VTI Group's quarterly report January–September 2006
Summary (Q1-Q3)
• Net sales for Q1-Q3 were EUR 56.8 (Q1-Q3/05: 54.7) million.
• Earnings before interest, taxes, depreciations and amortization (EBITDA) were EUR 9.3 (8.6) million.
• Automotive Business Unit (ABU) maintained the leading market position but sales have not grown as expected due to unfavorable market development.
• Sensing Solutions Business Unit (SES) commenced delivery of small series of its new products during August.
• Profitability improvement measures introduced at the beginning of the year were enhanced.
January–September 2006
Net sales and result
VTI Group's net sales for January–September were EUR 56.8 million (EUR 54.7 million in January–September 2005). The net sales of SES Business Unit improved by 45.3% being EUR 7.2 (5.0) million. The net sales of ABU Business Unit were EUR 49.6 (49.7) million.
Sales outside Finland accounted for 99.7% (99.8%) of the total net sales.
The Group's result before goodwill amortization (EBITA) in January–September was EUR 4.3 (4.1) million. The net result for the period was EUR -0.7 (-0.7) million. The goodwill was created when VTI was acquired by EQT in 2002.
Research and development expenses were EUR 9.1 (8.9) million, or 16.0% (16.2%) of net sales.
Development by business units in January–September
VTI's business is divided into the Automotive Business Unit (ABU) and Sensing Solutions Business Unit (SES).
During the review period, VTI opened a sales office in Tokyo to support local customers. Also, VTI signed a distributor agreement with HY-LINE Sensor-Tec of Germany, as well as with Kanematsu of Japan and EDOM Technology of Taiwan. In July the company introduced the three-axis accelerometer SCA3000 for measuring acceleration, motion and inclination. The product opens up totally new possibilities in many consumer applications.
Automotive Business Unit (ABU)
The net sales of ABU were EUR 49.6 (49.7) million during the review period.
VTI's market position in automotive applications remained strong. However, the business did not grow as expected due to unfavorable development of key markets.
VTI serves the automotive industry with motion and pressure sensors, used in applications such as electronic 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 a 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 automobile markets will increase in the long term. ESC is the main application for VTI's automotive products.
Sensing Solutions Business Unit (SES)
The net sales of SES grew by 45.3% over the corresponding period in the preceding year to EUR 7.2 (5.0) million.
The increase in sales was generated by the growing demand for medical and instrument applications using VTI sensors. Deliveries of small series of the new products, pressure sensor SCP1000 and three axis acceleration sensor SCA3000, started in August.
SES' sales are expected to grow due to increasing demand in medical and
consumer applications. Examples include cardiac rhythm management
(CRM), GPS navigation equipment, sports watches and diving
equipment.
Investments and finance
Gross investments during the review period were EUR 8.6 (9.7) million. The investments were directed to the new production technology and the increase production capacity for the new products.
The Group's solvency ratio remained strong at 60.6% (66.6%).
The structure of the Group was changed during the period by transferring the fixed assets of the Finnish production facility to a new subsidiary (VTI Kalusto Oy) to improve asset and investment management. The move created a short-term tax liability of EUR 6.7 million at the end of the review period, increasing total interest-bearing liabilities to EUR 28.8 (20.4) million.
Personnel
The Group had 751 (787) employees at the end of the period. 65% (66%) of the personnel worked in Finland.
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 will report in accordance with IFRS for the first time on fiscal year 2006.
Events after the review period
After the review period, in October, VTI introduced a new generation of digital accelerometers for Electronic Stability Control and other electronic automotive systems. This pioneering sensor solution combines ease of use and savings for customers and is intended for one-, two- and three-axis acceleration and inclination measurement.
Measures to improve profitability were introduced in the beginning of the year. Eventhough these measures have been correct their effect has not been sufficient. Therefore, VTI decided to launch additional measures to improve productivity and profitability of its operations and to secure a good operational basis for the near future. The statutory negotiations with the representatives of salaried employees were started on October 18, 2006.
VTI and the international automotive supplier Continental announced on October 17 the sale of VTI's automotive sensor module business to Continental. The business being sold has annual net sales of EUR 7 million. The agreement will become effective by October 31, 2006 and requires approval by the German competition authorities.
Market information
VTI operates in the 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.
Outlook for 2006
Net sales in 2006 are expected to be slightly lower than in 2005 due to automotive market development. To improve profitability and secure a more stable operation, measures aimed at increasing productivity were launched during the review period, and planning for operational changes in the Group have been started.
The sensor module business to be sold to Continental has had annual net sales of approximately EUR 7 million. If the sale will materialize, it will affect the Group's last-quarter net sales.
Vantaa, October 26, 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. 700 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.
Distribution
Principal media
Appendices
1. Profit and Loss Account
2. Balance sheet
3. Source and Application of funds
4. Key performance indicators