August 5, 2009

Q3 2009: Sales up sequentially

  • Sales: EUR 279 million; up 6% sequentially; down 24% year on year
  • EBIT: minus EUR 24 million (Q2 2009: minus EUR 42 million; Q3 2008: plus EUR 28 million)
  • Q4 2009: Further improvement in sales and earnings expected

1. Q3 2009


In the third quarter of fiscal 2009 (April 1 through June 30, 2009), EPCOS’ business development improved sequentially but was still down year on year.


Sequentially, sales rose 6 percent to EUR 279 million. Compared to the previous quarter, the EBIT loss (earnings before interest and tax) was reduced by EUR 18 million to minus EUR 24 million.

2. Sales


2.1. Comparison with Q2 2009

EUR millionQ2 2009±Q3 2009
Sales263+6%279

Sequentially, sales to automotive electronics customers increased by nearly 20 percent in Q3 2009 – the strongest gain in any of the industries served, albeit from a very low level. One reason for this increase is that customers have now refilled the inventories of components that they had reduced in some cases excessively in the preceding quarters. Furthermore, Government subsidy programs revived demand for new cars. As a result, automobile manufacturers raised their production volumes and thus also increased demand for electronic components.


Sales of products both for consumer electronics and for information and communication technology increased by about 10 percent. Business with distributors remained more or less stable. Only sales with products for industrial electronics applications weakened further. A drop in demand for components from manufacturers of industrial machinery and systems was responsible for this decline. By contrast, sales of products for energy technology and lighting systems remained stable.


Regionally, sales grew strongest by about 20 percent in Asia. This gain reflects positive business development with products for consumer electronics and information and communication technology. Sales in Germany posted single-digit growth, primarily due to revived business with automotive electronics customers. Other European countries posted a single-digit decline in sales. Sales in the NAFTA region fell by about 15 percent.

Sales by business segment

EUR millionQ2 2009±Q3 2009
Capacitors and Inductors116+1%118
Ceramic Components71+9%77
SAW Components76+10%84

Sales at the Capacitors and Inductors segment were up 1 percent to EUR 118 million. At Ceramic Components, sales rose 9 percent to EUR 77 million. In both cases, the main driver of this positive development was the increase in demand for components for use in automotive electronics applications.


Surface Acoustic Wave (SAW) Components experienced the strongest growth as sales climbed 10 percent to EUR 84 million. Stronger demand for multimedia filters and for filters and modules used in mobile communication devices was the reason for this growth.

2.2. Comparison with Q3 2008

EUR millionQ3 2008±Q3 2009
Sales367–24%279

EPCOS’ sales to almost all industries served posted a double-digit year-on-year decline, although the decline was no longer as pronounced as in the previous quarter. Only sales of products for consumer electronics were up compared to the same period a year ago. The main reason was the contribution to sales made by Chinese joint venture EPCOS Feida, which went into operation at the start of 2009. EPCOS Feida develops and manufactures AC capacitors, mostly for use in home appliances.


Sales to automotive electronics customers dropped by 40 percent, the strongest decline in any of the industries served. Sales to both industrial electronics customers and distributors were nearly 30 percent down. Sales to manufacturers of information and communication technology fell by about 15 percent.


Regionally, sales primarily reflect weak business with products for automotive and industrial electronics applications. Sales were down by about 40 percent in Germany and the other European countries. Sales in the NAFTA region dropped by 25 percent. By contrast, sales in Asia rose by 20 percent. Higher sales to Asia-based manufacturers of mobile communication applications and the mentioned contribution made by EPCOS Feida were the main reasons of this growth.

Sales by business segment

EUR millionQ3 2008±Q3 2009
Capacitors and Inductors144

–18

%

118
Ceramic Components126–39%77
SAW Components97–13%84

Year on year, all business segments had to accept a double-digit drop in sales.


At Capacitors and Inductors, sales development was largely shaped by weak business with industrial and automotive electronics customers. Overall, sales in this business segment were down 18 percent.


The decline in sales was sharpest – a drop of 39 percent – at Ceramic Components. As in the first two quarters of the current fiscal year, the main reason was the very weak demand from the automotive electronics sector.


In the SAW Components segment, year-on-year sales were down 13 percent. A modest increase in sales of filter products for mobile communication applications was not enough to compensate for weak business with modules and multimedia filters.

3. Earnings


3.1. EBIT by business segment

EUR millionQ3 2008Q2 2009Q3 2009
Capacitors and Inductors+10.1−9.9–8.2
Ceramic Components+11.4−15.312.6
SAW Components+5.2−16.32.9

Sequentially, the EBIT loss was reduced substantially in all business segments in Q3 2009.


EBIT was minus EUR 8.2 million at Capacitors and Inductors and minus EUR 12.6 million at Ceramic Components. At SAW Components, the EBIT loss was cut to EUR 2.9 million – less than one fifth of the value of the previous quarter.


These improvements were based above all on sales growth and measures to cut costs. In addition, second-quarter EBIT at the SAW Components segment was burdened significantly by the reduction of inventories.

3.2. Group earnings

EUR millionQ3 2008Q2 2009Q3 2009
EBIT+26.7−41.5–23.7
Net income (loss)+17.8−51.532.8

Earnings per share

(in EUR, undiluted)

+0.27−0.760.50

Group EBIT was minus EUR 23.7 million in the quarter under review. Net income was minus EUR 32.8 million. Earnings per share were minus EUR 0.50.


Despite the loss, positive net cash flow totaling EUR 17 million was realized in Q3 2009. Depreciation and amortization almost offset the net loss. As a result, the decrease in net working capital – realized largely by adjusting inventories – had a positive impact on net cash provided by operating activities, which came to plus EUR 39 million. EUR 22 million were used in investing activities.

4. The first nine months of fiscal 2009

EUR million

First 9 months

of 2008

±

First 9 months

of 2009

Sales1,096−25%824
EBIT+80.8---84.4
Net income (loss)+54.0---114.2

Earnings per share

(in EUR, undiluted)

+0.83---1.70

In the first nine months of fiscal 2009 (October 1, 2008, through June 30, 2009), EPCOS’ sales were down year on year by 25 percent to EUR 824 million. Due to the lower volume, EBIT was minus EUR 84.4 million.


Net income dropped to minus EUR 114.2 million. Earnings per share fell to minus EUR 1.70.


Net cash flow for the first nine months of fiscal 2009 was minus EUR 87 million.

5. Outlook


Although the world’s economy remains in a tense situation, there are definitely signs of a measure of improvement. Here and there, companies are no longer quite so reluctant to place orders and invest as in the preceding quarters. In recent weeks, EPCOS has seen an overall improvement in its order intake, albeit from a very low level.


Against this background, EPCOS expects sales to increase sequentially to between EUR 300 million and EUR 320 million and EBIT to improve accordingly in Q4 2009.

About EPCOS


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 2008 (October 1, 2007, to September 30, 2008), EPCOS posted sales of EUR 1.48 billion. At the end of the fiscal year, the company employed about 21,200 people worldwide.

N.B. All financial data has been compiled to IFRS.

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 forward looking 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.