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Elektrobit Group Oyj - EB, ELEKTROBIT CORPORATION GIVES MORE PRECISE PROFIT OUTLOOK FOR THE SECOND HALF OF 2010

December 30, 2010

EB, ELEKTROBIT CORPORATION GIVES MORE PRECISE PROFIT OUTLOOK FOR THE SECOND HALF OF 2010


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Free for publication on December 30, 2010, at 8:00 a.m. (CET+1)

 

EB, ELEKTROBIT CORPORATION GIVES MORE PRECISE PROFIT OUTLOOK FOR THE SECOND HALF OF 2010

 

EB, Elektrobit Corporation gives more precise guidance for the second half of 2010 based on more specific outlook available. Excluding the impairment of accounts receivables of EUR 8.3 million from its customer TerreStar Networks Inc., which has filed for reorganization, and other non-recurring costs amounting to approximately EUR 3.3 million, EB expects the operating loss to be approximately EUR 7 - 8 million. Including the non-recurring costs and the booked impairment of the accounts receivables of EUR 8.3 million, EB expects the operating loss to be approximately EUR 18 - 20 million in total.

 

The outlook from the operative business has clarified towards the end of the year, and it has become evident that the sales to the customer TerreStar Networks that filed for reorganization will be low in the last quarter of the year. As earlier informed, the operating profit in the second half of 2010 will be negatively affected by non-recurring costs of approximately EUR 2.6 million due to the termination of employments and other measures resulting from the decreased amount of personnel and lower sales volumes after the conclusion of the personnel negotiations in Wireless Solutions Business and EB corporate functions in December. Further, the operating profit in the second half of 2010 will be negatively affected by other non-recurring costs estimated to amount to approximately EUR 0.7 million.

 

As already informed earlier and provided in the outlook of the interim report on October 28, 2010, EB had expected the operating profit for the second half of 2010, excluding the impairment of accounts receivables of EUR 8.3 million, be clearly lower than the operating profit for the second half of 2009 (EUR 0.0 million). Respectively EB still expects the net sales for the second half of 2010 will be higher than in the second half of 2009 (EUR 73.6 million).

 

EB announced on October 20, 2010, that TerreStar Networks and certain other affiliates of TerreStar Corporation have filed voluntary petitions for reorganization. Potential implications of the filing for reorganization on the parties´ business relations in the future cannot be currently evaluated, but based on the current understanding the total business volume between the two parties will not be significant in the near future.  

 

Based on EB's current understanding, there is no reason to believe that EB would not be able to collect in due course at least that portion of TerreStar Networks´ receivables that exceed the amount of the impairment of accounts receivables. At the worst, TerreStar Networks´ reorganization process and challenges in obtaining funding may also result in a booking of significant impairment of accounts receivables and even termination of the business relation should TerreStar Networks, in an exercise of its business judgment and with Court approval, determine that it will not comply with its contractual obligations towards EB as provided by EB. Should the business relationship completely terminate in short-term, and the accounts receivables could not be collected, this would additionally lower EB´s operating profit non-recurringly by approximately EUR 11 million, at maximum (USD-nominated items as per exchange rate of December 29, 2010).

 

EB aims to collect the amounts owed to it in full either through the re-organization process of TerreStar Networks or through legal proceedings against TerreStar Corporation published on November 20, 2010, and/or for example through selling of the earlier mentioned accounts receivables. The above mentioned legal proceedings are partly based on a guarantee issued by TerreStar Corporation for EB's accounts receivables from TerreStar Networks and partly based on TerreStar Corporation's direct contractual obligations towards EB.

 

It is possible that based on later information related to the TerreStar Networks´ reorganization and to the legal proceedings against TerreStar Corporation and based on the completion of the Financial Statement 2010, the view may need to be reconsidered.

 

At the moment, EB's receivables from TerreStar Networks amount to approximately USD 26.0 million (EUR 19.8 million as per exchange rate of December 29, 2010), out of which USD 25.7 million (EUR 19.6 million as per exchange rate of December 29, 2010) are outstanding.

 

EB, Elektrobit Corporation will release Financial Statement Bulletin 2010 on February 17, 2011, at 8:00 a.m.

 

 

Oulu, December 30, 2010

 

Elektrobit Corporation
Board of Directors

 

 

Further information:

 

Jukka Harju
Chief Executive Officer
Tel. +358 40 344 5466

 

For further information on TerreStar and TerreStar Networks, please see www.terrestar.com and www.TerreStarInfo.com.

 

Distribution:

 

NASDAQ OMX Helsinki
Major media

 

EB, Elektrobit Corporation
EB develops advanced technology and transforms it into enriching end user experiences. EB specializes in demanding embedded software and hardware solutions for the automotive industry and wireless technologies. The company's net sales for the year 2009 totaled EUR 153.8 million. Elektrobit Corporation is listed on the NASDAQ OMX Helsinki. www.elektrobit.com