is still no sign of the global automotive market recovering to pre-crisis levels any time soon, the Company will most likely not return to profit this year. The Board of Directors and Management have taken steps to stop any further outflow of liquidity from operations," Kreutzer added.