Schweizer Electronic AG - half-year report 2003

Excert from report of the Managing Board - In June this year, at the general shareholders meeting, we already drew attention to the lasting difficult market situation. The weak demand and the price pressure accompanying it are continuing to reduce the trend of turnover and profits in our company. The business with mobile communication networks is especially suffering under the hesitant willingness to invest by network operators. Customer orders and our related orders position remained lower than our expectations in the first half of 2003. The incoming orders amounting to 43.6 million euros and the gross income from sales and services before sales deductions of 42.3 million euros are 4 % under the corresponding prior-year values. The backlog orders as of June 30, 2003 amounted to 35.4 million euros. The domestic sales amounting to 32.2 million euros remain almost constant compared to the same prior-year period. We were faced with drastic drops in sales in the export markets outside of the EU states partly due to the increased external value of the euro. Sales abroad dropped by 13 % to 10.1 million euros. The number of employees as compared to the same period last year decreased by 3 % to 832. This number includes 33 trainees and apprentices. Consistent implementation of the strategic new course towards becoming a more efficient supplier of com-plex multilayer boards was continued in the first half of 2003. 3.2 million euros were invested in the first half year in property, plant and equipment, mainly for the machinery in the new HDI plant. The first produc-tion facilities to manufacture circuit boards in this plant have meanwhile been put into operation. The depre-ciation over the period of the report amounted to 4.1 million euros. The weak demand and the resulting decrease in sales as well as the strong margin pressure have had a con-siderable effect on the results. We posted a deficit of 1.2 million euros for the first half of 2003. The EBITDA margin has dropped to 9.1 %.Our associated company, the PENTEX-SCHWEIZER CIRCUITS LTD in Singapore, has developed positively. In first half of the fiscal year 2003, which ended on 31/12/2002, the sales revenues increased by 13% to 63.7 mil-lion Singapore $. The profits after taxes increased in comparison to the same prior-year period by 204 % to 2.8 million Singapore $ (approx. 1.5 million euros).According to the latest figures from the branch-specific market research institutes, the market for printed boards in the US and Europe is not due to clearly improve until 2004. Today we must assume, as already de-clared at the last general shareholders meeting, that our planned sales of 91 million euros for the year 2003 will not be achieved.In order to increase sales and lower costs, we have introduced extensive, fast-working measures. One meas-ure that we would especially like to point out is the willingness of the majority of our employees to voluntarily work 3 additional hours a week without pay for the year 2003 and 2004. This time can be used flexibly within the framework of our model for annual working hours. Today we are assuming, based on annual sales of 85 million euros, that we will achieve the break even point. This figure for annual sales can be achieved if the current forecasts of a beginning economic revival prove to be true and the orders continue to come in as during the first half year.