Japanese crisis lessens sales expectations at Micronas for 2011 (PR1107)

• Sales of CHF 79.7 million and operating earnings of CHF 8.2 million in the first half year are in line with Company guidance
• Since end-March, loss of production in Japan has led to postponed orders and a reduction in new orders
• For the year as a whole, Micronas expects sales between CHF 150 and 155 million, and an EBIT margin between 8 and 10 percent
• The partnership with Siemens to develop a new type of fire alarm is an important milestone for the Industrial division

Zurich, July 19, 2011 – Following the successful refocusing of Micronas on the Automotive and Industrial sectors last year, 2011 has also been dominated by the transition and the resulting streamlining of the Company’s product portfolio. As planned, sales of Consumer products and dashboard controllers decreased in the first-half year. The first-half performance of the Automotive division was impacted by the effects of the earthquake in Japan; Micronas generates 45 percent of its sales with Japanese customers. Since the end of March, the production stoppage in Japan has led to postponed orders and a reduction in new orders. As a consequence, sales fell slightly in the second quarter after a good first three months. “Because of the continuing crisis in Japan we expect sales to bottom out in the third quarter, and to start recovering in the fourth quarter of 2011,” explains Micronas CEO Matthias Bopp.

Sales and earnings in the first half of 2011 were in line with Company guidance. Sales by the Micronas Group (Automotive and Consumer) in the first half of 2011 came to CHF 79.7 million, which is, as expected, 17 percent below the equivalent period last year (first half of 2010). Operating earnings (EBIT) came to CHF 8.2 million (compared with CHF 6.9 million in the first half of 2010). The EBIT margin stood at 10.3 percent of sales in the first half-year.

After taking account of financial expenses, financial income and taxes, Micronas posted a profit of CHF 1.3 million for the first half of 2011, compared with a loss of CHF 4.3 million in the first half of 2010. Financial expenses include valuation losses of CHF 3.4 million of cash positions resulting from the weakness of the euro. Earnings per share were at CHF 0.04. At the end of June 2011, Micronas held cash and cash equivalents of CHF 150.6 million (CHF 165.4 million at end-2010). With equity capital at CHF 113.6 million (CHF 122.7 million at end-2010) the equity ratio came to 43 percent.

Last year the Automotive division benefited from the worldwide recovery in car markets, but in the first half of 2011 its performance was heavily affected by events in Japan. Since March, production facilities in Japan have had to close or operate at much reduced capacity for extended periods of time. The impact has been dramatic even outside Japan, because most Japanese carmakers source key components from Japan for their operations all over the world. The Japanese car industry expects production to return to pre-earthquake levels during the fourth quarter.

Automotive generated CHF 76.5 million in the first six months, which is 7 percent lower than in the prior-year period. After adjusting for currency fluctuations (in euros), Automotive sales were up by 4 percent. Operating profit (EBIT) came to CHF 6.6 million (CHF 5.2 million).

The Industrial division is performing well. “The cooperation agreement between Siemens and Micronas on gas sensor technology, announced on June 22, was a milestone for Micronas and highlighted our good positioning,” says Matthias Bopp. The aim of the cooperation is to develop and launch new types of Siemens fire detection products based on Micronas mySENS technology.

As expected, sales by the Consumer division continued to decline. In the first half of 2011, sales stood at CHF 3.2 million (CHF 14.1 million in the first half of 2010). Operating profit (EBIT) came to CHF 1.7 million (CHF 1.7 million).

The ongoing volatility of the stock market requires a permanent assessment of the financial assets including the shares in Trident Microsystems, Inc. which Micronas had received as a consideration in the sale of its Consumer product lines in 2009. Should the currently low pricing level of the Trident shares be maintained, Micronas will be forced to adjust the value of its Trident participation resulting in a respective impact on its financial result which could, according to the current assessment, be in the range of a single-digit million amount.

Owing to the temporary fall in demand, capacity utilization at the Freiburg manufacturing facility went down to 70 percent. This capacity includes the front-end wafer fab and the back-end assembly and testing areas. In the second quarter, the amount of short-time working was increased in certain production areas in Freiburg. Short-time working is likely to be suspended during the holiday months over the summer, and then reinstated from October.

In April 2011, Micronas acquired the buildings and production areas it had previously leased in Freiburg. This has helped permanently reduce costs and improve operating results.

Micronas is continuing the strategy it pursued successfully in 2010, focusing on Automotive business and developing its Industrial division. Despite the temporary postponement of orders in 2011, Micronas is continuing to build up its research and development activities, marketing operation and worldwide sales presence.

Matthias Bopp outlines the Company’s position: “Precise forecasts for the current business year are hard to make in the face of the difficulties our Japanese customers are presently experiencing and uncertainties about economic developments. The Board of Directors and Management expect to see sales of between CHF 150 and 155 million for the year as a whole, including expected Consumer sales of CHF 7 million. The full-year EBIT margin is likely to be between 8 and 10 percent.”