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Punch Achieves 34% Increase in Net Profit, Completes Capital Increase

Tuesday, September 03, 2002

Press release from the issuing company

September 3, 2002 -- Punch International, EMS-provider with registered seat at St-Martens-Latem, generated a turnover of EUR 73 million during the first half of 2002, which is an increase of 41.7% when compared to the same period in 2001. Profit after taxes rose by 34% compared to the first year-half of 2001, to amount to EUR 2.75 million. As a result, Punch again managed to come well into budget expectations, feeling confident that it will be able to meet the anticipated results for the second year-half. In addition, Punch today also announced a planned capital increase of EUR 20 million. During the first year-half, turnover rose by 42% by comparison with the same period in 2001. External growth accounted for 36% of this increase. It was due to the joint-venture with Jiin Hui in China (consolidated from the second year-half of 2001 onwards), Xeikon International (since the second quarter of 2002), Xeikon Inc. and Xeikon Japan (since May 2002) and Punch Mécanique (since the second year-half of 2001). Internal growth amounted to 6%. While turnover in Belgium and France declined, sales at the Namestovo facility in the Slovakian Republic rose considerably. The performance of the facility at Roubaix, France, was below par during the first year-half. Consequently, Punch is searching for a structural solution. The Punch Electronique establishment in Dreux was closed down permanently. The lawsuit that Punch instituted resulted in a settlement, the proceeds of which were included in the extraordinary results. The EBITDA and EBIT-margins both fell slightly as, amongst other factors, the use of material increased significantly and Punch was not yet able to achieve the required profitability of the recently acquired activities. Tax pressure is lowered as Punch reckons that the campus in the Slovakian Republic will be exempted from taxation. DIGITAL CONSUMER ELECTRONICS BUSINESS UNIT The Digital Consumer Electronics business unit was significantly expanded in the beginning of June due to the acquisition of MCMS Belgium - now called Punchtronics -, in Colfontaine, the province of Henegouwen. At present, the business unit operates three facilities: Punch Assemblies in Namestovo, the Slovakian Republic, Punchtronics and Advantra International in Belgium. The Namestovo production unit performed within expectations. Advantra International achieved positive results before amortization of Goodwill. Advantra has completed the development stage of the 2.7 ReFLEX module and has already delivered the first 10,000 ReFLEX modules. Still, as a result of the decreased investments in the telecoms sector, there is uncertainty about new orders in the second year-half. DISPLAY SYSTEMS BUSINESS UNIT This business unit managed to come into budget expectations during the first year-half. The campus in the Slovakian Republic experienced impressive growth, both in terms of staff and turnover. Consequently, Punch International plans to further expand the campus by building a second production hall. An important new contract was signed with LG. Philips Displays America for the production in Mexico of CRT components used in Large Flat Displays. The establishment in the Peoples Republic of China performed well and Punch is currently studying possibilities for further expansion in the region. The company is exploring the market with the idea of starting a campus project here too in the long term. The facility in Brugge supplies the cabinets for the Philips television that has won the EISA ‘European Television of the Year’ Award. GRAPHIC SYSTEMS BUSINESS UNIT Strobbe Graphics has not yet been able to fully achieve the ambitious budget established for 2002. The development of a new range of CTP-machines, built with violet laser technology, was completed in the first half of 2002. The successful beta-tests run at different European sites give the go-ahead for the commercialization and delivery of these ‘next-gen’ machines. The largest acquisition ever made by Punch, was that of Xeikon International, world leader in digital color printing systems, which took place in March of this year. This multinational, with facilities in Belgium (Lier and Heultje), the United States and Japan, was incorporated within the Graphic Systems business unit. After the acquisition, Punch mainly concentrated on decreasing operational expenses. The number of employees has recently been reduced by around twenty. The consolidated turnover for Punch increased significantly due to this acquisition, although it did not contribute evenly to the results. For 2002, Punch expects a positive contribution. STRATEGY The cornerstones of the Punch strategy remain the same: a diversification of activities, the one-stop-shopping concept and a continuously growing globalization. In addition, the company increasingly focuses its attention on the tandem knowledge-campus. In the following years, Punch will endeavor to further build campus projects on the three continents and set up knowledge centers to provide substantial added value. The company more and more concentrates on developing and supplying end products – activities that require knowledge - and aims at developing activities generating recurrent income. This strategy is reflected in the most recent acquisitions, such as Xeikon and Advantra, and will also play a crucial role in future expansion plans. Whereas activities at Punch previously only focused on manufacturing, the company has now also established an own sales organization for the commercialization of several of its products and the group has more than 100 engineers working in its various R&D departments. PROSPECTS As announced during the annual results presentation, Punch is – strongly stimulated by the banks- looking for ways to improve the balance sheet structure, which was considerably weakened due to the recent acquisitions. In the course of the third quarter, Punch will enter into a Sale & Lease Back agreement, allowing the company to achieve increased corporate value of EUR 10 million. In addition, Punch will carry out a capital increase. The company chooses to raise liquid assets amounting to a total of EUR 11 million through a private placement and decided to also convert a EUR 9 million debenture loan. These additional funds should help restore the balance sheet equilibrium. Punch cannot escape the unfavorable economic conditions in various sectors where it is active. However, the company already took measures to anticipate the crisis situation in 2000. Today, Punch also pays special attention to subsidiaries that perform below expectations and undertakes measures whenever or wherever necessary. Consequently, Punch remains hopeful for the future and sticks to its expectations for 2002: a turnover of EUR 170 million and an estimated profit per share of EUR 3 after dilution and before extraordinary results. For more information on the Punch group and on the development of its activities, please visit our web site at http://www.punchinternational.com.




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