Kontron AG reports stable upturn

New record level of incoming oders
At EUR 204 million, the volume of incoming orders represented a new record level. The order book position of EUR 468 million also sets a record compared with EUR 398 million at the half-year stage, and EUR 306 million at the end of 2009. With operating profit (EBIT) of EUR 8.1 million in the third quarter, the performance of Kontron AG significantly exceeded the previous year's figures of EUR 4.8 million. Net income correspondingly amounted to EUR 5.6 million in the third quarter, compared with EUR 3.1 million in the previous-year period. Due to the complete write-down of EUR 34 million of receivables due from customers in Malaysia, Taiwan and Hong Kong, which was realized in the second quarter of 2010, the operating result (EBIT) amounted to EUR -15.7 million in the first nine months of the current financial year, compared with EUR 19.8 million in the same period of the previous year. At 29 percent, the current gross margin is better than in the previous year (25 percent).

Kontron assuming further growth in fourth quarter
According to the Kontron Management Board, the performance improvement measures that were accompanied by a better cost ratio were also reflected in staff number trends: with 2,896 employees at the end of the third quarter, compared with 2,807 at the end of June, there was an improved cost ratio accompanied by higher revenues when adjusted to reflect the acquisition of Ubitronix, and the transfer of temporary workers to fixed positions that was performed as part of cost and quality enhancing measures. Operating cash flow of EUR -1.3 million in the third quarter was primarily influenced by the EUR 13 million increase in receivables compared with the half-year stage reflecting strong September revenues. In overall terms, Kontron AG anticipates further growth in the market environment. The Management Board is assuming a further growth in the fourth quarter compared with the third quarter.

With regard to the formation of a EUR 34 million risk provision in the second quarter covering outstanding receivables, the suspicion of organized fraud has meanwhile been confirmed, according to the Kontron Management Board. A lawsuit has been filed against all debtors and participants. The final reports by the auditing company and lawyers' office that have been mandated to clarify the circumstances should be presented within the next few weeks. According to the company, it is still impossible to gauge the extent to which the receivables can be collected. Kontron AG has also taken this incident, which is restricted to the local management and the Asian Electronic Manufacturing (EMS) business, as an opportunity to further intensify compliance and risk management systems across the entire Group.