Difficult market environment for Consumer; Automotive goes from strength to strength (PR0615)

Key data for the first half of 2006

In the first six months of the current year, the Consumer division faced a difficult market environment. The football World Cup failed to provide the hoped-for impetus. The Automotive division continued to perform well, generating healthy growth. Although the consolidated net sales of the Micronas Group for the first half of 2006 were higher than in the same period a year ago, the trend in earnings was negative. At the same time, production capacity at Micronas was well-utilized, running at 95 percent during the reporting period.

The consolidated net sales of the Micronas Group for the first six months of the current year reached CHF 411.3 million, a rise of CHF 22.2 million or 5.7 percent over the same period of 2005. The gross margin for the reporting period was 30.4 percent. The order intake amounted to CHF 416.2 million; as at June 30, 2006, orders on hand stood at CHF 235.1 million.

Operating profit before depreciation and amortization (EBITDA) fell compared with the first half of 2005 by 45.5 percent to CHF 42.6 million. Operating profit before interest and taxes (EBIT) for the reporting period showed a loss of CHF 15.2 million.

The half-year period resulted in a loss of CHF 6.5 million, compared with a profit of CHF 19.9 million for the first semester of 2005. Earnings per share showed a loss of CHF 0.20.In the reporting period, the business priority for the Consumer division was the high-end flatpanel segment, where the long-term market trend is one of above-average growth. In the 30" to 34" screen range, worldwide sales of LCD sets outstripped traditional cathode-ray tubes for the first time. This trend will see a strengthening of the demand for the corresponding high-end product lines from Micronas. The football World Cup failed to produce the expected impetus in this market; the stimulation of demand for flat-screen TVs generated by this major sporting event remained low key.

Micronas achieved a technical quantum leap with its newly launched chip solutions. The first sets using this technology are on the market. Micronas offers the latest generation of audio and video encoders as well as decoder technologies for high-definition TV. Micronas is targeting new market opportunities in areas such as Internet TV, digital TV and media PCs. Technical challenges affecting the manufacture of newly launched products in the first few months of the business year were resolved during the reporting period.

The Automotive division continues to enjoy uninterrupted growth. New developments in Hall sensors were well received in the marketplace.On the basis of the approved reduction in the nominal value of Micronas shares by CHF 0.95 per share, shareholders received the corresponding payout on May 22, 2006. In addition, 1 311 000 Micronas shares worth CHF 44.9 million were repurchased using a second trading line during the reporting period.

In view of the uncertain inventory status at TV manufacturers, following a World Cup which failed to provide the sales boost that market players expected, it is difficult at present to give a detailed assessment of how this situation will affect sales of Micronas products. On the strength of the orders on hand for the third quarter of 2006, quarter-on-quarter sales growth of 13 to 15 percent can be expected. At best, the net result for the third quarter 2006 will break even.

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.