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Elektrobit Group Oyj - JOT Automation Group Plc's Financial Statement Bulletin

February 14, 2002

JOT Automation Group Plc's Financial Statement Bulletin


2001 was economically a difficult year for the JOT Automation Group. The fall in net sales, which began in the last quarter of 2000, continued throughout 2001. The net sales of JOT Automation Group fell 45.7 per cent and was 76.1 (140.1) million euros. The operating loss was 15.8 million euros, i.e. -20.7 (10.0) % of net sales, whereas the operating profit in the previous year was 14.1 million euros.

The most relevant factor from the Group's net sales and profitability point of view in 2001 was the lack of growth in the telecommunications industry. The proportional share of telecommunications industry in the Group's net sales fell 28,2 percentage unit to 41,6 %. The absolute amount of sales to the telecommunications industry fell about 66,1 million euros from the previous year.

The main marketing areas of the Group are still Europe, Northern America and Asia. The market situation has weakened in all marketing areas, however, most significantly in Central Europe.


Review of operations in the financial period

Changes in the operating environment

The financial period was characterized by a weakened global economy and volatility, which re-flected as weakening demand for our customers' end products in all market areas excluding, how-ever, China. Another significant factor with respect to the production automation markets has been the prevailing and longer than expected transition phase to full-scale implementation of new GPRS- technologies and to emerging 3G- technologies.

Due to the aforementioned factors the long continued growth in demand for automation equipment ended and JOT Automation's customer segments developed excess capacity in production. During the financial period significantly fewer production lines were built than before. Instead the custom-ers' investments were geared towards projects aiming to make the use of existing production ca-pacity more efficiently as well as to modifications of the current production lines.

The role of the plastic component manufacturing services (CMS) business segment grew in the assembly of mobile devices. This was due to increasing amount of components installed in the end products, and shorter life cycle of end products as well as the increasing amount of product varia-tions specific to particular market areas.

Geographically the electronics industry continued to establish itself to Asia and especially to China, where the demand for telecommunications products has continued to grow. Consequently in Europe and in USA production units were closed or their operations were reduced.

During the financial period the consolidation of companies operating in electronics industry contin-ued. Acquisitions and coalitions were carried out by EMS manufacturers and OEM producers. Si-multaneously several OEM producers continued to outsource their production to EMS manufactur-ers. To automation manufacturers this meant a reduction in the amount of customers as well as growth in the size of customers.

The competition in the automation markets became more difficult, especially with respect to stan-dard equipment. In these markets there are lots of local operators and the significance of equip-ment price is emphasized in investment decision-making.

In the comprehensive systems business the cost efficient renewal and the reutilization of produc-tion solutions have became a significant competitive edge. Also the local services offered to a cus-tomer became one of the most important elements in automation investment decision-making. To-gether these factors create an opportunity to develop different types of service concepts to improve the efficiency of the customers' production.

Operations were adjusted to the changed market situation

Due to the weakening market situation during the financial period the JOT Automation Group car-ried out cost saving measures, which were realized to a significant extent beginning the third quar-ter of the year 2001.

In February market situation changes were estimated greater than expected earlier and therefore personnel negotiations were started in the JOT Automation Group. As a result of the negotiations, a total of 31 persons were laid off for a maximum of 90 days and eight persons were given notice. In April it was found that the decreased growth estimates of the mobile phone segment will lead to further delays in production investments. In order to make its operations more effective the JOT Automation Group decided to cut costs in all operational business units to correspond to the re-quirements of the changed market situation. As one of the measures it was decided to reduce the amount of personnel in the Group's domestic and foreign units. By the termination of temporary contracts and giving notices, among others, the amount of personnel in the Group was reduced in total by approximately 200 persons. The most important of other measures, which mainly con-cerned premises and manufacturing activities, was the closing of a system factory located in Laxå, Sweden. With respect to information systems, significant investment decisions were held over.

Operations during the financial period

Changes in the telecommunications industry's operations was expected to result in a situation where mobile device components were increasingly be assembled in a sub assembly phase. Therefore at the end of the year 2000 a decision was made to invest in automation of plastic com-ponent manufacturing services (CMS). At the beginning of the year 2001 JOT Automation acquired in two separate phases the shares in DNT Consulting Oy. DNT Consulting Oy owns 100 % of JOT Automation CMS Oy (former Pretech Oy), which specializes in the delivery of automated assembly solutions to the electronics, mobile phone and plastic industries. The development of the CMS business segment has fulfilled the objectives set forth at the time of acquisition.

JOT Automation's net sales during the financial period resulted mainly from sales of standard equipment and production cells as well as modifications to existing production lines. Due to the market situation the demand for complete systems was not significant. Most clearly this change was apparent in Europe. Only the automation for component manufacturing services (CMS) devel-oped in line with expectations both in the form of system and modification deliveries.

The most significant of the market areas was the Nordic Countries resulting in 36.3 % of the Group's net sales. Net sales for the reporting period by market area broke down as follows: Nordic Countries 36.3 (23.7) %, rest of Europe 30.4 (39.2) %, Asia 16.0 (20.2) % and Americas 17.3 (16.9) %. In Asia, JOT Automation has established customer relations with local companies in telecommunications sector. As a center for the Asian operations a subsidiary was established in April in Beijing, China, the opening of which was held in September.

The biggest of the customer groups is still telecommunications with 41.6 %. Due to the market situation customers operating in the telecommunications industry have not invested at anticipated rate. The Group's net sales for the reporting period was divided by customer group as follows: telecommunications 41.6 (69.8) %, electronic manufacturing services (EMS) 10.8 (10.1) %, distri-bution channel sales (GDT) 26.6 (19.6) %, component manufacturing services (CMS) 19.9 % and others 1.1 (0.5) %.

The Group's net sales for the financial period was divided by product group as follows: test han-dling 30.0 (38.2) %, final assembly 27.3 (26.7) %, material handling 29.3 (25.4) %, and others 13.3 (9.7) %.


Net sales and profit development

October-December

The net sales for the last quarter of the financial period was 16.1 (24.4) million euros. The operat-ing profit for the last quarter was weak due the low level of net sales. The operating profit was -3.6 (-2.2) million euros and profit before taxes -3.1 (-3.3) million euros.

The operating profit includes approximately 0.7 million euros non-recurring items resulting from on the one hand from the cost saving measures and on the other hand from write-offs from invento-ries. In the period 0.3 million euros of research and development costs were capitalized.

January-December

The changes in the operational environment affected the demand for the Group's products and services during the year 2001. Therefore the sales and profit development of the financial period was weak.

The net sales of the Group was 76.1 (140.1), which showed a decrease of 45.7 % compared to the previous year. Export and foreign operations accounted for 53.0 (109.8) million euros, i.e., 69.7 (78.3) % of the net sales.

The operating profit was -15.8 (14.1) million euros, i.e., -20.7 (10.0) of the net sales. The Group's profit before taxes was -15.8 (13.1) million euros, which is -20.8 (9.4) % of the net sales. The net profit was -16.3 (9.5) million euros.

Return on investment (ROI) was - 16.6 (29,5) % and return on equity (ROE) - 49,6 (28,2) %. The ratios for ROE and ROI have been calculated in accordance with the previous practice on the ba-sis of the last 12 months. During the financial period the profit was negatively impacted by non-recurring items amounting to approximately 3 million euros resulting from the cost saving meas-ures and inventory write-offs.

The Group's order book on December 31, 2001 was 11,8 (15,5) million euros.

Financial position

The balance sheet total at the end of the financial period decreased by 9.0 million euros from the end of last year, and totaled 73.6 million euros. The liquid funds decreased to 18.3 (23.4) million euros, the current receivables decreased to 21.1 (32.7) million euros and inventories to 11.8 (13.1) million euros. Account receivables accounted for 15.9 (25.1) million euros of the current receiv-ables and other items for 5.2 million euros. In the balance sheet the increase of non-current assets was mainly due to the Group's consolidation of the new units and the decrease of the current as-sets was foremost due to the decrease in the level of the net sales.

Of current liabilities, 13.2 (15.9) million euros were non-interest bearing and 34.0 (27.8) million euros interest bearing. The amount of financing limit in the liabilities is 9.8 million euros. The Group's operational cash flow was 0.3 (4.3) million euros positive.

The equity ratio was 37.3 (47.5) % and the net gearing was 49.5 (11.2) %.

The Group follows a currency strategy, the objective of which is to ensure the margins of business operations in all market circumstances by minimizing the influence of exchange rate fluctuations. In accordance with the principles of the currency strategy, the incoming 12-month net cash flow of the currency in question will be hedged. The level of hedging has been decreased gradually during the year 2001 and the hedged foreign currency exposure at end the reporting period was equivalent to 22.0 million euros.

Research and development and investments

The Group has continued to invest in the standardization of products. As a result of the research and development work, the new products can now be better applied in changing and different types of production processes in an increased number of sectors in the electronics industry. The improvements increase cost-efficiency and flexibility in production automation. Through the stan-dardization and research and development efforts JOT Automation wants to enhance the usability of the products as stand alone devices but also as part of various systems.

At the end of the financial period about 24.3 % of the Group's personnel were in research, devel-opment and planning/design tasks. The research and development costs were 5.3 (7.9) million euros, 7.0 (5.6) % of the net sales. Of the research and development costs 4.0 million euros, i.e. 5.2 % of the net sales, were expensed. The research and developments costs include all direct costs recorded for product development projects.

Gross investments in non-current assets were in total 13.4 (6.9) million euros. The investments were mainly due to Group's consolidation of the new business units. In addition investments have been made in software licenses as well as in IT equipment and furniture.

Changes in the Group structure during the reporting period

JOT Automation CMS Holding Ltd. (former JOT Automation CMS Ltd.), which is a subsidiary of JOT Automation Group Plc, acquired 49% of the shares in DNT Consulting Oy, for the purchase price of about FIM 3.6 million. DNT Consulting Oy owned Pretech Oy (currently JOT Automation CMS Oy). The agreement included an option to purchase the remaining 51% of the shares in the DNT Consulting Oy.

The remaining 51 % of the shares in DNT Consulting Oy was acquired through share exchange. The Board of Directors of JOT Automation Group Plc. decided on April 27, 2001 on the basis of authorization granted by the annual general shareholders' meeting held on April 4, 2001 to issue new shares directed to the shareholders of DNT Consulting Oy. A total of 4,500,988 new shares were issued, the subscription price of which was determined on the basis of the average share price (closing price) of the Company calculated from the period of February 1 through April 20, 2001. The shares have been presented accordingly in the balance sheet.

DNT Consulting Oy owns JOT Automation CMS Oy (former Pretech Oy), which specializes in the delivery of automated assembly solutions for the electronics, mobile phone and plastic industries. Through the acquisition, the JOT Automation Group acquired special expertise and gained an ex-isting customer base.

During the financial period, in addition to DNT Consulting Oy and JOT Automation CMS Oy, the Group acquired the entire share capital of its joint venture company, JOT Automation Korea Ltd, which operates in the Republic of Korea and established a subsidiary, JOT Automation (Beijing) Ltd., in Beijing, China. The company's field of operations is the sale and marketing of JOT Automa-tion's products and turnkey solutions, system integration and production of maintenance services for JOT Automation's clients in China.

During the last quarter of the financial period, JOT Automation Group Plc. sold part of share capital in Visual Components Ltd. to Visual's key employees whereby the Group's shareholding in Visual Components Ltd. was reduced to 19 %. Further JOT Automation Group Plc. sold its 10 percent shareholding in the Swedish Laxnet Automation AB to Bo Lagerlöf Konsult AB.

By the end of the financial period JOT Robotics Ltd. was merged to JOT Automation Ltd.

Personnel

At the end of the financial period, the Group employed 588 (746) persons, of whom 285 in the for-eign units. The average number of personnel during this financial period was 695 (714). At the end of the financial period, 183 (264) persons worked in production, 118 (215) in product research and development and planning/design and 287 (267) in other tasks. During the financial period we have invested in the expertise of the personnel by organizing training, in JOT Academy, among others, whose training programs have been designed to raise the level of expertise of the Group's personnel.

Company's Board of Directors and Auditor

At the annual general shareholders' meeting held on April 4, 2001, Mika Kettula, Tapio Tammi, Jari Eklund, Jorma Terentjeff and President Lauri Ratia, as a new member, were elected to the Board of Directors of JOT Automation Group Plc. KPMG Wideri Oy was elected to be the auditor for the company, Reino Tikkanen, Authorised Public Accountant, as the primarily responsible auditor. The Board of Directors of JOT Automation Group Plc. at its assembly meeting held on April 4, 2001 re-elected Mika Kettula as chairman of the Board.

Events after the financial period

JOT Automation Group Plc's Board of Directors resolved to accept the resignation of Teijo Fabritius, the President of JOT Automation Group Plc, as of January 21, 2002. The resignation was the result of differing views concerning the operative management of the Group. Fabritius con-tinues, however, in special projects. JOT Automation Group Plc. has started to search the succes-sor to Fabritius immediately.

JOT Automation Group Plc's Board of Directors appointed Pertti Tarvainen, the Chief Financial Officer of the Company, in addition to his own tasks, to act as President as of January 21, 2002 until the new President has been appointed. In addition to CFO Tarvainen, JOT Automation Group Plc's Chairman of the Board, Mika Kettula, will be more closely involved in the development of the Company's operations until a new President has started in office.

Engineer Juha Nurmimäki, was appointed on January 21, 2002 as Director responsible for produc-tion of the Group and Juha Reinikka, M.Sc, was appointed on February 11, 2002 as Director re-sponsible for the Group's Sales. The composition of JOT Automation Group Plc's Executive Man-agement Team was changed so that the Chairman of the Executive Management Team is Presi-dent of JOT Automation Group Plc, Pertti Tarvainen. Other members of the Executive Manage-ment Team are Juha Nurmimäki, Director, Production, Mika Mämmelä, Director, Product Creation, Juha Reinikka, Director, Sales, Pekka Pesonen, MBA, Lic. Tech, Director, Business Development and Ritva-Liisa Niskanen, Trained at the Bench, Director, Human Resources.

Jari Lotvonen has been appointed Regional Manager for the Americas. The Nordic countries and Europe will be combined into one sales area, for which Timo Jauhiainen has been appointed Re-gional Manager. Jorma Venäläinen will continue as Regional Manager for Asia.

In the current market situation the cost saving measures carried out during the year 2001 have proven to be insufficient. Therefore JOT Automation Group Plc. announced on February 11, 2002 that it will adjust its operations to meet the current level of demand. The objective of the actions to be implemented is the significant improvement in the profitability without, however, endangering delivery and service readiness. The total objective for the measures is 700,000 euros per month, at a minimum. The result of these measures is expected to be realized mainly during the second quarter of the year.

The adjustment measures will address all the Group's operations. Amongst other actions produc-tion in Finland and the USA will be reorganized and the structure of the sales network will be re-vised to improve cost-effectiveness. JOT Automation will thus make more efficient of its network that serves international customers. The pre-study concerning the automation systems for the manufacture of photo-optic components has been completed and possible investment decisions relating to it have been postponed.

As a part of the adjustment measures JOT Automation will reduce its personnel in the Group's domestic and foreign units by about 120 persons. A proposal for personnel negotiations was given at 8.00 a.m. on February 11, concerning the Group's Oulunsalo, Salo and Vantaa units. The per-sonnel negotiations do not concern the assembly and component manufacturing (CMS) business units. The negotiations will concern all the personnel groups. In Finland the negotiations will affect about 80 persons. Personnel abroad will be reduced by approximately 40 persons.

Outlook for the financial period 2002

The instability of the economical situation and the changes in the operational environment still cre-ate uncertainty in long-term guidance. The future of JOT Automation depends on how the produc-tion investments are made and how the efficiency and capacity in production are increased both in telecommunications and other electronics industry sectors.

The short-term market outlook is still uncertain. The net sales for the first quarter of 2002 will re-main low. The result will be further worsened by non-recurring items arising from adjustment measures and it is estimated that the result will be lower than in the last quarter of 2001. The com-pany will concentrate on the development of its main business activities and the significant im-provement of its profitability, as well as ensuring a sufficiency of financing.

The Board's proposal for the distribution of profits

According to the Group's balance sheet, December 31, 2001, the Group's retained earnings were 7.147.990 euros, of which the distributable earnings are 6.901.201 euros. According to the parent company's balance sheet, December 31, 2001, the parent company's retained earnings were 17.327.168 euros, of which the distributable earnings are 17.327.168 euros

The Board of Directors proposes to the annual general shareholders' meeting that no dividend shall be paid for the financial period ended on December 31, 2001, and the loss for the financial period shall recorded as deduction of the equity.

Invitation to press conference

JOT Automation Group Plc. invites press and analysts to a press conference, which will be held in Restaurant Savoy, Eteläesplanadi 14, Helsinki, Finland, starting at 9.15 a.m. on the same day.

The company's financial information will be published simultaneously in Finnish and English. The financial reports will also be available on the Internet (http://www.jotautomation.com).


In Oulusalo, February 14, 2002

JOT Automation Group Plc.
The Board of Directors

You can download the appendix on the link below.