CEAG AG optimistically looking ahead to the future
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| 04/18/2002 |
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| CEAG AG optimistically looking ahead to the future |
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The business year 2001 turned out problematic and generated unsatisfactory results launch of strategic reorganization
Bad Homburg v. d. Hoehe/Ostbevern, 18 April 2002
The SDax listed CEAG AG (WKN 620110), holding of the FRIWO Group and located in Ostbevern/Westphalia has experienced an unsatisfactory business year 2001. The declining telecommunication market has generated considerable problems for the worldwide leading manufacturer of chargers for mobile phones. The Earnings before Interest and Taxes (EBIT) dropped from 21.6 mill. EUR in 2000 to minus 2.9 mill. EUR in 2001 which is mainly linked to onetime effects, for example restructuring measures to the amount of 2.8 mill. EUR. The earnings per share dropped to minus 0.35 EUR (previous year: 1.55 EUR in accordance with IAS).
Sales and turnover development
Despite shrinking markets, power supply and charger sales remained with 107.8 mill. pieces in 2001 at 2000's record year level. Unfortunately the economic development suffered considerable price pressure especially on the telecommunication market. Compared to the previous year, the company turnover dropped by 18 percent from 260.8 mill. to 213.8 mill. EUR, whereas the negative price impact alone contributed to the turnover drop with more than 35 mill. EUR. With 165.2 mill. EUR (previous year: 205.6 mill. EUR) telecommunications represented the major share of turnover. On the one hand considerable over-capacities of the suppliers who were expecting higher overall volumes created a massive price pressure. On the other hand it was possible to improve the corresponding market share from 22 to almost 24 percent. After the first quarter which still showed an increase of almost 19 percent, the European charger market crashed to minus 35 percent in the 4th quarter. Whilst the average decrease in this business sector read 14 percent, CEAG had to cope with a 12 percent drop in turnover from 55.2 mill. EUR in 2000 to 48.6 mill. EUR in 2001 in "Non-Telco".
Headcount
Looking at the individual locations, the headcount development shows a somewhat differentiated picture. Although the overall headcount rose from 8,095 to 8,519 (+ 5.2 percent) in the reference period, the Ostbevern headcount dropped from 526 to 431 (-18 percent). International headcount, especially in China, increased by 6.9 percent from 7,569 to 8,088.
Investments
Following the investment of 10.5 mill. EUR in 2000, 9.2 mill. EUR were invested in the reference year, out of which 8 mill. EUR were linked to the setup of production lines for modern switchmode technology. Due to the market, price and cost situation of the Ostbevern location, some of these production lines will be transferred to the Chinese facilities.
Scenarios and actions
The cautious but still optimistical expectations for the mobile phone market at the beginning of the year constantly needed to be downward adjusted. Instead of the forecasted 600 mill. mobile phones the global market absorbed 400 mill. only a loss of 3 percent vs. the previous year. The CEAG AG/FRIWO Group anticipated such a development and launched re-structuring measures and implementations in time. The cost leadership project generated cost savings of more than 20 mill. EUR which helped to offset increasing price pressure. Brasil in São Paulo the course has been set to adequately profit from the developing East Asian and South American markets.
Strategic refocussing leads to structural adjustments
As a result of the unsatisfactory business year 2001, the CEAG holding will be restructured. The new organization will be operating with two strategic business units under CEAG's leadership: FRIWO Mobile Power (FMP) for high volume business, mainly telecommunications, and FRIWO Power Solutions (FPS) for the development of power supplies for other non-mains driven equipment and systems. In the course of this restructuring process high volume production will be exclusively concentrated in China. German production capacities will be adjusted accordingly and used for the new business unit FPS. FRIWO EMC, Colorado Springs (USA), will market products from German and Chinese production. This means that the production facilities in Mexico and Colorado Springs will be closed by the end of this year.
In total, the location Ostbevern will cut 125 jobs and headcount in the U.S. and Mexico will be reduced by 75. Headcount reduction will be effected on a generous social basis and will be concluded by the end of this year.
All connected actions generate onetime costs of around 10 mill. EUR, out of which approx. 4 mill. EUR will not become cash-effective.
Product and customer portfolio will be further expanded by both inhouse activities and/or suitable acquisitions. Especially the business fields Industrial Automation, Medical Technology and IT Technology offer good perspectives.
The Board of Directors is convinced that with these far-reaching measures a positive, operative result and a lasting, profitable reorganization of the company can be achieved within a short space of time.
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