MEDION AG

Earnings Release • Nov 10, 2005

News Details

Corporate | 10 November 2005 07:31

Growth in sales continues in third quarter at MEDION

Corporate-news transmitted by DGAP. The issuer is solely responsible for the content of this announcement. —————————————————————————— Growth in sales continues in third quarter at MEDION Reliable projection for entire year not yet possible The MEDION Group recorded a 6.5% rise in sales in the third quarter of 2005 to EUR 319.9 million from EUR 300.5 million a year earlier. In the preceding quarter, sales had risen 1.8%. The continuing increase shows that the Group achieved the anticipated stabilization of sales despite the sluggish German economy and weak consumer spending in important foreign markets. Rising sales of notebooks, mobile navigation devices, and flat screen TVs fueled growth. Second and third quarter growth, however, did not fully compensate for the sales decline in the first quarter. As a result, nine-month sales decreased 6.9% to EUR 1,450.2 million from EUR 1,557.3 million a year earlier. The Multimedia segment contributed EUR 1,044.6 million or 72.0% of total sales (previous year: 73.3%) in the first nine months, the Entertainment and Household Electronics segment EUR 363.3 million or 25.1% (previous year: 24.4 %), and the Communication Technology segment EUR 42.3 million or 2.9% (previous year: 2.3%). The Group stabilized the gross margin and kept contract logistics costs below the prior-year level. But although unit costs were once again reduced, the Group did not make any real progress in optimizing service and other selling expenses. This is primarily due to the higher number of transactions caused by the rise in unit sales. In the third quarter of 2005, EBIT totaled EUR 0.2 million. For the first nine months of 2005, EBIT amounted to EUR 18.7 million, and earnings per share to EUR 0.21. When comparing earnings with the prior- year period, however, it should be noted that the nine-month figures for 2004 benefited from exceptionally high earnings in the first quarter of 2004. Solid capital structure As a result of strong earnings in the past few years, MEDION accumulated total shareholders’ equity of EUR 444.0 million. This provides a solid basis for financing future growth. As of September 30, 2005, the equity-to-assets ratio was approximately 50%. Foreign sales As in Germany, weaker consumer demand and significant price erosion also impacted key export markets such as France, Holland, and Italy. In response, foreign sales decreased to EUR 128.6 million in the third quarter of 2005. In the first nine months of 2005, foreign sales fell to EUR 523.7 million from EUR 647,0 million a year earlier. Foreign sales accounted for 36.1% of total Group sales for the first nine months and contributed a significant share to MEDION’s income. Capital expenditure Capital expenditure amounted to EUR 8.2 million in the first nine months of 2005 and mostly includes additions to our IT and communication infrastructure and for the property in Essen. Outlook Third quarter sales 2005 exceeded the level of the comparable period of 2004, further stabilizing the sales trend. Demand in Germany continued to recover in the third quarter of 2005, but some key markets in other European countries are still subdued as a result of consumer restraint. Anticipated impulses from the September elections in Germany did not materialize as the political situation remained unclear. Once again, new orders for the fourth quarter are coming in from our retail partners later than in the year before. Judging from the current level of new orders, MEDION expects that fourth quarter sales 2005 will match the level of sales of the fourth quarter of 2004. Personnel expenses are set to decline slightly from the previous year once again, but other operating expenses continue to be characterized largely by the rise in service costs and other selling expenses year-on-year. The MEDION Group is currently reviewing additional measures to improve efficiency and optimize costs by 2006 as part of a restructuring of product management and sales. The review focuses on the product portfolio and order and service structures. The necessary adjustments to product types and order structures which might have an impact on full year earnings will be defined on the basis of fourth-quarter results. Traditionally, the fourth quarter benefits from strong seasonal sales. As a result, we cannot give a precise and reliable forecast for the entire fiscal year 2005 at this point. However, it is likely that the Christmas business and the cost optimization measures implemented so far will not be sufficient to offset the earnings decline we experienced mainly in the first half of the year. Net income for the year will be significantly below the level of 2004. The current stabilization of domestic sales shows that MEDION is on the right path to successfully develop its business model on the basis of longstanding relationships with customers and suppliers. Improved organizational and cost structures should put the Group in a position to benefit from an improvement in the economy in the medium term and achieve growth in sales and earnings again. MEDION group financial highlights Figures in EUR million Figures in EUR million 01.01. – 30.09.2005 01.01. – 30.09.2004 Sales 1.450 1.557 – inside Germany 926 910 – outside Germany 524 647 EBIT 18,7 60,0 Net income for the period 10,1 34,4 Total assets 893 923 Equity- to- assets ratio 49,71 % 47,83 % Subscribed capital EUR 48.418.400 Figures in EUR Figures in EUR 01.01. – 30.09.2005 01.01. – 30.09.2004 Earnings per share 0,21 0,71 Contact MEDION AG Investor Relations Am Zehnthof 77 D-45307 Essen Tel +49 (0)201-8383 6500 Fax +49 (0)201-8383 6539 Email aktie@medion.com Internet http://www.medion.com End of announcement (c)DGAP 10.11.2005 —————————————————————————— WKN: 660 500; ISIN: DE0006605009; Index: MDAX Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin- Bremen, Düsseldorf, Hamburg, Hannover, München und Stuttgart