VTI Group's quarterly report January–June 2006
Summary
• Net sales for H1 were EUR 37.7 (H1/05: 34.9) million.
• Operating profit before goodwill amortization and depreciation (EBITDA) was EUR 4.7 (4.5) million.
• Automotive Business Unit (ABU) maintained its leading market position. Its sales were affected by changes in supply chain management and customers' inventory adjustments following that.
• Sensing Solutions Business Unit (SES) won new significant customers.
• Measures to improve productivity were introduced. These actions already showed positive results in July.
• H2/06 is expected to show improvement over H2/05 in sales and profitability. Due to the seasonality of VTI's business, H2 is typically stronger than H1.
January – June 2006
Net sales and result
VTI Group's net sales for January–June were EUR 37.7 million (H1/05: 34.9 million). The net sales of SES improved by 39% to EUR 4.3 (3.1) million, while those of ABU grew by 5% to EUR 33.4 (31.8) million.
Sales outside Finland accounted for 99.8% (99.8%) of the total net sales.
The operating result before the goodwill amortization of the Group in January-June was EUR 1.4 (1.5) million.
Research and development expenses were EUR 6.8 (6.1) million, 18% (17%) of net sales.
Net financing costs for the period were EUR 0.5 (0.5) million.
The Group's net result before goodwill amortization was EUR 0.9 (1.0) and the net result for January-June EUR -1.9 (-1.8) million. The goodwill was created when the present owner EQT acquired VTI in 2002.
Measures to improve productivity were introduced. These actions have already shown a positive outcome that will strengthen VTI's performance further towards the end of the year.
Development by business units in January-June
VTI's business is divided into the Automotive Business Unit (ABU) and Sensing Solutions Business Unit (SES).
During the review period, VTI has opened a sales office in Tokyo to support the local customers. Also, VTI has signed a distributor agreement with HY-LINE Sensor-Tec in Germany.
Automotive Business Unit (ABU)
The net sales of ABU increased by 5% to EUR 33.4 (31.8) million during the review period.
The market position of ABU remained strong. Sales were affected by changes in supply chain management and customers' inventory adjustments following that.
ABU will improve its performance towards the end of the year.
ABU serves the automotive industry with motion and pressure sensors, used in applications such as vehicle stability control (ESC), electronic parking brake (EPB), hill start aid (HSA), anti-lock braking systems (ABS), electronically controlled suspension (ECS) and various alarm and control applications. Tire pressure measurement (TPMS) is new growth area for VTI sensors. VTI sensors are being used by the majority of automotive manufacturers. It is estimated that vehicle stability control (ESC) penetration in automobiles will increase, creating growth opportunities for ABU. ESC is the main application for ABU.
Sensing Solutions Business Unit (SES)
Net sales of SES grew by 39% over the corresponding period of preceding year to EUR 4.3 (3.1) million.
The increase in sales was generated by the growing demand for medical and instrument applications using VTI sensors. SES won new significant customers during the review period, which will have a positive impact on future development of the net sales.
SES is expected to grow due to increasing demand in medical and consumer applications. Examples include cardiac rhythm management (CRM), GPS equipment, sports watches and diving equipment.
Investments and finance
Gross investments by the Group for January-June were EUR 6.7 (5.6) million. Investments were directed to new equipment and increases in production capacity, as well as new production technologies.
The Group’s solvency ratio remained strong at 64.2% (67.5%).
The Group’s interest-bearing liabilities amounted to EUR 22.1 (17.5) million.
Personnel
The Group had 760 (755) employees at the end of the review period. 68% (73%) of the personnel worked in Finland. 20% (17%) of the employees work in R&D.
Shares and shareholders
VTI's largest shareholder is the EQT III Private Equity Fund (former EQT Northern Europe).
Preparations for changeover to IAS/IFRS accounting
The company is expected to report its figures in accordance with IFRS for the first time on fiscal year 2006.
Events after the review period
In July, VTI introduced the SCA3000, which is a new 3-axis accelerometer for a broad range of consumer applications. This is a first step towards opening up novel consumer applications. The SCA3000 can be used to measure acceleration, motion and inclination.
In July, the Group also announced a distributor agreement with the Taiwanese EDOM Technology. According to the agreement, EDOM sells and markets VTI's pressure and acceleration sensors for the consumer electronics industry in Taiwan.
Market information
VTI operates in global two-billion-euro market of micro-electro-mechanical (MEMS) inertial and pressure sensors. In addition to the automotive industry, inertial and pressure sensors are increasingly being used in medical, industrial and consumer electronics, providing an attractive growth opportunity for VTI. The MEMS market is expected to grow more than 10% annually. VTI intends to grow faster than the market in general.
In the coming years, significant growth is expected for MEMS as new applications are emerging. This has attracted companies to invest in MEMS capabilities and production capacity. The most significant volume outlook is in hand-held terminals as well as sport and wellness applications. Sensor technology will be used to a growing extent in medical equipment and instruments in the future, although the growth is expected to be more moderate than in other industries. The automotive industry is already a large user of sensors, where growth is driven by increased penetration as well as new and more demanding applications.
Outlook for 2006
The demand for VTI sensors is increasing. The second half of the year is expected to be better both in sales and profitability than the first half. The full year 2006 is expected to show an improvement over the previous year. Measures to improve productivity that were launched internally during the review period have already shown a positive outcome during July, and the trend is expected to continue.
Vantaa, August 17, 2006
VTI Technologies Oy
Board of Directors
More information:
Tiina Olkkonen, Vice President, Corporate Communications, VTI Technologies Oy, tel. +358 9 8791 8240, mobile +358 40 827 8844.
VTI in brief
VTI Technologies is a global market leader of low-g acceleration sensors for automotive industry applications and Cardiac Rhythm Management (CRM). Application areas for the company's motion and pressure sensors include the automotive industry, Sports & Wellness, Medical & Instruments as well as hand-held terminals.
VTI develops and produces silicon-based capacitive sensors using its proprietary 3D-MEMS (MicroElectroMechanical System) technology, with application areas in acceleration, inclination, shock, vibration, angular rate and pressure measurement.
VTI is owned by EQT III private equity fund. VTI's net sales in 2005 totaled EUR 74.7 million and the company has approx. 750 employees. Along with the head office in Finland and the global partner network, VTI's international sales and marketing network includes offices in Germany, USA, Japan and China. Besides Finland, VTI also has manufacturing operations in Mexico. More information: www.vti.fi.
Distribution
Principal media
Appendices
1. Profit and Loss Account
2. Balance sheet
3. Source and Application of funds
4. Key performance indicators