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Oce Reports Q2 and First Six Months 2002, Revenues of $772 million

Monday, July 08, 2002

Press release from the issuing company

VENLO, Netherlands, July 4 - Consolidated results for the second quarter and the first six months of fiscal 2002 were published today by Oce N.V. (Nasdaq: OCENY). Results second quarter 2002 During the second quarter revenues of the Dutch based supplier of digital document systems and services increased to US$ 772 million (+2%). On an autonomous basis there was a 2% decrease. Although the decline in sales of machines stabilized, there are still no clear signs of the trend starting to move upwards again. A higher gross margin (41.3% as against 41.0% in 2001) and slightly higher operating expenses (attributable in full to acquisitions) resulted in an operating income (EBIT) of US$ 53 million, more than 2% higher than in 2001; EBITDA increased by 3%. Income before taxation was 11% higher than in the corresponding period of the previous year. Results first six months 2002 Operating income (EBIT) was in line with previously published expectations, whilst net income was slightly higher. Revenues amounted to US$ 1,518 million, an increase of almost 3% on the equivalent period of 2001. This increase was the result of positive exchange rate effects (+1%) in the first quarter and acquisitions (+4%). On an autonomous basis revenues were 2% down on those of 2001. Machine sales were 14% lower on aggregate; however, higher revenues from software and services largely compensated for this decrease. This picture is practically identical in all Business Units; the autonomous decrease in revenues was 2% in Document Printing Systems and 5% in Wide Format Printing Systems, whilst in Production Printing Systems there was no change in autonomous revenues. * The figures given in this report are unaudited. The gross margin as a percentage of revenues went up from 40.9% in 2001 to 41.1%. Positive exchange rate influences were reduced by mix effects (the increased importance of Facility Services) and by volume effects. In total the gross margin increased by US$ 19 million. Operating expenses rose by more than 4%, but this was attributable to acquisitions that took place after mid-2001. If these acquisitions are excluded, there was a slight decline in operating expenses (-1%). This reflects the initial benefits of the restructuring operation and of stringent cost control. Operating income (EBIT: US$ 104 million) was 2% lower than in 2001. This is an improvement compared to the first quarter. EBITDA increased by 1% to US$ 195 million. Financial expense (net) was lower than in 2001 and tax charges were higher. On balance net income increased by 1% to US$ 50 million or US$ 0.58 per share based on 84,111,878 shares, being the weighted average number of ordinary shares outstanding, compared to US$ 50 million or US$ 0.56 per share, based on 85,672,182 shares, being the weighted average number of ordinary shares outstanding at the first half of fiscal 2001. The restructuring program is on schedule and the expectation is that the targeted savings of US$ 33 million will be achieved in 2002. The number of job reductions already realized as part of the restructuring operation amounts to 341, which is equivalent to 32% of the target figure for the end of 2003. Of the planned reduction in unprofitable low-volume analogue machines, 22% of the target of US$ 47 million by the end of 2004 has meanwhile been achieved. The outsourcing of the lease activities in Scandinavia is proceeding according to plan. Outsourcing in the rest of Europe has been delayed because the contractual conditions require extra carefulness. Results Strategic Business Units In all Strategic Business Units the consequences of the weaker economic climate are making themselves felt. Investments are being postponed and this is leading to lower sales of machines. The lower machine sales are largely being compensated for by increased revenues from software and services. In geographical terms there are no significant exceptions to the picture outlined above. Oce has maintained its market position in all strategic market segments. In Document Printing Systems (DPS) revenues rose during the first six months by more than 1% to US$ 713 million; on an autonomous basis there was a decrease of 2%. Machine sales were down by 9% on the previous year. Sales of the Oce CPS700 color printer are proceeding according to plan. The increase in revenues from Facility Services continues to be most satisfactory (+26%, of which 19% autonomous). Operating income in DPS before R&D expenditure was US$ 59 million (2001: US$ 67 million), with the assets of DPS amounting to US$ 1,516 million (2001: US$ 1,655 million). Production Printing Systems (PPS) had a good first six months. Revenues rose by 1% to US$ 369 million. There was no autonomous increase in revenues. Sales of machines were down by 17%. The order portfolio is stable but still at too low a level. Operating income of PPS before R&D expenditure was US$ 70 million (2001: US$ 67 million); the assets of PPS amounted to US$ 540 million (2001: US$ 612 million). Oce results second quarter and first six months 2002 In Wide Format Printing Systems (WFPS) revenues in the first half of the financial year were US$ 436 million (+6%). On an autonomous basis revenues decreased by 5%. Machine sales were 18% lower than in 2001. The integration within Display Graphics of the businesses that were acquired (e.g. Rastergraphics and Onyx Graphics) is progressing smoothly. Despite the integration expenses and the amortization of goodwill arising upon acquisition, the operating income of WFPS before R&D expenditure rose by US$ 5 million to US$ 70 million (2001: US$ 65 million). The assets of WFPS amounted to US$ 753 million (2001: US$ 764 million). Geographical spread of activities During the first six months revenues in North America rose to 43% of total revenues; for Europe this figure was 51%. The influence of the economic climate does not differ significantly in these regions. Particularly in the United States and the Netherlands the results are developing favorably. Balance sheet and cash flow Total assets were US$ 221 million lower than in 2001. This decrease is the net result of the consolidation of acquired businesses (+ US$ 67 million), exchange rate effects (- US$ 135 million) and autonomous reductions (- US$ 153 million). Particularly the decrease in trade accounts and lease debtor receivable and the decrease in inventories are continuing unabated. Interest-bearing loans decreased by US$ 153 million to US$ 1,003 million. Free cash flow (i.e. cash flow before financing activities but after acquisitions) amounted to US$ 88 million positive. Prospects Because of the continuing adverse investment climate revenues are expected to be at the same level as in 2001. The influence of a lower exchange rate for the US dollar will depress the result. Thanks to a reduced cost level the expectation is that operating income for 2002 will be at least equal to that of 2001. Net income will work out higher than in 2001.

 

 

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