Kontron AG registers record level of design wins

• Third-quarter sales rise to EUR 123.8 million
• Volume of design wins jumps to EUR 241 million
• Gross margin rises to 31.7 percent
• Net cash position of over EUR 40 million
• 2008 sales and earnings forecasts confirmed

With sales of EUR 123.8 million, Kontron AG continued the dynamic business progress of the first six months in the third quarter of the current financial year. This represents growth of 7.7 percent compared to the prior year period (EUR 115.0 million). The record level of the second quarter (EUR 126.7 million) was once again slightly exceeded when taking into account the discontinuation of proceeds resulting from the deconsolidation of the Asian Quanmax joint venture as of June 30 (around EUR 4.7 million). Total organic growth was even in excess of 16 percent when adjusted for the deconsolidation of Quanmax, and strongly negative currency effects. Kontron AG consequently achieved sales of EUR 356.3 million in the first nine months of the 2008 financial year, compared with EUR 322.6 million in the previous year period. The order backlog climbed to EUR 299 million as of September 30. This represents an increase of 12 percent compared with the prior year period (EUR 267 million), despite the sharp drop in the dollar. Growth rates were even higher in terms of design wins, which are important for medium-term planning and forecasts. The number of design wins grew to 328, compared with 254 in the same period of the previous year, and volumes rose to EUR 241 million in the first three quarters (EUR 202 million in the prior year period). In particular, a new record level of EUR 91 million (previous year: EUR 73 million) was achieved in the third quarter. Among other things, major orders were booked in the energy area of application, in telecommunications, as well as in the new fields of application in the infotainment area. Kontron AG's high degree of diversification is consequently continuing to have a sustainably positive effect in vertical markets in the third quarter.

Gross margin rises to 31.7 percent
With operating earnings (EBIT) of EUR 12.6 million, Kontron AG continued to achieve a double-digit EBIT margin of slightly above 10 percent in the third quarter. When making comparisons with the extraordinarily high figure of EUR 16.8 million achieved in the previous year, it should be noted that this contains extraordinary effects arising from the sale of the mobile computer division in the USA, and the purchase of PLG. Operating earnings rose by over 29 percent year-on-year when adjusted for these two effects (around EUR 7 million). EBIT totaled EUR 34.0 million in the first nine months of the current financial year (compared with EUR 33.9 million in the prior year period). Third-quarter net earnings amounted to EUR 9.5 million (previous year: EUR 12.8 million), consequently bringing the total for the first nine months to EUR 25.4 million, compared with EUR 25.6 million in the previous year period. In this case too, it should also be noted that the previous year's figure contains the extraordinary effects arising from the sale of the mobile product line, and the acquisition of PLG. Kontron AG's significant year-on-year rise in profitability is also evident in the gross margin, which rose from 30.5 percent in the third quarter of the previous year to 31.7 percent this year. This also reflects the initial positive effects from the successful restructuring in Asia.

Very good liquidity
Kontron AG enjoys an excellent and stable liquidity position as of September 30. Cash and short-term securities of EUR 52.3 million, for instance, registered a further rise compared with the end of the second quarter (EUR 49.3 million). Given an almost unchanged level of bank debt, net cash amounted to slightly above EUR 40 million. Positive operating cash flow continued to be achieved in the third quarter, at EUR 6.0 million. It totaled EUR 12.6 million as of the end of September.

Positive year’s outlook despite the threat of recession
"Third-quarter sales growth, the high level of the order backlog of almost EUR 300 million, and, in particular, the further rise in design wins, both in terms of numbers and volumes, are positive indicators for Kontron AG's continued profitable business growth," commented Kontron CEO Ulrich Gehrmann. He went on to say that, as far as expectations for the fourth quarter are concerned, the company is assuming it will achieve the targets it set itself for 2008: (currency-adjusted) double-digit sales growth, accompanied by an even faster rise in operational earnings. While short-term negative effects cannot be excluded due also for Kontron to growing uncertainties in global markets, and particularly due to the emerging recession, Kontron, as an outsourcing specialist, nevertheless regards itself as well positioned due to its strong vertical and geographic diversification, and its stable financial and asset positions. CEO Gehrmann went on to say that the extensive Profit Improvement Program continues to cater for positive effects on the earnings side. In particular, the successful restructuring in Asia is already having a positive impact on the gross and EBIT margins as a result of more favorable purchasing conditions, and the fact that the company has recourse to its own production facilities there.