The Group-wide COMPETE program (which stands for "COst Management, Process Excellence, Time Efficiency") also made positive headway. Further savings totaling EUR 100 million were achieved in fiscal 2006, thanks in part to the company's zero-defect quality offensive. Production yields have been significantly improved and the number of complaints have been reduced sharply since 2003.
The decision to discontinue the UltraCap® activities, the launch of a program to restructure the plant in Málaga, Spain, and the production transfer – in particular of capacitors from Spain and Brazil to China, India and Hungary – are further milestones along EPCOS' road to sustainable profitability.
Earnings (continuing operations)
| (EUR million) | Fiscal 2005 | Fiscal 2006 |
| EBIT | -26.9 | +46.8 |
| Net income/loss | -66.3 | +35.2 |
| Earnings per share (euros) | -1.02 | +0.54 |
EBIT from continuing operations improved by EUR 74 million to plus EUR 47 million, mainly because of the significantly higher sales volume and realized cost cuts.
The EBIT margin for the EPCOS Group was +4 percent. Net income stood at EUR 35 million. Earnings per share were plus 54 eurocents.
Earnings (total Group business)
| (EUR million) | Fiscal 2005 | Fiscal 2006 |
| Net income/loss | -119.3 | +21.2 |
| Earnings per share (euros) | -1.83 | +0.32 |
| Net cash flow | -65 | +98 |
EPCOS also recorded total net income of EUR 21 million from total Group business – including a loss of EUR 14 million posted by the tantalum capacitor business that has now been sold to KEMET.
Net cash flow of plus EUR 98 million includes proceeds of EUR 68 million from the sale of EPCOS' tantalum business. Net cash flow of about EUR 30 million was thus generated from operating business.
Employees
At September 30, 2006, EPCOS employed about 17,900 people worldwide, an increase of 12 percent from about 16,100 a year ago. This increase in human resources was accompanied by double-digit sales growth and took place in countries with low labor costs – above all in China, where manufacturing focuses principally on products such as inductors that require more labor-intensive production processes. More than half of EPCOS' entire work force (55 percent) is already employed in Asia. 11 percent is based in Germany, 24 percent in the rest of Europe and 10 percent in the Americas.
3. Outlook for fiscal 2007
With the business climate remaining positive, EPCOS anticipates it will again increase sales in fiscal 2007. With a positive EBIT in all business segments, Group EBIT will further improve and a significantly positive net cash flow will be achieved.
EPCOS expects sales in Q1 2007 to be more or less the same as in the quarter just ended. Earnings before interest and tax too will probably be on a par with the reported EBIT figure of Q4 2006.
About EPCOS
EPCOS AG, a manufacturer of passive electronic components headquartered in Munich, is market leader in Europe and number two worldwide. With its very broad portfolio EPCOS offers a comprehensive range of products from a single source. The EPCOS Group has design, manufacturing and marketing facilities in Europe, the Americas and Asia.
Passive electronic components are found in every electrical and electronic product – from automotive and industrial electronics through information and communications to consumer electronics. Components from EPCOS store electrical energy, select frequencies, and protect against overvoltage and overcurrent.
In fiscal 2006 (October 1, 2005, to September 30, 2006), EPCOS posted sales of EUR 1.31 billion. At September 30, 2006, the company employed about 17,900 people worldwide.
N.B. All financial data has been compiled to US GAAP and is not audited except for data at September 30, 2005.
Live transmission of conference call
On November 16, 2006, the Management Board of EPCOS will inform analysts and investors of business performance in the fourth quarter of fiscal 2006 at a conference call starting at 12 noon, Central European Time, 6 a.m., US Eastern Standard Time. This conference can be followed live at the EPCOS corporate website (www.epcos.com/conferencecall ). A transcript of the speeches will be available for downloading after the end of the conference call.
Further dates
Results for the first quarter of fiscal 2007 will be published on February 1, 2007. The Annual General Meeting will be held on February 14, 2007.
This document may contain forward-looking statements with respect to EPCOS’ financial condition, results of operations, business, strategy and plans. In particular, statements using the words “expects”, “anticipates” and similar expressions, and statements with regard to management goals and objectives, expected or targeted revenue and expense data, or trends in results of operations or margins are forwardlooking in nature. Such statements are based on a number of assumptions that could ultimately prove inaccurate, and are subject to a number of risk factors, including changes in our customers’ industries, slower growth in significant markets, changes in our relationships with our principal shareholders, the ability to realize cost reductions and operating efficiencies without unduly disrupting business operations, currency fluctuations, unforeseen environmental obligations, and general economic and business conditions. EPCOS does not assume any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Further information on factors which could affect the Company’s financial results is provided in documents filed with the Bundesanstalt für Finanzdienstleistungsaufsicht and the US Securities and Exchange Commission.
