July 31, 2008

Q3 2008: Sustained stable business development

  • Sales: EUR 367 million; up 1 percent both year on year and sequentially
  • EBIT: EUR 28 million (Q3 2007: EUR 26 million, Q2 2008: EUR 26 million)
  • Net income up 25 percent year on year for the first nine months of fiscal 2008

1. Q3 2008

The overall stable development of demand in fiscal 2008 continued in the third quarter as well (April 1 to June 30, 2008). Sales were up slightly above both the previous quarter and also the previous year. Year on year around 4 percentage points of growth were lost through currency translation effects due to the stronger euro.

Earnings before interest and tax (EBIT) were like sales above the levels of the previous quarter and the comparable time period of the previous year.

2. Sales

2.1. Comparison with Q2 2008

EUR millionQ2 2008± in %Q3 2008

In comparison with the previous quarter EPCOS was able to increase its sales by 1 percent in

Q3 2008 to EUR 367 million.

In particular, sales of products for mobile communications have revived. Growth was also achieved in sales to components distributors and industrial electronics manufacturers. By comparison, sales to customers in automotive electronics have declined, as have also sales of products for consumer electronics.

There were only minimal changes in the development of sales to individual regions. The slight increase in the overall sales was achieved primarily in Europe without Germany.

Sales by business segments

EUR millionQ2 2008± in %Q3 2008
Capacitors and Inductors143+1144
Ceramic Components128-1126
SAW Components91+697

With sales of EUR 144 million at Capacitors and Inductors EPCOS was able to slightly exceed sales of the previous quarter.

Business for all product groups was more or less stable. Growth was realized for aluminum electrolytic capacitors used in industrial electronics applications.

At Ceramic Components sales were slightly lower at EUR 126 million.

In particular, sales of ceramic multilayer capacitors declined, where EPCOS is streamlining its portfolio. Moreover, sales of components for use in automotive applications have weakened. Sales increased primarily for thermistors and varistors (temperature- and voltage-dependent resistors) for applications in industrial electronics as well as those sold to distributors.

Sales at Surface Acoustic Wave Components (SAW) increased sequentially by 6 percent to

EUR 97 million.

The main reason for this growth is the revived demand for radio frequency filters and modules for mobile communications applications. This more than made up for the lower sales of multimedia filters for entertainment electronics.

2.2. Comparison with Q3 2007

EUR millionQ3 2007± in %Q3 2008

At EUR 367 million sales in Q3 2008 were slightly up year on year – despite the negative currency translation effects that amounted to approximately 15 million euros.

The greatest growth was realized with products for industrial electronics. In particular, the trend toward higher energy efficiency continues to drive growth in this area. Sales to components distributors and customers in information and communications technology also rose. This more than offset weaker sales of products for consumer and automotive electronics.

Sales in Europe without Germany grew at a double-digit rate. This is mainly attributable to the positive business development with manufacturers of mobile phones, which was able to more than compensate the – primarily currency-related – lower sales in Asia and the NAFTA region. In Germany sales reached the level of the previous year.

Sales by business segments

EUR millionQ3 2007± in %Q3 2008
Capacitors and Inductors134+8144
Ceramic Components137-8126
SAW Components93+497

Capacitors and Inductors increased sales by 8 percent to EUR 144 million.

Nearly all product groups contributed to this growth. As in the previous quarter the doubledigit growth rate for aluminum electrolytic capacitors stood out, which was mainly due to the higher demand than in 2007 from customers in the appliances and industrial electronics markets and among distributors.

Sales at Ceramic Components declined by 8 percent to a total of EUR 126 million.

Sales growth in this segment for thermistors and varistors, which were in particularly strong demand from industrial electronics customers and components distributors, was not sufficient to offset decreasing sales of other ceramic components – especially for automotive electronics applications.

SAW Components sales increased year on year by 4 percent to EUR 97 million.

This development was driven by double-digit sales increases for radio frequency filters and modules for mobile communications applications. This more than compensated the decreased sales of multimedia filters. The strength of the euro was felt most noticeably at SAW Components. Negative currency translation effects resulting from the weakness of the US dollar and the yen alone accounted for an approximately EUR 7 million reduction in sales volume in Q3. The unfavorable exchange rates for EPCOS resulted in further price pressure, which again led to price erosion in the double-digit percentage range. Altogether, the currency situation negatively impacted segment earnings in the period under review in the low doubledigit million euro range.

3. Earnings

3.1. EBIT by segments

EUR millionQ3 2007Q2 2008Q3 2008
Capacitors and Inductors+5.8+10.0+11.6
Ceramic Components+10.7+10.1+11.4
SAW Components+9.5+5.6+5.2

The Capacitors and Inductors segment posted earnings before interest and tax (EBIT) of plus EUR 11.6 million. The EBIT margin was 8 percent.

The EBIT of this segment includes a positive special effect of EUR 1.5 million from the minority stake in Becromal S.p.A./ Italy.

Despite the decrease in sales sequentially, Ceramic Components improved both EBIT and EBIT margin to EUR 11.4 million and 9 percent, respectively.

In particular, process improvements and measures to streamline the portfolio of ceramic capacitors once again had a positive effect on earnings.

SAW Components posted EBIT of EUR 5.2 million. The EBIT margin was 5 percent.

The fact that EBIT did not improve despite the increase in sales is due to the less favorable product mix compared to the previous quarter. In addition, earnings were burdened by capacity expansion costs for products for high-end UMTS mobile phones, the demand for which did not yet increase as expected.

3.2. Group earnings

EUR millionQ3 2007Q2 2008Q3 2008
Net income+15.0+17.1+19.3
Earnings per share (in EUR, undiluted)+0.23+0.26+0.30

Group EBIT was 28 Millionen EUR in Q3 2008. Net income was plus EUR 19 million. Earnings per share were plus EUR 0.30.

Net cash flow was almost balanced in the quarter under review.

Net cash of plus EUR 32 million provided by operating activities stood against net cash used in investing activities on more or less the same level. Net income and depreciation had a positive impact on net cash provided by operating activities. On the other hand net current assets increased mainly due to increased inventory level.

4. The first nine months of fiscal 2008

EUR million9 months 2007± in %9 months 2008
Net income+44.6+25+55.5
Earnings per share (in EUR, undiluted) +0.68+25+0.85

In the first nine months of fiscal 2008 (October 1, 2007 to June 30, 2008) EPCOS increased sales by 3 percent (adjusted for currency effects by 7 percent) to EUR 1,096 million and improved EBIT by 10 percent to EUR 82 million.

Net income and earnings per share increased by 25 percent to plus EUR 55 million and to plus EUR 0.85, respectively.

5. TDK and EPCOS pursue comprehensive partnership

TDK, a leading electronics company with headquarters in Japan, and EPCOS signed a Business Combination Agreement (BCA) today (see the separate press release of both companies). The purpose of the agreement is to combine EPCOS with TDK's business in the area of electronic components. This combination will create a leading manufacturer of electronic components with a strong presence in all regions and industries served.

6. Outlook

In Q4 of fiscal 2008 EPCOS is anticipating a further upturn in sales to manufacturers of mobile phones and more or less stable sales of products for industrial electronics. Sales to customers in automotive electronics are expected to decline again.

EPCOS is consequently expecting stable to slightly rising sales in Q4 2008. Operative earnings should be at the same level of the previous quarter.

During the course of fiscal 2008 achieving sales targets over the quarters has become increasingly difficult due to the continuous worsening of economic conditions. EPCOS will probably not entirely realize the increase in sales of 4 to 6 percent. Nevertheless, EPCOS will reach the targeted improvement in earnings (EBIT) by approximately 25 percent to around

EUR 110 million. These projections do not take into account that the planned combination of EPCOS with the passive electronic components business of TDK will burden EBIT in the current quarter in the mid-single-digit million euro range.

The outlook for 2009 is currently influenced by expectations of a further downturn in the global economy and rising energy and raw material prices. There are presently no signs of a weakening of the euro, whose strength has had a negative impact on sales and earnings. Should these trends continue, declining sales and earnings cannot be ruled out for EPCOS in fiscal 2009.


EPCOS AG is a leading manufacturer of electronic components, modules and systems headquartered in Munich. With its broad portfolio EPCOS offers a comprehensive range of products from a single source and focuses on fast-growing and technologically demanding markets, in particular in the areas of information and communication technology, automotive electronics, industrial electronics and consumer electronics. The EPCOS Group has design and manufacturing locations and sales offices in Europe, Asia, and in North and South America.

Electronic components are found in every electrical and electronic product and are indispensable for their flawless operation. Products from EPCOS store electrical energy, filter frequencies, and protect against overvoltage and overcurrent.

In fiscal 2007 (October 1, 2006, to September 30, 2007), EPCOS posted sales of EUR 1.44 billion. At the end of the fiscal year, the company employed about 18,300 people worldwide.

N.B. All financial data has been compiled to IFRS and is not audited.

Live transmission of conference call

On July 31, 2008, the Management Board of EPCOS will inform analysts and investors of business performance in the third quarter of fiscal 2008 at a conference call starting at 12 noon, Central European Time, 6 a.m., US Eastern Standard Time. This conference can be followed live at the EPCOS corporate website (www.epcos.com/conferencecall). A transcript of the speeches will be available for downloading after the end of the conference call.

Further dates

Results for the fourth quarter of fiscal 2008 will be published on November 12, 2008.

This document may contain forward-looking statements with respect to EPCOS’ financial condition, results of operations, business, strategy and plans. In particular, statements using the words “expects”, “anticipates” and similar expressions, and statements with regard to management goals and objectives, expected or targeted revenue and expense data, or trends in results of operations or margins are forwardlooking in nature. Such statements are based on a number of assumptions that could ultimately prove inaccurate, and are subject to a number of risk factors, including changes in our customers’ industries, slower growth in significant markets, changes in our relationships with our principal shareholders, the ability to realize cost reductions and operating efficiencies without unduly disrupting business operations, currency fluctuations, unforeseen environmental obligations, and general economic and business conditions. EPCOS does not assume any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.