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PRESS RELEASE: Kontron AG remains sustainably -2-

PRESS RELEASE: Kontron AG remains sustainably profitable

PRESS RELEASE: Kontron AG remains sustainably profitable

Kontron AG / Final Results 24.03.2010 07:58 Dissemination of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer / publisher is solely responsible for the content of this announcement. =-------------------------------------------------------------------------- Slight revenue decline of 6 percent to just under EUR 470 million / Margins cut earnings to EUR 30.1 million / Traditionally strong fourth quarter / Design wins at historic record level (EUR 361 million), order book climbs to EUR 306 million / Tax-free dividend of 20 cents per share proposed / Operating costs down by EUR 11 million / High net cash position of EUR 80 million / Consolidation expected Eching, Munich, March 24, 2010. Despite the ongoing challenges posed by economic conditions, TecDAX-listed Kontron AG reached the target of continuous profitability that it had set itself at the start of 2009. The company is the world's leading provider of embedded computer technology, and employs around 2,500 members of staff. Amidst a global financial and economic crisis that above all affected Kontron's important industrial automation sales market, and with it mechanical engineering in particular, a slight revenue decline from EUR 496.7 million to EUR 468.9 million was reported compared with the previous year. The company's diversification with regard to technologies, regions and vertical markets, which it has initiated over recent years, exerted a stabilizing effect. Consistent cost management and a solid financial and capital cushion enabled a further strategic strengthening in the important future markets of transportation, medical and government, as well as in terms of the product range. EBIT earnings were exposed to greater margin pressure, and fell from EUR 46.9 million to EUR 30.1 million, mainly due to weakness in the high-margin automation market, and the sharp decline in the still lower-margin original design manufacturer (ODM) business in Asia. Earnings per share amounted to 41 cents compared with 67 cents in 2008. Depending on global economic trends, the company anticipates stabilization or slight growth for the 2010 financial year. Management Board and Supervisory Board have decided to recommend the Annual Shareholder Meeting on June 9, 2010 as in the last two years the distribution of a dividend of 20 cents per share. Market developments burden revenue Kontron AG's revenue in 2009 was around 6 percent below the previous year's level. This was mainly due to the decline in demand in the wake of the financial crisis in Europe. Here, the traditionally high-margin business with modules and systems was hit, particularly in the automation area. The automation application area contracted by over 20 percent, and declined from 23 percent of total revenue to 18 percent. Slight drops were also registered by the gaming/infotainment areas, as well as the energy sector, due to currency factors. Products in the less economically dependent areas of transport, government, telecommunications, and medical engineering were stable or provided a boost to business, but were nevertheless unable to fully compensate for the declines in the areas mentioned above. Our business in Asia felt the recession to a lesser extent, although margins were lower as a rule. China and Russia reported the best rates of growth: both markets meanwhile constitute a 29 percent share of total revenue. European share of total revenue, by contrast, fell from 46 percent to 40 percent; our America business remained stable with a meanwhile 31 percent revenue share. As a consequence, Kontron's broad horizontal and vertical positioning has had a positive impact on its business development in the second year of the global economic and financial crisis. Strong fourth quarter In the fourth quarter of 2009, Kontron AG achieved revenue of EUR 135 million, and an EBIT operating profit of EUR 10 million. As a consequence, the last three months of 2009 were, as expected, and as is traditionally the case, the strongest quarter of the financial year that has just elapsed. Due to the trends over the course of the full year, however, the last three months were below the level of the prior-year period (revenue of EUR 140 million, and EBIT of EUR 13 million). Shortages in the global components market, and the resultant allocation, had a negative impact: this allocation policy resulted in supply times that in some cases exceeded 30 weeks, as a result of which Kontron was only able to safeguard its production for the coming months through massive stock building (EUR 92 million compared with EUR 71 million in the prior-year period). Integration costs for the Swiss company Digital-Logic AG, a majority of which was acquired in September, also affected operating cash flow, which amounted to EUR 6 million in the fourth quarter, and EUR 23.9 million as of the end of the year (compared with EUR 27.5 million in the previous year). At EUR 80 million, cash and cash equivalents remained at a high level, and were significantly ahead of the previous year's figure of EUR 53 million. Fourth-quarter net income fell correspondingly to EUR 8.2 million, compared with EUR 9.5 million in the same period of the previous year. By contrast, design wins, which are of particular importance for Kontron's business growth outlook, remained stable at a high level - at EUR 74 million, the volume of design wins was at the level of the fourth quarter of 2008 (EUR 76 million). Large development orders were won in all key regions, and particularly from the telecommunications, government, energy and transportation areas. Expansion of order book position, presence and product range Our order book position was positive not only in the fourth quarter, but also on a full-year basis: it rose to EUR 306 million at the end of the year, compared with EUR 291 million in the previous year. Design wins also continued to register very good growth: as an important indicator for medium- and long-term business trends, they reported renewed growth to a historic record: the number of design wins was up from 428 in 2008 to 447 in 2009, and their monetary volume was up from EUR 317 million to EUR 361 million. Here, Kontron is benefiting from growing cost pressure on the customer side, and from the ongoing outsourcing trend. Kontron also strengthened its presence in important markets, including through a new sales cooperation between Kontron and Emerson Network Power on the Japanese market, and a new sales and support center in the strategic market of India. The company has expanded its range of software and services, as well as its co-operative venture with its important partner, Intel, through a global sales cooperation with Wind River (an Intel subsidiary since 2009). The acquisition of Swiss company Digital-Logic AG in September provided a major boost to the product range, and will enable tangible future growth in the high margin segments of government, transportation and medical engineering in the Central European region. Cost-saving measures continue to make contributions Operating costs amounted to EUR 101 million in 2009, EUR 11 million lower than in the previous year. Here, investments in more streamlined processes and organizational structures have already proved effective. The long-term Profit Improvement Program also made contributions: the production relocation to the Group's own cost-effective production location in Malaysia meant that Asian production now commands a 60 percent share of total company production. Manufacturing capacities in comparably expensive locations, such as North America and Europe, have been dismantled further in favor of the Penang location. In other areas, too, centralization measures were implemented, and further cost-saving potentials were achieved. The reduction in the number of employees from 2,536 to 2,487 also made a contribution to the lower costs achieved: when taking into account the 107 jobs acquired with Digital-Logic AG, a net total of 156 jobs were cut. Financially well hedged Kontron AG's liquidity position remains highly solid. The year-end cash position was EUR 80 million (previous year: EUR 53.1 million). This increase is primarily attributable to the capital increase performed end of July, whereby new ordinary shares were issued that were subscribed for by one of the world's leading private equity companies, the Warburg Pincus Group. This boosted Kontron AG's issued share capital from EUR 50.8 million to EUR 55.7 million. This strong financial backing allows Kontron to secure acquisition-related advantages in a strongly consolidating competitive environment. Total assets amounted to EUR 461 million (previous year: EUR 394.5 million) and the equity ratio stood at 72 percent. Compared with the previous year, operating cash flow fell from EUR 27.5 million to EUR 23.9 million. This was due to the integration of Digital-Logic AG, and the requisite stockbuilding in the fourth quarter due to allocation among suppliers. Management Board expects year of consolidation Although it is hardly possible to issue specific forecasts in view of the economic prospects that are difficult to predict, the Management Board is anticipating a year of consolidation. 'The enormous cost pressure is prompting a growing number of companies to outsource extensive and cost-intensive development and production steps,' commented Ulrich Gehrmann, Kontron's CEO. 'This is particularly reflected in our strong growth in design wins and the order book, and will feed through to growth in the second half of 2010.' Although individual markets, such as the automation sector in Europe, remained under pressure, Kontron's broad regional presence and high degree of sector diversification offer a significant hedge against major risks, Mr. Gehrmann went on to note. He suggested that comparatively economically independent sectors such as telecommunications, security (government) and medical engineering would act as growth-drivers.

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March 24, 2010 02:58 ET (06:58 GMT)

PRESS RELEASE: Kontron AG remains sustainably -2-

Further cost reduction and growth planned The final steps of the Profit Improvement Program will ensure further stability and cost-efficiency, including a reduction in research and development expenses from 12 percent to 11 percent of revenue. Along with technology and quality leadership, the medium-term objective is also to achieve production-cost leadership in the embedded computer technology business segment. This will be assisted by a constant improvement in purchasing terms (for instance through the central strategic purchasing operation in Taiwan), and the continuous rise in more cost-effective production at the Malaysian location in Penang. The aim is that 70 percent of production will already be realized in Asia by 2010. Where administration costs are concerned, preparations are currently underway to make successive and significant savings through centralization, and the integration of smaller organizational units into larger ones. More streamlined structures and competence centers will thereby allow greater performance and revenue to be generated in the future, along with a lower cost base. Together with its solid financial position, the company's organizational strength positions it optimally to make further strategic acquisitions as part of the market consolidation process. 'In terms of internal organization, we have achieved greater performance levels through more streamlined processes. At the same time, we have also achieved sustainable cost reductions, and strengthened sales and proximity to our customers. We have minimized risks on the sales side during the crisis through broad vertical and horizontal diversification,' Mr. Gehrmann commented further. 'We are expanding these activities, and we are exploiting our technology leadership to grow in 2010 and subsequent years, accompanied by rising profitability. We are now laying the foundations in order to achieve our 12 percent EBIT target margin with double-digit organic growth rates in a normal economic environment.' Note: previous year's figures following IAS 8.41f adjustment Investor Relations: Further information: Gaby Moldan Florian Bergmann Kontron AG Engel & Zimmermann AG Oskar-von-Miller-Str. 1, Agentur für Wirtschaftskommunikation 85386 Eching Schloss Fußberg, Am Schlosspark 15, Tel:+498165/77212,Fax+498165/77222 82131 Gauting Tel: +4989-89 35 633, Fax: +4989-89 39 84 29 E-mail: 24.03.2010 07:58 Ad hoc announcement, Financial News and Media Release distributed by DGAP. Media archive at and =-------------------------------------------------------------------------- Language: English Company: Kontron AG Oskar-von-Miller-Str. 1 85386 Eching Deutschland Phone: 08165-77-225 Fax: 08165-77-222 E-mail: Internet: ISIN: DE0006053952 WKN: 605395 Indices: TecDAX Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, München, Hannover, Düsseldorf, Hamburg, Stuttgart End of News DGAP News-Service =--------------------------------------------------------------------------

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