BARCO Anticipates 2001 Results to Be Down 50%, Includes Xeikon Writedown
Press release from the issuing company
Kortrijk, December 14, 2001. BARCO reports that they anticipate that the current result before taxes for the entire year 2001 will decrease by more than 50%. After a period of growth in the first semester, the turnover has declined in the second. The cost structure established to support further growth is having a negative effect on the result. Stocks created by a slowdown in sales of standard projectors have made a depreciation of roughly 20 million euros necessary. Both economic and structural factors are responsible for the declining result.
BARCO has already taken a number of measures. These measures will decrease the operational costs in 2002 by more than 10 million euros. The workforce has been reduced by laying off 350 employees. Planned investments for 2001 have been cut back by half. The focus strategy that was initiated last year will in the long run also lead to an improvement of the result.
In the exceptional costs over the course of 2001, provisions were established for the early write-down of goodwill on a number of acquisitions and for writing off the participation in Xeikon.
The worldwide economic recession that began in the second quarter of 2001 and gained strength in the two following quarters has made it impossible for some BARCO business units to fulfill turnover expectations. Especially the turnover trends in the United States and, to a lesser extent, in Asia have been unfavorable for BARCO. The unfavorable market conditions are affecting all companies, but especially those companies that deliver investment goods for other businesses. The tragic events of September 11, 2001 have further aggravated the general climate of investment uncertainty. Orders are to a limited extent being cancelled in the various BARCO activities, but on the other hand OEM customers in particular are to a considerable extent requesting postponement of orders. In addition, in a number of specific markets we are observing a certain slowdown in customer order behavior. When investment decisions are put back into force, particularly in the United States, we can certainly expect a rapid rise in turnover.
In their graphic arts business, taking into account the general economic climate, the restructuring of Barco Graphics and the continuing weak results of several acquisitions, the Board of Directors has decided on an advanced write-down of goodwill on a number of acquisitions. Provisions will also be made for writing off the participation in Xeikon.
The exceptional costs also include the restructuring costs, such as for example the costs resulting from employee layoffs.
For 2002 BARCO is taking into account a continuation of the unfavorable market conditions in the first half of the year. For this reason BARCO will keep putting the emphasis on cost control.
Barco Graphics continues to find itself confronted with the general economic slowdown, and specifically with the persistent slump in the graphics market. Nonetheless, Packaging Systems registered further growth, just as in the first semester. It is especially in the commercial printing market, however, that the slump is being felt. Delivery of Mondrian computer-to-plate machines in the definitive version has indeed started, but it will not be possible to ship all orders this year. A portion of the production capacity is being used for upgrading previously manufactured machines, while the total capacity is being maintained in line with expectations for the coming year. As a consequence of this, the delay in delivery of the Mondrian is continuing to depress Barco Graphics’ margins for the entire year 2001.
In the meantime, the process of de-investing Barco Graphics has been set into motion. The ETS business unit, which is active in systems for the production of printed circuits, is being put into a joint venture with Mania GmbH. Commercial Printing and Packaging Systems are being merged with Purup-Eskofot, and Industrial Printing will be spun off.
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