Kontron AG Declares Profitability

TecDAX-listed Kontron AG reached the target of continuous profitability that it had set itself at the start of 2009. Kontron's important industrial automation sales market recorded a slight revenue decline from EUR 496.7 million to EUR 468.9 million compared with the previous year. EBIT earnings were exposed to greater margin pressure, and fell from EUR 46.9 million to EUR 30.1 million, mainly due to weakness in the high-margin automation market, and the sharp decline in the still lower-margin original design manufacturer (ODM) business in Asia. Earnings per share amounted to 41 cents compared with 67 cents in 2008. Depending on global economic trends, the company anticipates stabilization or slight growth for the 2010 financial year. Management Board and Supervisory Board have decided to recommend the Annual Shareholder Meeting on June 9, 2010 as in the last two years the distribution of a dividend of 20 cents per share.

Although it is hardly possible to issue specific forecasts in view of the economic prospects that are difficult to predict, the Management Board is anticipating a year of consolidation. "The enormous cost pressure is prompting a growing number of companies to outsource extensive and cost-intensive development and production steps," commented Ulrich Gehrmann, Kontron's CEO. "This is particularly reflected in our strong growth in design wins and the order book, and will feed through to growth in the second half of 2010." Although individual markets, such as the automation sector in Europe, remained under pressure, Kontron's broad regional presence and high degree of sector diversification offer a significant hedge against major risks, Mr. Gehrmann went on to note. He suggested that comparatively economically independent sectors such as telecommunications, security (government) and medical engineering would act as growth-drivers.

Along with technology and quality leadership, the medium-term objective is also to achieve production-cost leadership in the embedded computer technology business segment. This will be assisted by a constant improvement in purchasing terms (for instance through the central strategic purchasing operation in Taiwan), and the continuous rise in more cost-effective production at the Malaysian location in Penang. The aim is that 70 percent of production will already be realized in Asia by 2010. Where administration costs are concerned, preparations are currently underway to make successive and significant savings through centralization, and the integration of smaller organizational units into larger ones. More streamlined structures and competence centers will thereby allow greater performance and revenue to be generated in the future, along with a lower cost base. Together with its solid financial position, the company's organizational strength positions it optimally to make further strategic acquisitions as part of the market consolidation process. "In terms of internal organization, we have achieved greater performance levels through more streamlined processes. At the same time, we have also achieved sustainable cost reductions, and strengthened sales and proximity to our customers. We have minimized risks on the sales side during the crisis through broad vertical and horizontal diversification," Mr. Gehrmann commented further. "We are expanding these activities, and we are exploiting our technology leadership to grow in 2010 and subsequent years, accompanied by rising profitability. We are now laying the foundations in order to achieve our 12 percent EBIT target margin with double-digit organic growth rates in a normal economic environment."