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IPTE: Q4 & annual results 2008

IPTE NV, (Euronext Brussels: IPTE) ended 2008 with total group sales for the year of EUR 232 million, 9% lower than in 2007 (EUR 255 million). Net profit was EUR 441,000 compared with EUR 10.9 million in 2007.

During the 4th quarter the company recorded a pre-tax loss of EUR 1,784,000, as compared with a pre-tax profit of EUR 2,591,000 in Q4 2007. Q4 sales were EUR 58.2 million compared with EUR 68.5 million in Q4 2007.

The general economic crisis has impacted sales and results at IPTE too. After falling slightly by 4% during the first half of 2008, the fall reached more than 15% for the group as a whole during the second half.
Contract manufacturing activity fell by over 15% for the year as a whole (from EUR 195.3 million to EUR 165.9 million). Sales by the automation division, on the other hand, rose in 2008 by 11.2 percent to EUR 67 million (EUR 60.2 million in 2007), reflecting the acquisition of Platzgummer GmbH as at 1 January 2008. Aside from Platzgummer activity levels were down 9% (from EUR 60.2 million to EUR 55 million).
Total order book at end-2008 amounted to EUR 78 million (EUR 83 million at end-2007).

Sales of the automation division rose from EUR 17 million in Q4 2007 to EUR 20 million in Q4 2008. The division ended the fourth quarter with an order book of EUR 24.5 million (EUR 28 million at the end of the third quarter). Sales of the Contract Manufacturing division fell from EUR 51.4 million in Q4 2007 to EUR 38.2 million in Q4 2008. The division ended the fourth quarter with an order book of EUR 53.5 million (EUR 60.8 million at the end of the third quarter).

The fourth quarter ended with a loss of EUR 1,806,000. This loss is the result of:
- restructuring in both divisions (impact of around EUR 400,000 in contract manufacturing – closing in Slovakia and personnel reduction – and 400,000 in automation – personnel reduction);
- realized and unrealized foreign exchange losses of EUR 1.3 million on the US dollar, Romanian lei and Czech crown;
- undercoverage of fixed costs in contract manufacturing owing to the 25% reduction in sales compared with Q4 2007;
- increased costs with the expansion of automation activities in Estonia, Spain and Mexico. These facilities were started up in the course of 2008 to meet customer demand. In the general economic malaise they are not yet earning enough to cover their costs.

2008 ended with a group profit of EUR 441,000 (compared with EUR 10,883,000 in record year 2007).  At the start of 2008, expectations for the year were good and positive. The financial crisis, followed by the economic crisis, is however clearly having a more than average impact on the electronic sector in which IPTE operates. Already during the past year falling sales led us to decide to undertake restructuring in all parts of the organization in readiness for a difficult year in 2009. Staffing has already been reduced by more than 250 permanent employees (out of a total 2400 at the end of 2007) and 150 temporary employees.  Investments will be limited to those most necessary to meet customer demands. The unclear market prospects require the company to do everything possible to secure its long-term health.  At the end of the year IPTE met all its bank covenants and has sufficient credit facilities to continue to operate normally in 2009.

Significant events in 2008:
In early 2008 the acquisition of Platzgummer GmbH was successfully completed. Platzgummer specializes in developing and producing customer-specific automation solutions. The company is based at Karlsfeld, close to Munich (Germany). Customers are German and international suppliers to the automobile, metal and packaging industries. Platzgummer is being acquired in 2 stages. 80 percent of the shares have been acquired with immediate effect. The remaining 20% will be purchased in January 2011.

In May 2008 the Connect Systems group opened a new 16,000 m² plant at Oradea, Romania (8,000 m² PCB assembly and 8,000 cable assembly).  The new plant, representing an investment of EUR 0.75 million, employs 800 people and is the largest plant in the entire group. This new plant will further reduce the cost structure and boost production efficiency in the coming years.

Other major investments during the first half include an additional manufacturing hall at Kampenhout (EUR 2.5 million), licences for new operating software (EUR 1 million) and taking into service a cable assembly clean room in the Netherlands.

At the end of July 2008 the firm TAF3 in Estonia was acquired. TAF3 specializes in automation and testing, and employs 30 highly trained mechanical, electrical and software development engineers, each averaging more than 10 years’ experience in the telecoms and automobile sectors. IPTE paid goodwill of EUR 964,000 to acquire this company, necessary for being in a position to activate potential customers in Northern Europe.

In early October 2008 contract engineering announced the closure of the plant in Slovakia, following the centralization of the Eastern European back offices. Maintaining two similar back office cabling plants (Romania and Slovakia) was resulting in inefficient production, increasing operating costs (inventory management) and in double management.  Transferring Connect Systems Slovakia’s cable activities to Romania improves efficiently and simplifies communications and logistics to give a low cost structure. The closure will produce annual cost savings of EUR 850,000 from 2009 onwards.

In early November, IPTE already announced an initial organization of the automation activity. This reorganization aims at reducing the cost structure by over 10 percent and combining and strengthening a number of core competencies. Vis-à-vis our customers we are maintaining our strategy of local presence with service and support on 3 continents (Europe/ America/ Asia) and on key European sub-markets. The reorganization is on schedule and will be continued in 2009.

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