INTERIM REPORT OBDUCAT AB (PUBL) JANUARY - DECEMBER 2009
New CEO appointed at Obducat
Fourth quarter
• Fourth quarter sales amounted to SEK 7.7 M (24.3)
• Fourth quarter profits after taxes were SEK -17.5 M (-7.3), and earnings per share before dilution were SEK –0.03 (–0.02)
• Gross margin stood at 70 (51) per cent
• Cash flow before financing activities was SEK -1.6 M (–2.9)
• Order intake was SEK 10.8 M (19.3)
• Lars Tilly was appointed new CEO at Obducat on 30 November 2009 and formally entered upon his duties on 1 February 2010
January - December
• Sales for the period amounted to SEK 51.6 M (71.5)
• Profits after taxes were SEK –52.1 M (–28.8) and earnings per share before dilution were SEK -0.13 (–0.09)
• Gross margin stood at 51 (58) per cent
• Cash flow before financing activities was SEK –59,3 M (-25.9)
• Order intake was SEK 38.9 M (104.3). The order stock amounted at the close of the period to SEK 47.0 M (63.5)
• New share issue with preferential rights provided about SEK 74 M in cash before issue expenses and guarantee costs
(All amounts below in SEK 000 unless otherwise stated)
Significant events after the close of the reporting period
The Sindre 400® machine, previously installed at Unilite (Luxtaltek), Taiwan, was in January 2010 formally approved by the customer (”Site Acceptance Test approval”). Unilite (Luxtaltek) is a world-leading LED manufacturer and the Sindre 400 is an essential requirement for the company’s ability to increase its production volumes.
Thanks to its market leading role as industrial provider of production equipment for LED manufacturing, Obducat at the end of January received an order for an Eitre 6 system from Hamamatsu Photonics in Japan. The NIL system provided by Obducat will be used for product development and pilot production of new optical components. Hamamatsu based its choice of supplier on imprint quality as well as Obducat’s industrial accomplishments and the strong local support provided by Japan-based Canon Marketing, Obducat’s agent in Japan.
The patented processes IPS® and STU® were employed during the assessments. Hamamatsu Photonics is a global leader of electro-optical components and measurement instruments supplying products such as optic semiconductor components, light enhancers, light sources, and cameras for academic as well as industrial customers. The order substantiates Obducat’s recognition as industrial supplier of imprint technology for lithography in the LED market.
Within the HDD industry, the technology development for patterning hard-disk substrates is proceeding towards Bit Pattern Media (BPM). In this respect Obducat is active towards the industry and is also participating in EU projects concentrating on this.
Lars Montelius, member of Obducat’s Nominations Committee, has been replaced by Lars Hein.
Sales/Market – Fourth quarter
The order intake in the fourth quarter was SEK 10.8 M (19.3), resulting at the close of the reporting period in an order stock totalling SEK 47.0 M (63.5).
The order intake during the fourth quarter is on the same level as the last few quarters, to a great extent as a consequence of the continued great cautiousness among the majority of our customers as far as investments are concerned. However, the general view in the market is that the beginning of a recovery may be seen, and also that there are signs showing that a gradual return to a normal investment pace can be expected in 2010.
Since the fourth quarter Obducat takes part in the EU funded SMASH project. The project is aimed at creating new materials and process technologies for use in the production of cost-effective, energy-saving white LED light sources for the general lighting market. The production of stamps and replication of nanostructures based on IPS®-STU®, Obducat’s proprietary nanoimprint lithography for high volume production, will be the main focus for Obducat in this project. The SMASH project extends over three years with a total budget of Euro 11.5 million.
January- December
The order intake for the period of January-December 2009 totalled SEK 38.9 M (104.3).
The order intake for the year was lower than expected. This is, as previously communicated, in all essentials due to customers postponing their purchase decisions as a direct result of the global financial crisis. Obducat believes, based on the basic driving force of the technology changes already initiated, that the long-term potential for its NIL products remains unchanged.
As previously communicated, the technical requirements specification concerning the order for a Sindre HDD HVM system has been changed. As a result delivery to the customer could not be carried out in 2009.
Sales and Result – Fourth quarter
Group sales for the fourth quarter amounted to 7.736 (24.337). The Group generated a gross profit of 5.439 (12.397), corresponding to a gross margin of 70 (51) per cent. Operating loss for the fourth quarter was -15.857 (-5.626), which was charged with depreciation according to plan of -2.614 (-3.435).
Loss for the quarter after taxes was –17.539 (–7.254), the difference compared with the same period the previous year largely being due to lower invoicing levels. The cost-saving measures initiated during the second quarter have now been fully implemented and will have full impact in 2010. The Q4 result was charged with costs in connection with change of CEO.
January - December
Group sales for the period amounted to 51.603 (71.503), with a gross profit of 26.410 (41.498), corresponding to a gross margin of 51 (58) per cent. Operating loss for the period was -45.596 (-24.565), comprising depreciation according to plan of -10.364 (-13.974).
The sales discrepancy between this year and the corresponding period the previous year depends largely on lower sales volumes in 2009. Also the margin is somewhat lower, mainly resulting from the changed product mix entailing a larger amount of SEM systems sold. The Group’s depreciation methods remain unchanged whereas the economic life for the development of machine platforms was revaluated for 2009 (see below).
Financing and Liquidity – Fourth quarter
Liquid assets at the close of the reporting period were till 51.816 in comparison with 47.861 at the start of the year.
Cash flow from current operations for the period amounted to 5.315 (3.434). Total cash flow from investing activities in the fourth quarter was –1.598 (–2.940). As for liquidity, the fourth quarter was charged with the result of current operations, investments in development projects and change in the working capital. The significantly improved cash flow in the fourth quarter compared with previous quarters during 2009 is largely due to improvements in working capital related to previously processed production costs for a customer order which, during the fourth quarter, was delivered and paid for.
January - December
Cash flow from current operations for the period amounted to -38.443 (-11.738). Cash flow after investing activities was -59.303 (-25.863). Cash flow for the period was charged with increased investments in development as well as the result for the period.
As authorised by the Annual General Meeting on 18 June 2009, the Board of Directors in the third quarter implemented a new share issue with preferential rights for Obducat’s shareholders and holders of its convertibles 2008/2011. The share issue was fully subscribed and yielded the Company about SEK 74 M before issue expenses and guarantee costs. The issue resulted in the number of shares in Obducat increasing to a total of 532 357 370, of which 10 082 918 series A shares and 522 274 452 series B shares.
At the close of the period equity amounted to 68.722 compared with 57.482 at the beginning of the year. Equity/assets ratio on 31 December was 42 per cent compared with 38 per cent at the start of the year. Interest-bearing liabilities are composed largely of convertible subordinated debentures, property credits and lease debts.
Investments – Fourth quarter
The Group’s total net investments amounted to 6.913 (6.374). The investments are mainly composed of intangible assets in the form of capitalised development expenses and patents, capitalised in compliance with IAS 38 (International Accounting Standards).
January- December
Net investments for the period amounted to 20.860 (14.125),of which the greater part refers to investments in intangible assets as mentioned above.
Research and Development – Fourth quarter
Sales for the quarter was charged with research and development costs totalling 8.962 (9.572), (excluding R&D related depreciation according to plan). Investments in the form of capitalised expenditure for development and patents amounted to 7.542 (4.629).
Compared with the corresponding period the previous year, research and development were pursued to a somewhat lesser degree in the fourth quarter, primarily due to a number of development activities in order to produce the Sindre machines having been finalised and completed.
January - December
Sales for the period comprise research and development related costs totalling 31.726 (28.187), (excluding R&D related depreciation according to plan). Investments in the form of capitalised expenditure for development and patents amounted to 20.462 (12.003). The increased investments in the form of capitalised development expenditure pertain to development of the Sindre machines.
Patents
Robust patent protection is of utmost importance to Obducat and its business. The purpose of patents is to create exclusiveness, which is a significant part of the generation of future sources of income.
Obducat’s Patent portfolio comprises a total of 275 active patent applications pertaining to 49 inventions. 156 patents have been granted.
Transactions with closely associated persons
In the second quarter of 2009, Obducat signed an agreement with European Nanoinvest AB (ENI) in which ENI, in return for compensation, pledged to guarantee the above-mentioned new share issue as previously communicated under ”Legal matters and other information” in the prospect pertaining to the new share issue in July 2009.
With the exception of the above, no transactions with closely associated persons took place in 2009.
Organisation
At the end of the period the Group had a total of 63(70) full time employees, of which 11 (11) women. Obducat continuously and actively works to adapt the organisation to the prevailing market conditions. As previously communicated, a number of cost reduction measures were implemented during the year, which during the autumn had some impact and which have now been fully implemented.
External factors
The global financial crisis is assessed to have impacted Obducat’s progress during 2009, and the speed with which Obducat will achieve commercial success will depend on how quickly trade conditions will improve.
Seeing that Obducat if possible, and in accordance with its currency policy, hedges outstanding currency flows, it is estimated that currency fluctuations will continue to have a relatively small impact on the business.
The Obducat share and Ownership Structure
On 31 December 2009 the number of shareholders was 15.255. On the same day the total number of shares was 532.359.870, of which 10.082.918 series A shares (each representing ten votes), and the remainder series B shares (each representing one vote). For the twelve months of 2009, an approximate total of 351.5 (203.7) million series B shares were traded, equivalent to an average volume per trading day of approximately of 1.4 (0.8) million shares. During the fourth quarter an approximate total of 143.5 (49.7) million series B shares were traded, equivalent to an average volume per trading day of approximately 2.3 (0.8) million shares.
The ownership structure on 31 December 2009 was as follows:
(For table, see attached file)
Risks and risk factors when compiling this interim report
The Group’s risk exposure is outlined in the Annual Report 2008 (pages 51-52) as well as in the prospectus issued by Obducat pertaining to the new share issue in July 2009 (pages 12-13). This risk exposure is not subject to any general changes.
The speed of Obducat’s commercial success and future capital requirement will to a degree depend on how quickly the market recovers. Should in 2010 the recovery that the industrial indicators and trend reports show not materialise, thus resulting in low levels of orders and invoicing, a need for liquid resources might arise. In that event, the Board of Directors and the Management will, at the earliest possible convenience, inform the shareholders further.
Outlook
The basic driving forces creating a demand for Obducat’s products are believed to remain unchanged in the long run, and Obducat’s market position in the prioritised application areas is strong. In the short run it is estimated that a highly cautious attitude will characterise customers’ behaviour as far as investments in production technology and capacity are concerned, but that previously dormant investment plans will again be brought up for discussion. This, combined with industrial indicators as well as trend reports pointing at the beginning of a recovery during 2010, causes Obducat to expect the order intake to develop in a positive manner.
Obducat will continue to pursue its efforts to create long-term customer relationships and will accordingly also in the future prioritise customer relations which are expected to result in industrial orders, and consequently improved profitability
Obducat’s application areas for patterning of various substrates by the use of NIL technology continues to comprise light-emitting diode production (LED), patterning of hard-disk substrates (HDD) and the manufacture of displays (controlled structuring of large surfaces), applicable also to the solar cell industry.
According to Gartner, Inc., provider of technology-related analyses, the LED market for lighting purposes and displays is expected to increase by 9.3% to USD 6.784 M in 2010, and by a further USD 2.062 M to USD 8.846 M until the year 2013. Lithography for patterning of substrates is a central part of the manufacturing process for LED components. Nanoimprint lithography (NIL) is a technically and economically attractive option compared with traditional optical lithography, both for LED based nanothreads and LED technology based on patterned sphire substrates (PSS).
Obducat has captured a leading position in the market for industrial NIL production equipment used to manufacture LEDs.
The HDD market is yet again, in parallel with solid state based memory media, seeing positive progress. The industry is at present considering the introduction of a generation of hard disks with increased memory capacity, so-called “shingled write recording”. This would enable the HDD industry to continue to make progress directly towards “Bit Patterned Media” (BPM). The introduction of BPM based production is expected to take place in 2012 at the earliest.
In 2009 Obducat commenced trials to increase, by the use of its NIL technology, the effectiveness of transforming sunlight to electric power in solar cells by controlled structuring of substrates and the different cell layers. In this way Obducat will be prepared when the solar cell manufacturers are now beginning to invest in new production capacity.
Review
This interim report has, in compliance with the rules and regulations of the Code of Corporate Governance, been reviewed by the Group’s authorised public accountant; see separate Review Report.
Proposed distribution of dividends
The Board of Directors and the Chief Executive Officer propose that no dividends be distributed for the financial year of 2009.
Annual General Meeting
The Annual General Meeting for shareholders in Obducat AB (publ) will take place on 23 June 2010. Time and place for the AGM will be notified at a later date.
Future reports, contacts, etc.
Annual Report 2009 31 March 2010
Interim Report Q1 2010 (January-March) 6 May 2010
Interim Report Q2 2010 (January-June) 23 July 2010
Interim Report Q3 2010 (January-September) 22 October 2010
Year-end Report 2010 (January-December) 11 February 2011
Previous financial reports may be downloaded from Obducat’s website, www.obducat.com, or be ordered in printed version at info@obducat.com or by phone at +46 40 36 21 00.
For further information, please contact:
Lars Tilly, CEO, +46 40 36 21 00 or +46 703 27 37 45
Henri Bergstrand, Chairman of the Board, +46 40 36 21 00 or +46 708 88 72 45
(For full report, including tables, see attached file)