Elektrobit Corporation Lowers Its Profit Guidance For 2012 Due To Non-recurring Items Weakening The Fourth Quarter And Gives More Precise Net Sales Outlook For 2012

Elektrobit Corporation (EB) lowers its profit guidance for 2012 due to the weaker than expected fourth quarter. The reason for the weakening of the fourth quarter is the non-recurring items of approximately EUR 4 million in total, booked as result of the financial challenges faced by a US based customer of EB’s subsidiary, Elektrobit Inc. … Continued

Elektrobit Corporation (EB) lowers its profit guidance for 2012 due to the weaker than expected fourth quarter. The reason for the weakening of the fourth quarter is the non-recurring items of approximately EUR 4 million in total, booked as result of the financial challenges faced by a US based customer of EB’s subsidiary, Elektrobit Inc.  EB expects the operating result of the fourth quarter of 2012 to be approximately between EUR -0.4 million and EUR 1.1 million (EUR 3.5 million, 4Q 2011), the operating result of the second half of 2012 to be approximately between EUR 1.7 million and EUR 3.2 million (EUR 0.4 million, 2H 2011), and the operating result of the whole year 2012 to be approximately between EUR 2.2 million and EUR 3.7 million (operating loss of EUR -4.0 million in 2011). The expected operating results presented above include non-recurring items that caused the lowering of the fourth quarter profit guidance, as well as non-recurring income and costs related to the reorganization processes of TerreStar companies, booked earlier in 2012.

The outlook for the net sales is expected to develop as earlier estimated and thus EB expects that the net sales of the fourth quarter of 2012 will be approximately EUR 57 million (EUR 49.0 million in 4Q 2011), the net sales of the second half of 2012 is expected to be approximately EUR 104 million (EUR 86.1 million in 2H 2011) and the net sales of the whole year 2012 is expected be approximately EUR 200 million (EUR 162.2 million in 2011).

Based on the information received by EB’s subsidiary, Elektrobit Inc., from the US based customer, the customer does not have enough funds to satisfy its contractual obligations towards EB. Due to the significant risk of the customer’s insolvency, EB books an impairment of all accounts receivable from the customer, will not recognize revenue for the work already done for the customer project, and will book a cost reserve related to purchase obligations of the customer project. As a result EB’s operating result of the fourth quarter decreases by approximately EUR 4 million in total.

In the earlier guidance, given in the interim report published on November 6, 2012, EB expected for the year 2012 that net sales and operating result will grow clearly from the previous year (net sales of EUR 162.2 million, and operating loss of EUR -4.0 million in 2011). For the second half of 2012 EB expected that the net sales will grow clearly (EUR 86.1 million in 2H 2011) and operating result to be clearly positive (EUR 0.4 million in 2H 2011). Due to the seasonal nature of the EB’s business and due to the holiday period during the third quarter, the net sales and operating result without non-recurring items in the fourth quarter were expected to be higher than in the third quarter of 2012 (net sales EUR 47.0 million, operating profit without non-recurring items EUR 0.8 million, 3Q 2012).

The above mentioned customer project of EB’s Wireless Business Segment was based on the EB’s Specialized Device Platform technology to be used in the customer’s mobile devices. Financial challenges of the abovementioned customer and the related financial implications for EB, will not affect the further development of EB’s Specialized Device Platform, or serving of other customers.

EB will publish its Financial Statement Bulletin on February 19, 2013 at 8.00 am.

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