Annual Report
09 le k tr o n ik G ru p p e n A n n u al R e p o rt 2 0 0 9
HEAD OFFICE
ElektronikGruppen BK AB (publ)
Box 39, SE-162 11 Vällingby, Sweden. Street address Grimstagatan 160 Tel +46 8 759 35 00, fax +46 8 759 35 20, info@egruppen.com www.egruppen.se
ElECtrOnICs BusInEss ArEA www.egelectronics.com
EG Electronics
Box 39, SE-162 11 Vällingby, Sweden. Street address Grimstagatan 160 Tel +46 8 759 35 70, info@egelectronics.com
Box 2001, SE-145 02 Norsborg, Sweden. Street address Kumla Gårdsväg 24C. Tel +46 8 531 939 00
Box 96, SE-183 21 Täby, Sweden. Street address Gribbylundsvägen 11–13 Tel +46 8 587 088 00
Askims Verkstadsväg 5A, SE-436 34 Askim, Sweden. Tel +46 31 45 80 40 Box 15035, SE-750 15 Uppsala, Sweden. Street address Söderforsgatan 1 Tel +46 18 56 33 00
Korskildeeng 6, DK-2670 Greve, Denmark. Tel +45 43 43 50 00 Box 89, FIN-00381 Helsinki, Finland. Street address Höyläämötie 3B Tel +358 9 7510 3500
Hovfaret 17B, N-0275 Oslo, Norway. Tel +47 23 25 46 00 Martin-Behaim Str. 2, D-63263 Neu-Isenburg, Germany Tel +49 6102 88 27 422
EG (Shanghai) Commercial Co., Ltd.
Room 1808, Shenshi Building, 511 Weihai Road, CN-200041 Shanghai, China. Tel +86 21 5213 0077
EG Power Electronics (India) Pvt. Ltd.
No 406, 4th Floor, Barton Centre, M.G. Road, Bangalore IN-560001, Karnataka, India. Tel +91 8041 7161 79
PrODuCts BusInEss ArEA www.etalgroup.com
ETAL Group AB
Box 39, SE-162 11 Vällingby, Sweden. Street address Grimstagatan 160 Tel +46 8 759 35 00, info@etalgroup.com
Gottorpsgatan 11, SE-582 73 Linköping, Sweden. Tel +46 8 759 35 00 ETAL (UK) Ltd.
Luna Place, Dundee Technology Park, Dundee, DD2 1XZ, U.K.
Tel +44 1382 561 561 ETAL Group Oy
Kuormatie 14, Box 130, FIN-03101, Nummela, Finland Tel +358 20 7500 330
AS ETAL Group
Tulika 15/17, EE-106 13 Tallinn, Estonia. Tel +372 614 3030 ETAL Group Pvt. Ltd.
No. 7, 2nd Lane, Maligawa Road, Ratmalana, Sri Lanka Tel +94 11 2623 804
PrODuCtIOn tECHnOlOgy BusInEss ArEA www.scanditron.se
Scanditron Sverige AB
Box 39, SE-162 11 Vällingby, Sweden. Street address Grimstagatan 162 Tel +46 8 795 24 00, info@scanditron.se
Box 15035, SE-750 15 Uppsala, Sweden. Street address Söderforsgatan 1 Tel +46 18 56 11 61
Scanditron Danmark A/S
Lyshøjen 12, DK-8520 Lystrup, Denmark. Tel +45 8674 1233 info@scanditron.dk
Scanditron Finland
Höyläämötie 3B, FIN-00380 Helsinki, Finland. Tel +358 9 439 3330 scanditron@scanditron.fi
Scanditron Sp. z o.o.
Ul. Obywatelska 115, PL-94-104 Lodz, Poland. Tel +48 42 686 02 46 info@scanditron.pl
Scanditron Estland
Tulika 15/17, EE-106 13 Tallinn, Estonia. Tel +372 614 3030
info@scanditron.ee
The cover photo shows a Pacemaker, a Swedish-developed pocket-sized DJ system that has received a number of international awards for its design and functionality. A combination of music player and professional mixer with two independent audio channels, the Pacemaker has multiple features for playback, cue, effects and sound control.
ElektronikGruppen delivers the TFT display that is used in this product, a high performance display with 262K colours, a 166 ppi screen resolution and a 1.7 inch (diameter) active area.
The photo on this page shows a detail from production of laser cut stencils that are used in manufacturing of PCB assemblies. A stencil is made of thin Shareholders who wish to participate in the AGM
• Must be entered in the register of shareholders maintained by Euroclear Sweden AB no later than 21 April 2010.
• Must notify the company of their intention to participate in writing to ElektronikGruppen BK AB (publ.), Box 39, SE-162 11 Vällingby, Sweden, by telephone +46 (0)8-759 35 00, or by e-mail to info@
egruppen.com, no later than Thursday, 22 April 2010.
• The notification should include the participant’s name, address, telephone number, personal or corporate identification number and registered shareholding.
In order to participate in the AGM, shareholders whose shares are registered in the name of a nominee must temporarily re-register their shares in their own name with Euroclear Sweden. Such re-registration must be completed no later than Wednesday, 21 April 2010, and should be requested from the nominee well in advance of this date.
Financial calender 2010
27 April Interim report for 1 January–31 March 16 July Interim report for 1 January–30 June 28 October Interim report for 1 January–30 September February 2011 Year-end report for the full year 2010 Shareholder contacts are handled by Fredrik Celsing, President and CEO, and Håkan Lundgren, Head of Corporate Communications.
All financial reports are available in Swedish and English and are published at www.egruppen.se and www.egruppen.com. It is also possible to subscribe for press releases and financial reports from ElektronikGruppen by e-mail. Register on the company’s website under the heading “Press”.
This annual report has been produced in Swedish and English and will be sent to all new shareholders and those shareholders who have requested a printed version of the annual report. It can also be ordered through several leading Swedish media channels. The annual report has been produced by ElektronikGruppen in coopera- tion with Grayling & Citigate Norden AB. Printing: åtta.45. Photos:
Johanna Wulff, Mats Lundqvist, Mattias Bardå, et al.
This annual report is a translation of a Swedish original. In the event of
any difference between the original and the translation, the Swedish
annual report (Årsredovisning) shall govern.
14 Electronics business area 17 Products business area
19 Production Technology business area
21 Share capital and ownership structure 23 Five-year summary for the Group 24 Corporate governance report 28 Board of Directors
29 Executive Management
Audited Annual Report 30 Administration report Financial statements – Group
34 Consolidated income statement 35 Consolidated balance sheet
36 Consolidated statement of changes in equity 37 Consolidated cash flow statement
38 Notes for the Group
Financial statements – Parent Company 50 Parent Company income statement 51 Parent Company balance sheet
52 Parent Company statement of changes in equity 53 Parent Company cash flow statement
54 Notes for the Parent Company 60 Proposed appropriation of profit 61 Audit report
62 Glossary and definitions
ElektronikGruppen in brief
ElektronikGruppen is one of the nordic region’s leading suppliers of high-tech components, systems and production equipment to the electronics industry.
Operations are organised into three business areas with specialised knowledge of design, distribution and production of electronics and electromechanics. The Nordic region is the home market, but ElektronikGruppen is also established in the Baltic countries, Poland, Germany, the United Kingdom, China, India and Sri Lanka, and has distribution partnerships in an additional 20 or so countries. The Group has a broad customer base in the manufacturing industry, with key customers belonging to the telecommunications, automotive and industrial automation sectors. Manufacturers of informa-
tion systems and contract manufacturers are also important customer groups.
ElektronikGruppen applies a management model with considerable decentralisation of business responsibility and clearly defined goals for the operating units. The Group is also seek- ing synergies through joint support functions.
Consolidated net sales for 2009 amounted to SEK 718 M, and the number of employees at the end of the year was 517. The Elektronik- Gruppen share is quoted on the Small Cap list of the NASDAQ OMX Nordic Exchange in Stockholm, IT segment.
Sells electronic components and systems that require in-depth technical and commercial exper- tise, in addition to reliability and effective logistics. The main markets are the Nordic region and China, and key customers are found in the telecommunications, commercial vehicle, industrial automation, and information system sectors.
ElektronikGruppen
Production Technology Products
Electronics
Develops, manufactures and sells inductive components to companies with global operations in the tele- communications, power technology and defence industries. Production takes place in-house and through contract manufacturers.
Sells production equipment, consu- mable materials, and support and training services to the electronic industries in the Nordic region, the Baltic countries and Poland.
70% 14% 16%
Principal brands Business areas
Area of activity
Share of consolidated
net sales
highlights of 2009
First quarter
The sharp downturn in the European industrial market that began in the fourth quarter of 2008 continues. Demand falls in all customer seg- ments except telecommunications and medical technology. A group-wide cost-cutting scheme is initiated. Decisions are also made for extensive capacity reductions and structural changes in the Products business area. A goodwill impair- ment loss of approximately SEK 16 M is recog- nised in Products. Fredrik Celsing takes over as President and CEO.
Second quarter
Telecom-related sales in the Electronics busi- ness area continue to enjoy stable development in the Nordic region and are even more positive in Asia. However, the Group’s other operations experience a continued drop in demand. The negative outlook is not helped by the weak dollar and euro. A restructuring programme is launched in Products and among other things includes cutbacks at the European units and the transfer of production to Sri Lanka.
Third quarter
The quarter begins with persistent low demand (except in telecommunications and the Asian operations), which leads to additional cost- cutting measures. Among other things, a pro- gramme to reduce working hours in Electronics and Production Technology is implemented.
The restructuring of production in Products continues with full force. A new customer-seg- mented organisation is introduced for Electron- ics. Towards the end of the period there are initial signs of a general recovery in the market.
Patrik Fagerholm takes over as CFO.
Fourth quarter
There is a weak but definite upturn in demand, particularly in Electronics. Despite consider- able uncertainty about the future, there are additional positive signals from customers. The Group’s operations in Asia are strengthened by the establishment of a sales office in India and recruitments in China.
Group development in figures
2009
2008 2007
Net sales, SEK M 718 935 838
Order intake, SEK M 722 882 853
EBITDA, SEK M –26.0 20.3 42.2
Operating profit/loss, SEK M –67.6 –7.5 22.2 Profit/loss before tax, SEK M –69.7 –13.7 19.6 Earnings per share, SEK –12.08 –2.45 2.66 Cash flow from operating
activities, SEK M 34.9 –1.0 –3.1
Proposed dividend per share, SEK 0.00 0.00 2.10
Items affecting comparability
Overall, the Group’s income for 2009 has been burdened by items affecting comparability of approximately SEK –43 M (–22). Of these items, approximately SEK –34 M is attribut- able to measures taken or adopted during the first quarter in the form of a group-wide cost- cutting scheme, a restructuring programme in Products and a goodwill impairment loss in Products. Other items are attributable to one- time cost-cutting measures in the third and fourth quarters, as well as a goodwill impair- ment loss in the fourth quarter.
Business area development in figures
Electronics
20092008 2007
Net sales, SEK M 507 657 600
Order intake, SEK M 506 611 604
Operating profit/loss, SEK M –2.3 36.4 34.5 No. of employees at end of year 99 111 108
Products
20092008 2007
Net sales, SEK M 103 126 123
Order intake, SEK M 107 121 134
Operating profit/loss, SEK M –42.5 –27.2 0.8 No. of employees at end of year 356 318 178
Production Technology
20092008 2007
Net sales, SEK M 110 154 119
Order intake, SEK M 109 150 115
Operating profit/loss, SEK M –7.7 0.6 5.3
No. of employees at end of year 54 62 55
President’s comments
improvements are part of the explanation, but also the fact that the business area was successful in the telecom seg- ment. With the exception of Ericsson and Nokia Siemens Networks, today’s leading telecommunications manu- facturers are found mainly in Asia, and in the past year Electronics won new contracts and increased its volumes to existing customers. These increased volumes have helped to offset the constant price pressure in this segment.
Sales in Production Technology also fell sharply as a result of very low levels of investment in production equipment. The number of employees has been reduced, primarily in Denmark and Finland, and shorter working hours have also been introduced in most units. The result- ing cost reductions have been substantial, but have arisen at a delay and have been unable to fully compensate for the steep drop in income.
However, with a strong offering of consumable materials and skills services, as well as a more effective and stream- lined organisation, I see this business area as well prepared to act in a market that should grow somewhat from its current low levels during 2010.
Working for a sustainably competitive structure in Products
The situation in Products was complicated even before the economic downturn, partly because of an acquisition in 2007 that fell short of expectations in terms of the cus- tomer base and internal processes. The integration process was also made more difficult by a large number of units in a widely distributed organisation, which put severe strain on managerial and other resources. At the same time, the production carried out by contract manufacturers did not meet the required level of quality. Throughout 2008 we worked hard and spent significant sums to correct these problems, but just as the situation began to improve towards the end of the year, the business area was hit by new problems in the form of rapidly falling demand, pri- marily from customers in the defence and power technol- ogy industries.
This market deterioration forced us to take drastic and costly measures in the business area. Even though these have been largely focused on quickly reducing our For ElektronikGruppen, 2009 was an especially tough
year when we were forced on several occasions to adapt our operations to a harsh reality. We are dependent on our customers – something we must never forget – and when they find it hard going, so do we. And although it is neces- sary to avoid the risk of additional losses, it is very costly to restructure a business to whole new conditions, and the consequences are naturally unpleasant for those affected.
A dismal market with certain bright spots The dramatic slowdown in the industrial market in the fourth quarter of 2008 was followed in 2009 by continu- ously falling demand levels across the majority of customer segments. For ElektronikGruppen, this downward trend persisted until the third quarter, when the curve began to level out. Towards the end of the quarter, we were able to discern a slight increase in order intake. There were more positive signs in the fourth quarter, and order intake has continued to rise, albeit only slightly and from low levels.
This general description of market development is certainly relevant in explaining the Group’s net sales and loss for 2009, but does not show the variations that existed nonetheless. For example, demand from our telecommu- nications customers remained relatively stable throughout the year. Other segments that appeared to be relatively unaffected by the market downturn were medical technol- ogy and energy, although these are not among the Group’s largest segments. The most negative development was noted for commercial vehicles through an exceptionally large volume decrease in the wake of drastic production cutbacks among vehicle manufacturers.
To further clarify the situation, I should mention that while the general economic climate in Europe was well below freezing, the Chinese market showed continued strength, which clearly benefitted our Asian operations.
Volume decrease, adjustments and successes In light of the above, I would like to say that our largest business area Electronics performed at an acceptable level during the year. Despite a drop in sales of 23 per cent, earn- ings were positive if we exclude items affecting compara- bility for workforce reductions. Cost cuts and efficiency
The year we have now left behind is unlikely to be remembered by many readers of this annual
report as a particularly good one, at least not from a wider socioeconomic perspective. here in
the nordic region, as in the rest of Europe, we have experienced a global recession of historical
proportions that has been a source of trial and hardship for both individuals and companies.
costs, the foremost aim is to achieve a more cost-effective production structure in the long term. In short, this means an increased share of in-house production and improved production quality at a lower total cost. In order to accom- plish this, we need to redistribute and cut back capacity in the European units while at the same time scaling up pro- duction in Sri Lanka. This is a major restructuring that has necessitated the appointment of a new management team for the business area but will also require endurance, and work will continue until we have raised profitability to an accept- able level. Since the end of 2009 we have seen an improve- ment in the market and the effects of our actions should now become clearer. However, due to the complex nature of this work and continued uncertainty about the market situa- tion, it may take time before we see the concrete results.
More reasons to believe in a brighter 2010
In my opinion, which is shared by many others, is that we have left the worst behind us and will see an improved European industrial market in 2010. The major sources of uncertainty now are the speed and stability of this recovery.
Do we have a tough and bumpy ride ahead of us before reaching more normal levels, or can we look forward to a sharp upswing already this year? We are planning for a slow recovery but remain ready to deal with any setbacks.
After the past year’s adjustments and efficiency enhance- ments, the Group has reduced its costs dramatically. In spite of this, we have been able to retain all critical exper- tise and have even reinforced our competence in a number of prioritised areas. One contributing factor has been the introduction of a new organisation in Electronics which will enable us to work in a more segment-focused manner with a more well defined and coherent offering. The business area has thus been able to strengthen its position among several key customers, although it may be some time before this is reflected in the order books due to long sales cycles.
The Group’s Asian operations have grown steadily in importance over the past few years and its contributions to earnings are becoming more substantial. The Asian market will continue to grow and our own growth in the region shows that our business model as niche supplier has the potential to be scaled up. We have therefore strengthened the organisation in China and have opened a new sales office in India, which will support all business areas in this market. To further promote growth in this region, we have recruited a Business Development Manager for Asia.
On the whole, I see good indications that 2010 could be a more positive year with many opportunities for Elektronik- Gruppen and all its skilled employees.
Fredrik Celsing
President and CEO
Vällingby, March 2010
and production of electronics and electrome- chanics. This enables ElektronikGruppen to provide its customers with added value through development of innovative solutions based on the latest technology, through adaptation of products and solutions to specific needs and through high-quality logistics, service, support and training.
Goals
ElektronikGruppen’s overall objective is to grow with healthy profitability, and thereby create value for its shareholders. The Board of Directors has adopted the following long-term financial targets:
• Annual growth in the Group’s operating profit of at least 12 per cent, measured over a business cycle.
• A return on average operating capital (ROOC)* of at least 45 per cent for each busi- ness unit.
• An equity/assets ratio on Group level of at least 35 per cent.
* Measured as earnings before depreciation/amortisation, EBITDA, as a percentage of average operating capital.
Vision for the Parent Company
ElektronikGruppen shall be a professional and active owner of technology-based B2B enter- prises in expansive niche segments.
Vision for the Group
On selected markets, ElektronikGruppen shall be a leading supplier of technical products and services in expansive niche segments based on both trading and in-house development. In this context, leading means that the Group will meet its established long-term goals for growth, profitability and market position in the pri- oritised niches, which can be defined on the basis of either product categories or customer segments.
Business mission
ElektronikGruppen offers high-tech electronic components, systems and production equip- ment to manufacturing companies in selected market niches, with a focus on the Nordic mar- ket. The Group’s business is underpinned by specialised knowledge in design, distribution
The Group’s customers are provided with added value through develop- ment of innovative solutions based on the latest technology, through adap- tation of products and solutions to specific customer needs, and through high-quality logistics, service, support and training.
business mission, goals and strategy
Shielding products, such as the
EMC packages shown above, are
used to prevent electronic devices
from interfering with, or being
affected by, other electronic
equipment.
Business professionalism also means acting in a way that builds lasting confidence and relationships with customers and suppliers.
This includes communicating in a clear and straightforward manner and always meeting contractual and other obligations.
It is also vital that all business activities are conducted on the basis of clear ethical standards, where ElektronikGruppen seeks to contribute to positive changes for people and the environment.
Target selected niches where the Group sees potential to create tangible added value
Because ElektronikGruppen is a small player in a global perspective, it is necessary to focus on a number of well defined product and/or customer niches that offer good opportunities for growth and where the Group sees oppor- tunities to create tangible added value for its customers and thereby strengthen its positions in these niches in the long term.
Strive for organic growth
Growth is vital in maintaining and enhancing ElektronikGruppen’s long-term competitive- ness and profitability. Growth in the existing operations can be achieved by a) raising the level of value added, b) increasing the market shares, c) expanding geographically, or d) expanding the offering in markets where the company is already established.
Strive for acquisition-driven growth
As a complement to organic growth, Elektronik- Gruppen also has an ambition to seek and utilize opportunities for value-creating acquisi- tions. These can include a) acquisitions that are integrated into existing operations, and b) freestanding acquisitions in new product or service areas with high and stable profitability or good growth.
Strategy
To meet these goals, ElektronikGruppen is working according to a group-wide strategy that can be broken down into the following five main points:
Decentralised commercial responsibility and centralised support functions
The Group’s business areas, which can in turn consist of one or several business units, func- tion as independent profit centres with their own separate identities, goals and strategies.
This gives each business unit considerable freedom to develop operations on the basis of its specific conditions.
The Group’s supervision of the operating units takes place mainly through setting of explicit goals and monitoring of growth, profit- ability and market position. The profitability target is the same for all business units, while the other goals are set individually and annu- ally for each business unit.
To maintain a suitable balance between the business units’ ability to develop in the desired direction and the goal of achieving higher profitability for the Group than is possible through a collection of fully independent com- panies, ElektronikGruppen has chosen to seek synergies when coordination gains between the business units/subsidiaries clearly exceed the related costs.
Good business know-how with
a corporate culture built on innovation, flexibility and a focus on results
Successful business relies on the ability to
detect and quickly understand customer needs
and, by drawing on this insight, to deliver
solutions that are perceived by customers as
offering added value and that at the same time
contribute to enhancing ElektronikGruppen’s
profitability. As a result, in-depth technical
expertise combined with innovative ideas and
approaches and a powerful drive to achieve
results are highly prioritised qualities among
the employees.
the commitment and innovativeness that are generated in an environment where individu- als are given the freedom to make their own decisions and grow with the task. The Group’s operating units therefore work with a high degree of autonomy and establish their own goals and strategies for market cultivation and develop- ment of the offering. Far-reaching decentralisa- tion of responsibilities and powers contributes to short decision-making paths and gives each employee wide scope to influence his or her own work situation and results, which is an advantage in recruiting and retaining talented and profes- sionally driven employees. This organizational structure also promotes flexibility and closeness to the customers, which is increasingly important in the market.
Group-wide resources and management Through the applied management model, ElektronikGruppen strives to uphold the best possible balance between a small company’s flexibility, closeness and efficiency and a large company’s stability and potential for synergies.
One of the Parent Company’s primary tasks is to support the operating units by offering group-wide resources in areas such as account-
Organisation and management
Geographic presence and activities All of the group units are wholly owned with the exception of EG Electronics GmbH in Germany, where the ownership share is 91 per cent, and the newly-formed Swedish joint ven- ture company Dispio AB, where the ownership share is 50 per cent. In all, these companies operate in 11 countries: Sweden, Norway, Fin- land, Denmark, Estonia, Poland, Germany, the United Kingdom, China, India, and Sri Lanka.
In addition, there are distribution partnerships in some 20 countries where the Group does not have its own subsidiaries or branch offices.
A large share of the Group’s activities are conducted through subsidiaries and sales offices that focus on sales and distribution. The Group also has production units. Through the Products business area, ElektronikGruppen has production facilities in Estonia, the UK and Sri Lanka. The Production Technology business area also conducts manufacturing of laser cut stencils in Sweden, Denmark, Finland, Poland and Estonia.
Decentralised organisation promotes entrepreneurship
ElektronikGruppen sees a fundamental value in
At the end of the year, ElektronikGruppen consisted of 16 operating
group units divided into three business areas – Electronics, Products
and Production Technology – with distinct differences in their offerings
and business models. The Parent Company supports the operating units
among other things by providing a range of group-wide resources.
cation, HR and IT infrastructure. The Parent Company also represents the Group in contacts with the shareholders, the capital market, pub- lic agencies and authorities and other external stakeholders. In 2009, the Parent Company recruited a Business Development Manager with special responsibility for supporting the Group’s development in Asia.
The Group’s supervision of the units takes place mainly through setting of explicit goals and monitoring of growth, profitability and market position. The profitability target is the same for all business units, and has been set as an annual return on operating capital of at least 45 per cent.
Other targets are set individually and annually for each business unit in connection with formu- lation of the units’ business plans.
Retain and develop employees
Being a leading supplier of high-tech compo- nents, systems and production equipment to industrial companies naturally requires both broad and in-depth technical expertise in design, production and distribution. Further- more, the Group must be permeated by a power- ful entrepreneurial spirit, with sales staff who are passionate about doing business and reaching targets. A high level of service, flexibility and innovation is also crucial in providing custom- ers with the added value they have the right to demand from a strategic business partner.
In order for the operating units to recruit and retain employees with the right profile, they must be able to offer competitive terms of employment and a pleasant working environment. It is also essential that the employees are given room and resources to grow, both in their current profes- sional roles and through opportunities for advancement. In this context, one central aspect is to always consider internal hiring to fill vacant positions as an alternative to external recruitment.
Group affiliation also offers increased possibilities for an internal career.
Geographic breakdown of number of employees at 31 December 2009
23%
8%
21%
48%
Sweden Rest of nordic region Rest of Europe Rest of
world
2005 2006 2007 2008 2009 400
500 600
300 200 100 0
number of employees at end of year
Employees in numbers
At the end of 2009 the Group had 517 employ- ees (501), equal to an increase of 3 per cent.
The average number of employees in 2009 was 534 (438), an increase of 22 per cent. During the year the workforce was reduced by a total of around 115 people in most of the Group’s companies. At the same time, the number of employees in Sri Lanka rose by approximately 130 due to the build-up of production capacity in the country.
At the end of the year, the Swedish opera- tions employed 117 people, representing 23 per cent of the total number of employees.
The employee turnover rate* in the Swedish operations was 17 per cent (15). The majority of employees outside Sweden were found in Sri Lanka, with 238, followed by Estonia, with 72, the United Kingdom, with 24, and Finland and Denmark, with 18 each. Of the Group’s employees, 63 per cent (55) were women. The average age of the Group’s employees was 35 years (38), with an average employment period of 4.6 years (4.7).
* Employee turnover is defined as the number of
permanent employees who left during the year
divided by the average number of employees
during the year. This figure has been affected
by completed workforce reductions.
In-house product development is focused on inductive components in the Products business area. However, all of the business areas work with suppliers and customers on the develop- ment and adaptation of products and solutions.
Quality assurance work and certifications As a rule, the customers have rigorous qual- ity requirements for products and solutions and typically demand that their suppliers are certified according to a recognised quality standard. ElektronikGruppen works consist- ently to ensure high quality throughout the chain, from development and production of its own products and/or purchasing from suppli- ers, through transport and warehousing, all the way to customer delivery and invoicing.
The entire Electronics business area is certi- fied in accordance with the ISO 9001 quality management standard. During 2009 strenuous efforts were made within the business area to develop a shared business management system.
Important objectives for this work have been to streamline the sales process, to create better tools for follow-up and decision-making, and to increase the spread of information. The sales process has thus been quality-assured and inte- grated into the business management system,
which has also been made available to all the business area’s units via a web-based system.
Development and adaptation of the group-wide business system, including the CRM system, has also taken place and uniform user routines have been introduced.
All production units in the Products busi- ness area are certified in accordance with the ISO 9001 quality management standard. The business area’s standard components are also certified according to the American UL safety standard. In Production Technology, the Swed- ish stencil operations are certified in accord- ance with ISO 9001.
Increased environmental requirements with more rules...
The level of environmental commitment is growing steadily among customers and society in general, which is changing the demands on ElektronikGruppen as a supplier and corporate citizen. The rate of introduction of environmental legislation by the EU has also accelerated over the past decade. Examples of environmental laws that must be observed by ElektronikGruppen include:
• The Battery Directive, which states that any- one placing any type of batteries on the com- ElektronikGruppen conducts R&D for proprietary product development and in collaboration with customers. The process of developing a new product is undertaken either to meet specific customer requirements or as a general solution for a wider market.
Product development, quality and environment
Today, Light Emitting Diodes
(LEDs) are used in a multitude of
electronic devices around the
home, out on the street, and in the
workplace. The areas of application
are also increasing because in
many fields LEDs are superior
to other more traditional light
sources. A LED can be very small, is
significantly more energy efficient
than a bulb, for example, and emits
very little heat which can damage
objects and textiles. Compared
with bulbs and fluorescent tubes,
LEDs are also more resistant to
bumps and vibrations and have a
longer service life.
mon EEA market is responsible for ensuring a suitable collection system for handling spent batteries.
• The ERP Directive (Energy Related Prod- ucts), which stipulates that all products with an impact on energy consumption must meet certain criteria relating to functionality and performance, i.e. “ecodesign requirements”.
• The RoHS Directive (Restriction of Hazard- ous Substances), which prohibits the use of certain hazardous substances, such as mercury, cadmium, lead, hexavalent chromium and PBB, in new electrical and electronic products.
• The REACH Directive (Registration, Evalua- tion, Authorisation and Restriction of Chem- icals), whose purpose is to increase knowledge about the chemicals present on the European market and gradually replace the substances with the most serious consequences for health and the environment with safer alternatives.
As a result of this directive, all importers and manufacturers in the EU are required to document and carry out risk assessments of the chemical substances included in their products, as well as to inform customers about how these risks should be managed.
...but also business opportunities This trend is leading not only to stricter requirements but also the emergence of new business opportunities. In the electronics industry, the drivers for product development are often linked to a need to reduce one or more parameters such as price, weight, volume and energy consumption, which can create positive environmental effects when properly utilised. By assisting its customers in evaluation and selection of new products and materials, ElektronikGruppen can help them to reduce their environmental impact. At the same time, there is a growing electronics market for prod- ucts for improving energy efficiency and for alternative energy.
In its own operations, ElektronikGruppen strives to minimise environmental impact through efficient resource utilisation at every stage. In trading activities this mainly involves optimising transports and reducing consump-
tion of packaging materials, etc. As far as is commercially justifiable, ElektronikGruppen strives to use suppliers and transport compa- nies that are environmentally certified.
The Electronics business area has estab- lished environmental targets in three areas:
a) transport of goods, b) transport of personnel, and c) environmentally harmful substances in products. For 2010, several of these targets have been raised and/or more clearly formulated, such as the targets for reducing obsolescence and increasing the use of battery-free acces- sories in its own operations. The amount of travel will be reduced through increased use of videoconferences and similar services. The ambition for 2010 is also to begin measuring the environmental burden caused by carbon dioxide emissions from the business area’s primary transport companies.
The business area’s logistics centre in Hong Kong has been fully operational since March 2009 and is helping to cut both direct trans- port costs and indirect environmental costs for transports to customers in Asia.
Environmental and OHS certifications In 2009 the entire Electronics business area received environmental certification in accord- ance with ISO 14001. Many employees were involved in efforts prior to certification, which resulted in a number of suggestions as to how the business area could become more eco-efficient.
The Products business area is also striving for environmentally-friendly processes and materi- als in its own manufacturing. Manufacturing in Estonia is already certified in accordance with the ISO 14001 environmental management standard and the OHSAS 18001 occupational health and safety standard. The unit in Sri Lanka was awarded both of these certifications in 2009.
Among other things, OHS certification encom-
passes roles, communication and participation,
preventive procedures and protective equipment,
as well as systems for recording incidents and
minimising the effects of workplace accidents.
Electronics business area
ElektronikGruppen has gathered together all of its electronics trading operations to create the Electronics business area. Its offering consists of niche components and systems in a number of select product areas, including microwave and shielding, semiconductors and passive components, TFT displays, industrial PCs and storage media, as well as instruments and fibre optic products. The range also includes electro- mechanical components for use in connector, sensor and switch technology.
The majority of the products have a high technological content and are included in cus- tomer-specific applications that are designed to operate in demanding environments. By offering customer-specific solutions, the business area can compete with global component distribu- tors which often only offer standard products.
The Electronics business area therefore works extensively with design-in projects, where sales staff and product experts support customers in their product development with requirement specifications, prototype development, testing and adaptation of components for customer applications. This places high demands on the employees’ technical expertise and knowledge about customers’ operations. Another important success factor for this business area is the ability
Markets and customers
Through the Electronics business area, ElektronikGruppen is one of the leading distributors on the Nordic electronics market.
In addition to Sweden, Norway, Finland and Denmark, Electronics also operates in Ger- many and has steadily growing operations in Asia, where the business area has been repre- sented since 2007 by a sales office in Shanghai, China. Towards the end of 2009, the business area’s presence in Asia grew with the establish- ment of a sales office in Bangalore, India.
Although the business area has a broad customer base that spans most industrial segments, the key customers include manu- facturers of telecommunications equipment, commercial vehicles, industrial automation and information systems. Contract manufacturers of electronics are another important customer group. Many customers operate globally and have production facilities in several countries.
Joint sales and product organisation A new organisational model for the business area was introduced in September 2009 when the former Components, Display & System, Electromechanics and Networks units were combined in a joint sales organisation under
Products
• Microwave and shielding products
• Semiconductors
• Passive components
• Fiber optic products and
instruments
• Displays
• Industrial PCs
• Storage media
• Connectors and cables
• Level and temperature sensors
• Switches and circuit breakers
Key customer segments
• Telecom
• Commercial vehicles
• Industrial automation
• Information systems
• Contract manufacturers of
electronics
The above photo shows a distri- bution box (M12 CAN-BUS) for distributing sensor signals in a CAN-OPEN system. The product is fully customised and features a unique wiring arrangement. It is a vital component in the customer’s truck cranes.
• Good development in the telecom sector but sharp drops in volume elsewhere
• Adaptations and efficiency enhancements to reduce costs and strengthen positions in prioritised areas
• new organisation with joint sales under a single brand
have, in turn, been grouped into a number of prioritised customer segments, which means that they can devote all energy to “their own”
customers’ unique requirements and offer broader solutions with a higher customer value.
To support the sales staff in their work, there is a joint product organisation staffed by experts with in-depth technical knowledge of the individual products. The business area’s central warehouse and logistics function, with the main warehouse in Stockholm and a logistics centre in Hong Kong, also provides vital support. The logistics centre in Hong Kong is fully integrated with the European operations and handles deliveries to both local customers and European customers with production in Asia.
Competitors
The competitive situation for electronics distributors is highly fragmented and the differences between their ranges are typically greater than the similarities. Players with par- tially similar products on the Nordic market include the global component distributors Arrow Electronics and Avnet, as well as Nordic trading companies such as OEM International and Lagercrantz Group. ElektronikGruppen also competes with certain large manufacturers that sell directly to industrial customers. On the comparatively gigantic Asian market, the competitive situation is even more fragmented and ElektronikGruppen concentrates its efforts there on distinct and narrow niches.
Market development in 2009
Throughout 2009 the Northern European electronics market was impaired by the very weak industrial market that has dominated large parts of the West since the autumn of 2008. For the Electronics business area this has meant a tough year with markedly lower demand in most segments. Meanwhile, the Asian market has shown continued strength.
Based on ElektronikGruppen’s experi- ence, the customer segments that have been less severely affected are telecommunications and medical technology, and to some extent also energy. Within these segments, demand has remained relatively stable. In the telecom
segment, this trend has been further reinforced by market successes for the business area in the form of new or extended agreements in both the Nordic region and China.
In glaring contrast is the trend for commer- cial vehicles, where a sharp drop in customer orders at the end of 2008 was followed by continued volume decreases in the first half of 2009. The trend then levelled out and showed a slight upward curve in the fourth quarter.
Demand in the other customer segments was generally weak, although order intake improved toward the end of the year as a result of rising optimism among the customers.
Financial development in 2009
The business area’s net sales in 2009 fell by 23 per cent to SEK 507 M (657). Order intake dropped by 17 per cent to SEK 506 M (611).
Operating profit/loss was SEK –2.3 M (36.4).
The weak industrial market has affected sales and also had a pronounced negative impact on profit. To offset the volume decrease, the busi- ness area implemented cost-cutting measures in the form of workforce reductions, temporarily reduced working hours, mergers of legal entities and administrative functions, and the re-nego- tiation of some supplier agreements. In total, these measures have given rise to one-time costs of just over SEK 7 M, most of which is attribut- able to workforce reductions. At the same time, the business area has chosen to prioritise a larger workforce and increased market activity in cer- tain segments to strengthen its position among a number of customers conducting development projects with significant future potential.
The US dollar and euro fluctuated consider- ably during the year, which had a visible effect on the business area’s results for the individual quarters. However, the overall effect for the full year was limited, if slightly negative.
Trends and growth areas
The positive trend in order intake since the fourth quarter of 2009 supports the assessment that the European market is showing signs of a revival. There is still great uncertainty, however, about the strength and speed of this recovery. Although optimism has improved
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A fusion splicer is used by network engineers to splice optical fibre. This fusion splicer has a unique user interface that makes it simple to splice indivi- dual fibres with high precision and very little weakening of the signal flow.
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An RF Splitter/Combiner is used in a variety of telecom applications, for example, dealing with high RF outputs in the power amplifier circuits of mobile phone base stations.
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trend is driven by a desire among customers to reduce the number of suppliers, and for the remaining suppliers to be able to take on the role of strategic partner in business development. It is therefore increasingly important for suppliers such as EG Electronics to prioritise among their product and customer segments in order to offer a well adapted range and value-creating services in these selected niches.
The ongoing migration of electronics pro- duction from Western Europe to the low-wage countries of Asia accelerated in 2009 as a result of the weak industrial market. For a number of years the business area has been working to capture the production that is migrated, mainly by the build-up of a global distribution system and global distribution agreements. Asia, and China in particular, are also growing as local sales markets for the business area. Over the past year, several new global distribution agreements have been signed with customers in the Nordic region, while growth in locally generated busi- ness in Asia has also been good.
Strategic focus in 2010
One overall aim for the business area is to continue strengthening its position as a value- creating partner in prioritised customer segments. The new organisation introduced in 2009 supports this objective by providing a higher degree of customer specialisation and improved conditions for reaching out with a broader offering. In 2010 there will be particu- lar emphasis on continued optimisation of the organisational structure in order to exploit its full potential.
Another focus area is to build further on recent years’ successful investments in Asia.
The newly-opened sales office in Bangalore, India, is helping to improve geographical cov- erage and the ambition is to increase cultiva- tion of customers and widen the product range on the Asian market.
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The fanless embedded com- puters offered by the business area are highly resistant to vibrations and shocks and are able to withstand both extreme cold and heat. The computers, which are also very energy efficient, can be configured according to customer spe- cifications and optimised for specific performance criteria.
The computer shown has an extra wide input voltage (8–30V DC) and is ideal for customers in the automotive industry.
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Fuse box with fuses fitted, specially adapted for heavy vehicles such as trucks and construction equipment. This product has been produced in close cooperation between the customer, manufacturer and ElektronikGruppen.
among the business area’s customers, it is clear that great caution is needed. ElektronikGrup- pen is therefore planning for a slow return to more normal levels but remains ready to deal with any setbacks.
Many of the business area’s customers, such as vehicle manufacturers and manufacturers of machinery and advanced instruments, are directly or indirectly dependent on access to financing. As a result, the actions of banks and other players on the credit market will have a significant impact on development of demand in 2010.
In ElektronikGruppen’s opinion, the tele- communications industry is a segment with good potential for positive development, even in a continued weak economy. The leading manufacturers have weathered the downturn relatively successfully so far, and new services and subscription types are continuing to drive ever greater volumes of traffic in the networks, which will create a need for future upgrades.
Furthermore, in large parts of the world there is a continued increase in investments in new infra- structure for telecom and data communication.
Another segment where there is reason for optimism is information systems, where demand is expected to increase for more advanced displays and information panels with related computer solutions. These applications are becoming more attractive, for example, as communication solutions in hotels, hospitals and other public areas, as well as for gaming, entertainment and advertising in shops and department stores.
To strengthen its position and broaden its offering in this market, ElektronikGruppen ini- tiated a joint venture project in 2009 in associa- tion with Smart Media Solutions AB. Through the jointly-owned company Dispio, both parties can offer complete display-based communica- tion solutions that include hardware, software, installation and regular servicing.
A general trend on the electronics market
is that the customers are demanding more
comprehensive solutions rather than individual
components, and that product suppliers are also
able to provide support and design services. This
Products business area
relatively standardised ranges that cater to a wide range of customer groups. These include American firm Pulse Engineering, the Japanese- German partnership TDK/Epcos, and Germa- ny’s Vachuumschmelze. Competition at Nordic level is more fragmented, with players that focus more on specific customer segments. Among the most significant are AQ Gruppen in Sweden, Dantrafo in Denmark, and Trafox in Finland.
Market development in 2009
The weak industrial market in Europe had a pronounced negative impact on the business area’s sales during the year, with particularly weak demand from customers in the power and defence industries. In the fourth quarter the market began to show signs of recovery with a slight increase in the order intake, albeit from low levels.
The economic downturn had less of an impact on the Asian operations. Through the establishments in China and Sri Lanka, the business area can serve European customers that have migrated their production to Asia, while also furthering its ambition to increase sales to local customers in the region. The number of Asian customers has increased in recent years, but the volumes these represent still account for only a small share of the busi- ness area’s total volume.
The Products business area manufactures and sells in-house developed high-performance inductive components, primarily transform- ers and inductors, which are used in AC/DC converters, DC/DC converters and various signal applications, for example. The majority of components are custom-designed for specific applications, but the business area also offers standard components.
Markets and customers
Operations are conducted within the ETAL Group and sales are handled by subsidiaries and branch offices in Sweden, Estonia, the United Kingdom, China and Sri Lanka, and through distribution partners in an additional 20 or so countries. Production takes place at the company’s own facilities in the UK, Estonia and Sri Lanka as well as through contract manufac- turers in Asia. The customers consist primarily of global companies with manufacturing in many parts of the world. The most important customer segment is the telecom industry.
Other significant customer groups include manufacturers of equipment for power trans- mission and the defence industry.
Competitors
At a global level there are a number of major manufacturers of inductive components with
• Lower demand as a result of the weak industrial market
• high costs for adaptations and changes
• Efforts to create a sustainably competitive production structure continuing with full force
Products
• Inductive components
Key customer segments
• Telecom
• Power engineering
• Defence
The majority of products are deve-
loped and manufactured according
to customer-specific requirements,
but the business area also offers
standard components. The image
shows a variety of line transformers,
which are used in data and telecom
applications, among other things.
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A choke assembly, potted in steel case. Used in the oil industry for down-hole appli- cations.
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Planar components are used mainly for power supply appli- cations and are found in devi- ces such as PCB assemblies for mobile base stations. The busi- ness area’s planar components are characterized by a high effi- ciency rate and very compact design, enabling integration of multiple components in a single module, as shown above.
The high efficiency rate saves energy and reduces the need for coolant material, which is positive from an environmental standpoint. The component’s relatively small size also ena- bles more efficient use of the PCB surface.
Financial development in 2009
The business area’s net sales in 2009 amounted to SEK 103 M (126). Adjusted for the acquisi- tion of the operation in Scotland in 2008, the drop in sales was 21 per cent. Order intake amounted to SEK 107 M (121). Operating profit/loss was SEK –42.5 M (–27.2).
The drop in sales is mainly due to lower demand from customers, but to a certain extent can also be attributed to the delivery problems that affected the business area in the first half of the year.
In order to combat the combination of already weak profitability and a significantly deteriorated market situation, a decision was made to launch a large-scale programme to rea- lign the structure and improve capacity utilisa- tion in the business area’s production. Another goal is to gain greater control over production quality by increasing the proportion of in- house production thus reducing dependency on contract manufacturers. The programme was introduced in the second quarter and contin- ued the year out. The implemented measures have included redistribution and downsizing in the European units and the transfer of produc- tion to Sri Lanka, where capacity has instead been expanded. Changes have also been made in the business area’s management team.
The costs of the realignment programme have been charged to profit in an amount of approximately SEK 16 M. Furthermore, a goodwill impairment loss of around SEK 16 M motivated by the current market situation and low profitability in the acquired units was rec- ognised in the first quarter. The business area’s profit for 2009 was thus affected by total items affecting comparability of approximately SEK –32 M (–18).
Trends and growth areas
Since the beginning of the fourth quarter of 2009, demand has increased on most of the business area’s geographical markets, particu- larly from power technology customers. How- ever, this increase started from low levels and the
rate of growth has remained weak so far. Cus- tomer behaviour continues to reflect widespread uncertainty about economic development.
In a longer perspective, however, Elektronik- Gruppen sees many factors that vouch for posi- tive market development. Many of the business area’s customers are leading players in industries with good long-term potential. Furthermore, continuous development in new application areas and technology shifts are stimulating growth in demand for inductive components.
Growth is also being driven by increased environmental awareness and related demands for energy efficiency. One example of this is the increasingly tangible phasing out of traditional linear power supplies in favour of switched devices. Transformers – traditionally a strong range for the business area – are thus becom- ing more important as companies try to reduce energy transfer losses.
Strategic focus in 2010
As earlier, the overall aim is to restore profit- ability in the business area to an acceptable level. In 2009 forceful measures were taken to adapt costs to the weaker market and establish a long-term economically sound organisation and production structure. Good progress has been made in the extensive restructuring proc- ess, which will continue in 2010. Continued adjustments in the mix of in-house and external production will be necessary and productivity in the company’s own facilities will be further improved. An important element in this work is the continued expansion of capacity at the Sri Lanka plant. However, due to the complex nature of this work and the uncertain market situation, it may take some time before concrete effects on earnings are visible.
In its marketing, the business area will prioritise larger projects among existing cus- tomers, as well as a number of new customers with considerable potential. In order to create new business, the business area will increase its activities in growth regions such as China and India.
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Production Technology business area
Market development in 2009
Because the business area’s equipment sales take the form of larger projects, there can be large variations from one quarter to the next. Demand for new production equipment remained low, however, throughout 2009 in all geographical markets except Poland. This is explained by the weak industrial market which dampened the desire of customers to invest in new equipment and contributed to an acceler- ated migration of production. During the year, the latter was particularly pronounced among Finnish electronics manufacturers. In Poland, however, the domestic electronics industry con- tinued the recovery that began in 2008 after a number of years of poor production figures.
The market for laser-cut stencils and other consumable materials remained generally weak throughout the year, as did the market for serv- ices, although there were some positive signs.
Demand for stencils clearly correlates with the development and manufacture of prototypes, with short runs and wide product variation.
Demand for other consumable materials, as well as service and support, is more closely related to volume production and capacity utilisation in the existing machinery. For the business area this meant relatively good demand for materials and services in Sweden, and after a slow start the new stencil operation in Poland was increasingly successful with its offering.
The Production Technology business area sells production equipment, consumable materials, and support and training services to the electronics production industry. Cus- tomers are found in a wide range of industrial segments and include both OEM and contract manufacturers.
Operations are conducted by the compa- nies in the Scanditron Group. Scanditron is one of Northern Europe’s leading distributors of machinery and consumable materials for electronics production. Scanditron also has a market-leading position as a manufacturer and supplier of laser-cut stencils for PCB assembly production.
Through Scanditron the business area has sales offices in Sweden, Denmark, Finland, Estonia and Poland. With the introduction of stencil operations in Poland at the end of 2008 and Estonia in February 2009, stencils are now manufactured in all the countries where the business area operates.
Competitors
The business area competes with other Nordic distributors of production equipment, such as Cyncrona (part of OEM International), Tecono (part of Addtech) and Svenska Kretsteknik, as well as manufacturing companies like Siemens, Assembléon and Panasonic.
• A weak economy with low levels of investment resulted in significantly lower sales
• Adjustments to a persistently weak market for production equipment
• Continued focus on areas with growth potential, such as consumable materials, services and new technologies
Products
• Equipment, process support and
consumable materials
• Laser cut stencils for manufactur-
ing of PCB assemblies
• Support and application services
• Training
Key customer segments
• Telecom
• Commercial vehicle/automotive
• Medical technology
• Defence
• Industrial electronics
• Power engineering
• New technologies
The image shows DEK PV Solar Line, a complete production platform for the manufacture of solar cells. The machine combines screen-printing with systems for inspecting and firing solar cells constructed of silicon wafers or thin photovoltaic film. The Solar Line platform has a production capacity of 1,200 to 3,600 solar cell wafers per hour with a very high printing accuracy (12 u) but is still compact, occupying a small footprint.
Solar cell energy is environmen- tally friendly, the cells last virtually forever and are also becoming cheaper to produce thanks to technological developments and increased production efficiency.
Demand for production equipment
of this type is increasing in pace
with growth in the market for
alternative energy sources.
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Pressure head on a screen prin- ter. With extreme precision, solder paste is printed onto a PCB as a first step in the manu- facture of a PCB assembly.
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Detailed view showing moun- ting of flip chips on the PCB.
With flip chip technology, the microchip is mounted upside- down with the active surface facing the PCB, meaning the chip takes up less space on the PCB. This provides huge benefits if you need to keep the volume and weight of the end product down.
.
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