3rd Quarter Results
JSC Sitronics
JSC SITRONICS UNAUDITED FINANCIAL RESULTS FOR THE THIRD QUARTER AND
FIRST NINE MONTHS OF 2009
MOSCOW, Russia – December 3, 2009 – JSC SITRONICS (‘SITRONICS’ or
‘the Group’) (LSE:SITR), a leading provider of telecommunications,
information technology and microelectronic solutions in Russia and the
CIS, with a growing presence in other EEMEA emerging markets, today
announces its unaudited consolidated US GAAP financial results for the
third quarter and nine months ended September 30, 2009.
THIRD QUARTER HIGHLIGHTS
-
Consolidated revenues of US$ 221.4 million
-
Telecommunication Solutions revenues of US$ 124.6 million; Information
Technologies revenues of US$ 35.0 million; and Microelectronics
revenues of US$ 57.3 million
-
OIBDA1 profit of US$ 11.6 million
-
Net loss attributable to SITRONICS of US$ 14.8 million
-
Total assets of US$ 1.7 billion
NINE MONTHS HIGHLIGHTS
-
Consolidated revenues of US$ 625.4 million
-
Telecommunication Solutions revenues of US$ 370.7 million; Information
Technologies revenues of US$ 100.6 million; and Microelectronics
revenues of US$ 143.3 million
-
OIBDA profit of US$ 25.7 million
-
Net loss attributable to SITRONICS of US$ 81.7 million including US$
26.2 million loss from discontinued operations
-
US$ 590 million of new contracts secured since the beginning of 2009
Sergey Aslanian, President of SITRONICS, commented: “We continued to
out-perform the market in the third quarter and have now won US$ 590
million of new contracts since the beginning of the year. We have
further strengthened our close working relationship with the Russian
Government at both national and regional level, as is clear from the
agreement that we have just signed with RUSNANO to develop and launch
full-scale 90 nanometre microchip production at our plant in Zelenograd.
We have also developed our presence across a range of industrial sectors
in the Russian and international markets with both existing and new
customers.”
“The measures that we have taken over the past eighteen months to
optimise our cost base and investment plans have enabled us to deliver
an OIBDA margin of 5.2% in the third quarter and of 4.1% for the year to
date. Furthermore, we have also continued to restructure our debt by
renegotiating or replacing short term liabilities with longer term
facilities on competitive terms and conditions, including the signing of
a US$ 230 million two year loan agreement with the Bank of Moscow this
week.”
“We are now well into the seasonally strongest sales quarter of the year
and are continuing to outperform the market. As expected, we will
therefore deliver an OIBDA profit for the full year.”
FINANCIAL SUMMARY
|
(US$ millions)
|
|
Q3 2009
|
|
Q3 2008
|
|
9M 2009
|
|
9M 2008
|
|
|
Revenues
|
|
221.4
|
|
279.6
|
|
625.4
|
|
905.2
|
|
|
OIBDA
|
|
11.6
|
|
15.5
|
|
25.7
|
|
45.9
|
|
|
Net loss from continuing operations
|
|
(14.8)
|
|
(32.0)
|
|
(57.1)
|
|
(59.9)
|
|
|
Net income / (loss) from discontinued operations
|
|
-
|
|
6.4
|
|
(26.2)
|
|
20.7
|
|
|
Net loss attributable to SITRONICS
|
|
(14.8)
|
|
(25.9)
|
|
(81.7)
|
|
(46.1)
|
|
|
Total assets
|
|
1,736.9
|
|
2,229.8
|
|
1,736.9
|
|
2,229.8
|
|
OPERATING REVIEW
Group Overview
The Group’s consolidated revenues decreased by 4.9% year on year at
constant exchange rates in the third quarter, and by 14.2% in the first
nine months of the year, which reflected a continuing outperformance in
the adverse economic environment. The reported year on year decline also
reflected the significant weakening of the Group’s operating currencies
against its US dollar reporting currency. The Group has now won US$ 590
million of new contracts since the beginning of 2009.
Operating expenses, when excluding depreciation and amortization costs,
were reduced by 31.9% year on year to US$ 43.4 million in the third
quarter, and by 24.3% to US$ 141.7 million for the year to date. The
reduction reflected the cost saving measures implemented during the
second half of 2008 and first nine months of 2009. Selling, general and
administrative expenses, net of stock option expenses and bad debt
provisions, were reduced by 33.7% year on year in the quarter and by
29.1% for the year to date.
The Group consequently reported an OIBDA profit of US$ 11.6 million in
the third quarter, and a US$ 25.7 million profit for the nine month
period, compared to profits of US$ 15.5 million and US$ 45.9 million for
the respective periods of 2008. Group OIBDA margins of 5.2% in the third
quarter and 4.1% for the year to date, compared to margins of 5.6% and
5.1% for the comparable periods of 2008.
Group depreciation and amortization charges were lower year on year at
US$ 14.7 million in the third quarter and US$ 40.1 million for the year
to date, compared to US$ 16.0 million and US$ 49.7 million for the
corresponding periods of 2008.
The Group’s net interest expenses decreased year on year to US$ 12.0
million from US$ 12.7 million in the quarter, but were up to US$ 36.2
million from US$ 27.1 million for the year to date. This reflected the
changes in the Group’s cash balances and borrowing levels, as well as
currency exchange rate movements.
The Group reported a foreign exchange gain of US$ 1.7 million in the
quarter and a loss of US$ 3.4 million for the year to date, which was
mostly due to the difference in value of the Group’s US dollar
denominated borrowings between the balance sheet dates. This compared to
losses of US$ 16.3 million and US$ 12.8 million for the corresponding
periods of 2008.
The Group’s net losses from continuing operations were reduced by 53.8%
year on year to US$ 14.8 million in the third quarter and by 4.7% to US$
57.1 million for the year to date. The Group’s results also included a
net loss from discontinued operations of US$ 26.2 million for the year
to date, compared to a profit of US$ 20.7 million for the corresponding
period of 2008. This included the US$ 25.8 million net loss arising from
the difference between the book value of the distribution businesses
sold in April 2009 and the sale price, as well as the losses from the
operations for both periods.
The Group therefore reported a reduced net loss attributable to
SITRONICS shareholders of US$ 14.8 million in the third quarter but an
increased net loss of US$ 81.7 million for the nine month period.
Segmental Review
SITRONICS Telecommunication Solutions
|
(US$ millions)
|
|
Q3 2009
|
|
Q3 2008
|
|
9M 2009
|
|
9M 2008
|
|
|
Revenues
|
|
124.6
|
|
154.2
|
|
370.7
|
|
503.5
|
|
|
OIBDA
|
|
4.4
|
|
12.1
|
|
8.0
|
|
26.2
|
|
|
Net loss attributable to SITRONICS
|
|
(11.5)
|
|
(15.8)
|
|
(33.9)
|
|
(43.1)
|
|
|
Total Assets
|
|
896.6
|
|
1,019.0
|
|
896.6
|
|
1,019.0
|
|
Revenues were down 11.2% year on year and 14.8% for the year to date at
constant exchange rates, and the segment accounted for 56.3% and 59.3%
of Group revenues for the two respective periods.
The year on year decline in sales could not be fully compensated for by
costs savings so segment OIBDA was down year on year but still positive
for both periods.
The segment businesses have now secured US$ 393 million of new contracts
since the beginning of 2009.
SITRONICS continued to implement its FORIS billing solution for a number
of Russian and international clients during the quarter. Following the
successful transition of MTS Ukraine billing to the solution by July,
SITRONICS is about to complete the first stage of a similar project for
MTS India. SITRONICS’ FORIS solution is currently used by leading
telecommunication companies in Russia and the CIS, the Czech Republic,
Serbia, Congo and Uganda to bill over 100 million customers.
INTRACOM TELECOM signed two contracts with Telecom SERBIJA, the
incumbent telecommunications carrier in Serbia, in September and
October. The contracts to supply integrated access devices for high
speed ADSL providers and set-top boxes for IPTV services, have a total
combined value of US$ 8.8 million and are expected to be completed by
the end of 2009.
SITRONICS Telecom Solutions signed a US$ 3.8 million contract after the
end of the quarter with Warid Telecom Uganda, which is one of the
leading mobile telephony operators in Africa, to provide technical
support over a three year period.
INTRACOM TELECOM has also just signed a framework agreement with
Etisalat, which is a leading UAE-based mobile telephony operator, to
supply point-to-point (INTRALINK) and point-to-multipoint (WiBAS) radio
equipment.
SITRONICS Information Technologies
|
(US$ millions)
|
|
Q3 2009
|
|
Q3 2008
|
|
9M 2009
|
|
9M 2008
|
|
|
Revenues
|
|
35.0
|
|
54.7
|
|
100.6
|
|
141.7
|
|
|
OIBDA
|
|
1.5
|
|
2.0
|
|
10.5
|
|
(1.8)
|
|
|
Net income / (loss) from continuing operations
|
|
(2.3)
|
|
1.3
|
|
3.6
|
|
(3.5)
|
|
|
Net income / (loss) from discontinued operations
|
|
-
|
|
6.4
|
|
(26.2)
|
|
20.7
|
|
|
Net income / (loss) attributable to SITRONICS
|
|
(2.3)
|
|
7.7
|
|
(22.6)
|
|
17.2
|
|
|
Total assets
|
|
247.8
|
|
514.1
|
|
247.8
|
|
514.1
|
|
Revenues were down 9.3% year on year and stable for the year to date at
constant exchange rates. The segment accounted for 15.8% and 16.1% of
Group revenues for the two respective periods.
Segment OIBDA was however largely stable year on year in the quarter and
showed a substantial improvement for the year to date, due to the
enhanced operating efficiency levels and the year on year reduction in
operating expenses.
US$ 136 million of new contracts have now been secured since the
beginning of 2009.
SITRONICS completed the creation of an IT infrastructure for the billing
platform of FRESHTEL, which is Ukraine’s first 4G mobile telephony
provider, in July.
SITRONICS also completed the implementation of a trial wireless
broadband network for Comstar-Ukraine in the cities of Kiev and Odessa
in September.
SITRONICS commenced the third phase of the construction of a wireless
broadband network for MTS Ukraine at the end of the quarter. The network
is being developed using third generation CDMA technology.
A US$ 5.17 million contract was signed with MTS in September to supply
CISCO equipment and provide technical support.
SITRONICS signed a US$ 2.2 million three year agreement in October to
supply software support to the Bashneft power generation and
distribution companies.
SITRONICS has also confirmed its position as the leading provider of
international vendor solutions in the Russian market. SITRONICS
completed the installation of the Oracle Retail information system in
over 120 Detsky Mir regional retail stores and offices in October. The
project is the largest ever Oracle Retail implementation in Russia and
will enable Detsky Mir, which is the leading retailer of children’s
goods in Russia and the CIS, to manage a range of over 50 thousand trade
names and brands and to support network functionality across all regions
and time zones
SITRONICS also signed an agreement in Sochi (host city for the 2014
Olympic Games) in September with the Krasnodar Regional Administration
in Sochi to cooperate on the development and installation of information
and communication systems in the education, transport and other fields.
STRONICS Microelectronics
|
(US$ millions)
|
|
Q3 2009
|
|
Q3 2008
|
|
9M 2009
|
|
9M 2008
|
|
|
Revenues
|
|
57.3
|
|
61.2
|
|
143.3
|
|
222.1
|
|
|
OIBDA
|
|
13.2
|
|
10.7
|
|
29.6
|
|
44.3
|
|
|
Net income / (loss) attributable to SITRONICS
|
|
4.2
|
|
3.2
|
|
(1.6)
|
|
18.5
|
|
|
Total Assets
|
|
565.1
|
|
603.2
|
|
565.1
|
|
603.2
|
|
Revenues were up 20.5% year on year and down 13.9% for the year to date
at constant exchange rates. The business segment accounted for 25.9% and
22.9% of Group revenues for the two respective periods.
The year on year increase in OIBDA margins to 23.0% in the quarter and
20.6% for the year to date reflected the completion of a higher
proportion of high margin contracts in the third quarter in particular.
US$ 61 million of new contracts have been secured since the beginning of
2009.
SITRONICS won a three year contract with Sberbank, which is the largest
bank in Russia, in September to supply the issuer with VISA and
MasterCard chip banking cards. This followed the agreement with VTB24
Bank in July to provide the retail bank with magnetic strip cards.
SITRONICS signed a one year contract with Megafon, which is the third
largest mobile telephony operator in Russia, in September to supply SIM
cards. Further SIM card supply contracts were signed during the quarter
with MTS in Russia, Ukraine and Uzbekistan.
SITRONICS signed an agreement with the Russian Corporation of
Nanotechnologies (RUSNANO) in October to develop and launch full-scale
90 nanometer microchip production at SITRONICS’ existing facility in
Zelenograd. RUSNANO has committed to invest RUR 6.5 billion in the
project.
SITRONICS also won a tender in November to supply 1.2 million RFID swipe
cards for all types of overground public transportation in St.
Petersburg.
FINANCIAL POSITION
The Group’s total borrowings were reduced to US$ 753.8 million at as at
September 30, 2009, compared to US$ 809.9 million at June 30, 2009.
SITRONICS’ weighted average cost of borrowing was approximately 8.6% as
at September 30, 2009, compared to 9.0% as at June 30, 2009. The Group’s
cash and cash equivalents declined to US$ 42.0 million at the end of the
period, compared to US$ 174.9 million as at June 30, 2009. The Group’s
net debt therefore amounted to US$ 711.7 million at the end of the
period, compared to US$ 635.0 million at the end of the second quarter.
SITRONICS had repaid, refinanced or rescheduled over US$ 300 million of
loans between the beginning of the year and the end of the third
quarter. In addition, the Group signed a new US$ 230 million two-year
loan agreement with the Bank of Moscow group of companies at the end of
November 2009. The Bank of Moscow is one of Russia’s five largest banks
and the new credit facility will be used to refinance the financing
provided by Russia’s “Bank for Development and Foreign Economic Affairs”
(Vnesheconombank) in November 2008. The Group has also repaid US$ 15
million of loans from HSBC since the end of the third quarter.
OTHER INFORMATION
Conference call
SITRONICS management will host a conference call today at 4.00 PM Moscow
local time, 1.00 PM London local time and 8.00 AM New York local time to
present and discuss these results. Participants may dial the following
numbers in order to access the call:
UK / International: +44 20 8515 2302
US: +1 480 629 9771US: +1 480 629 9771
A replay facility will also be made available for 7 days after the call
and may be accessed by dialing the following numbers and using the
following pin code:
UK / International: +44 20 7154 2833
US: +1 303 590 3030US: +1 303 590 3030
PIN
CODE: 4186207#
PIN
CODE: 4186207#
For further information, please visit www.sitronics.com
or contact:
SITRONICS is a leading provider of telecommunication solutions,
including software, equipment and systems integration, IT solutions and
microelectronic solutions in Russia and the Commonwealth of Independent
States with a strong presence in Central and Eastern Europe and a
growing presence in the Middle East and Africa.
SITRONICS serves over 3,500 clients, maintains offices in 32 countries
and exports its products and services to more than 60 countries.
SITRONICS’ key Telecommunication Solutions operations are based in
Prague, Czech Republic and Athens, Greece, while the company’s IT
Solutions and Microelectronics divisions are based in Kiev, Ukraine and
Zelenograd, Russia respectively.
SITRONICS generated revenues of US$ 625.4 million for the nine months
ended September 30, 2009 and had total assets of US$ 1,736.9 million
at the end of the period. SITRONICS is majority owned by Sistema, the
largest public diversified corporation in Russia and the CIS, which
manages fast growing companies operating in the consumer services sector.
Some of the information in this press release may contain projections
or other forward-looking statements regarding future events or the
future financial performance of SITRONICS. You can identify
forward-looking statements by terms such as "expect," "believe,"
"anticipate," "estimate," "intend," "will," "could," "may" or "might"
the negative of such terms or other expressions. These statements are
only predictions and actual events or results may differ materially. We
do not intend to or undertake any obligation to update these statements
to reflect events and circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events. Many factors could
cause the actual results to differ materially from those contained in
our projections or forward-looking statements, including, among others,
general economic conditions, our competitive environment, risks
associated with operating in Russia, rapid technological and market
change in our industries, and other factors specifically related to
SITRONICS and its operations.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THIRD QUARTER OF 2009
(UNAUDITED) AND THE THIRD QUARTER OF 2008 (UNAUDITED)
(Amounts
in thousands of U.S. dollars or if otherwise stated)
|
|
|
3 months ended 30/09/09
|
|
3 months ended 30/09/08
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
221,367
|
|
279,559
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
(166,341)
|
|
(200,240)
|
|
|
Research and development expenses
|
|
(4,087)
|
|
(8,157)
|
|
|
Selling, general and administrative expenses
|
|
(39,081)
|
|
(55,087)
|
|
|
Depreciation and amortization
|
|
(14,690)
|
|
(15,951)
|
|
|
Other operating expenses, net
|
|
(245)
|
|
(541)
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
(3,077)
|
|
(417)
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
2,934
|
|
890
|
|
|
Interest expense
|
|
(14,909)
|
|
(13,639)
|
|
|
Foreign currency transaction gains/(losses), net
|
|
1,677
|
|
(16,304)
|
|
|
Other non-operating losses
|
|
(30)
|
|
-
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income tax
|
|
(13,405)
|
|
(29,470)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
(1,372)
|
|
(2,505)
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
(14,777)
|
|
(31,975)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
-
|
|
6,431
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(14,777)
|
|
(25,544)
|
|
|
|
|
|
|
|
|
|
Less: net income attributable to non-controlling interests
|
|
(59)
|
|
(404)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO SITRONICS
|
|
(14,836)
|
|
(25,948)
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND SEPTEMBER 30,
2008 (UNAUDITED)
(Amounts in thousands of U.S. dollars
unless otherwise stated)
|
|
|
9 months ended 30/09/09
|
|
9 months ended 30/09/08
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
625,410
|
|
905,188
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
(457,994)
|
|
(672,040)
|
|
|
Research and development expenses
|
|
(15,330)
|
|
(29,301)
|
|
|
Selling, general and administrative expenses
|
|
(127,111)
|
|
(163,216)
|
|
|
Depreciation and amortization
|
|
(40,091)
|
|
(49,716)
|
|
|
Other operating income, net
|
|
755
|
|
5,258
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
(14,361)
|
|
(3,827)
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
8,435
|
|
3,289
|
|
|
Interest expense
|
|
(44,677)
|
|
(30,366)
|
|
|
Foreign currency transaction losses, net
|
|
(3,378)
|
|
(12,798)
|
|
|
Other non-operating losses
|
|
(725)
|
|
-
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income tax
|
|
(54,706)
|
|
(43,702)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
(2,406)
|
|
(16,228)
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
(57,112)
|
|
(59,930)
|
|
|
|
|
|
|
|
|
|
(Loss)/ Income from discontinued operations
|
|
(26,154)
|
|
20,686
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(83,266)
|
|
(39,244)
|
|
|
|
|
|
|
|
|
|
Less: net loss / (income) attributable to non-controlling interests
|
|
1,520
|
|
(6,876)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO SITRONICS*
|
|
(81,746)
|
|
(46,120)
|
|
|
|
|
|
|
|
|
|
Translation adjustment, net of non-controlling interest of $ 3,442
and $(3,022), respectively, and income tax effect of nil
|
|
(1,538)
|
|
(4,342)
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
(83,284)
|
|
(50,462)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding (basic and
diluted)
|
|
8,818,863,734
|
|
8,619,347,116
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share ( US dollars)
|
|
(0.009)
|
|
(0.006)
|
|
|
|
|
|
|
|
|
*Net income (Noncontrolling interests)
Until December 31, 2008, Sitronics reported net income attributable to
noncontrolling interest as a deduction in arriving at consolidated net
income. With effect from January 1, 2009, Sitronics has adopted the new
mandatory provisions FASB Statement No. 160 (As Amended) “Noncontrolling
Interests in Consolidated Financial Statements”, which requires that
consolidated net income be reported to include the amounts attributable
both to the parent and to the noncontrolling interest. Sitronics has
therefore reported net income before the amounts attributable to the
noncontrolling shareholders of its subsidiaries, and the latter amounts
(previously referred to as “minority interests”) are separately
disclosed. All comparative financial information has been restated in
accordance with this new policy.
Attachment A
Non-GAAP financial measures. This press release includes
financial information prepared in accordance with accounting principles
generally accepted in the United States of America, or US GAAP, as well
as other financial measures referred to as non-GAAP. The non-GAAP
financial measures should be considered in addition to, but not as a
substitute for, the information prepared in accordance with US GAAP.
Operating Income Before Depreciation and Amortization (OIBDA) and
OIBDA margin. OIBDA represents operating income before depreciation
and amortization. OIBDA margin is defined as OIBDA as a percentage of
our net revenues. Our OIBDA may not be similar to OIBDA measures of
other companies; is not a measurement under accounting principles
generally accepted in the United States and should be considered in
addition to, but not as a substitute for, the information contained in
our consolidated statement of operations. While depreciation and
amortization are considered operating costs under generally accepted
accounting principles, these expenses primarily represent the non-cash
current period allocation of costs associated with long-lived assets
acquired or constructed in prior periods. OIBDA can be reconciled to our
consolidated statements of operations as follows:
|
(US$ 000’s)
|
|
Q3 2009
|
|
Q3 2008
|
|
9M 2009
|
|
9M 2008
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
(3,077)
|
|
(417)
|
|
(14,361)
|
|
(3,827)
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
14,690
|
|
15,951
|
|
40,091
|
|
49,716
|
|
|
|
|
|
|
|
|
|
|
|
OIBDA
|
|
11,613
|
|
15,534
|
|
25,730
|
|
45,889
|
1 OIBDA is defined as operating income before depreciation
and amortization. Please see Attachment A to this statement for further
information.
