Weak 1st half of 2002 – New orders outpace sales

Continuing crisis in the semiconductor industry in the United States

The sustained weakness of the global economy is also reflected in the numbers announced by Pfeiffer Vacuum: The sharpest decline in sales was in the United States, falling by 28.0 % from € 25.8 million in the 1st half of 2001 to € 18.5 million in the 1st half of 2002. The continuing crisis in the semiconductor industry is playing a key role in Pfeiffer Vacuum’s weak sales in this region, where the company supplies high-vacuum pumps and vacuum gauges to tool manufacturers for the production of wafers. Given consumer buying hesitancy and high inventories at the semiconductor manufacturers, there is not yet any indication of a sustained upswing.

Order wins in Germany to supply turbomolecular pumps

Year-on-year, there was less of a decline in sales in the other key markets: Germany went from € 24.3 to € 19.7 million = - 18.9 %, the rest of Europe from € 29.4 to € 24.5 million = -16.5 %. In Germany and many European countries, it was possible to win a number of orders to supply turbomolecular pumps for the production of architectural glazing in the face of stiff competition. Sales in Asia and the rest of the world developed on a positive note, rising by 2.7 % from € 10.5 million to € 10.7 million during the period under review.

Manufacturing costs were again able to be kept at a low level during the 1st half of 2002. This produced a gross margin of 45.1 % (1st half of 2001: 45.0 %). Lower sales, which were reflected in a relatively higher ratio of selling, general and administrative expenses, as well as increased development activities, resulted in an operating profit of € 8.7 million, as opposed to € 16.4 million in the 1st half of 2001. In particular, the expenses involved in establishing the sales and marketing organization as well as the development costs for the new DVD Division (metalizers and complete systems for producing prerecorded and rewritable DVDs) impacted operating profit, as this division – as planned – is not yet generating any significant sales.

Positive change in the trend of the level of new orders

After-tax income totals € 5.6 million. This represents a net return on sales of 7.6 % – an exceptionally high level for a German industrial enterprise, especially in view of the present economic situation. The level of new orders suggests a positive change in the trend: For the first time since Q 1/ 2001, new orders rose year-on-year. While new orders had reached a low of € 35.4 million in the 1st quarter of 2002, they went on to rise by 11.3 % to € 39.4 million in the 2nd quarter of 2002. For the first time, new orders in the 2nd quarter of 2002, totaling € 39.4 million, were higher than sales (€ 36.5 million). This results in a positive ratio between new orders and sales, i.e. the book-to-bill ratio is greater than 1.

The products from Pfeiffer Vacuum met with strong interest at Semicon West, the world’s premiere semiconductor tradeshow that was held in San Francisco in late July. Promising talks were conducted with all key accounts. However the industry does not anticipate an upswing to set in until 2003, although the recovery will then be strong.

Chief Executive Officer Wolfgang Dondorf had this to say about the economic outlook: “We can’t be satisfied with the fiscal year thus far. With only few exceptions, economic development is stagnating in all regions. There are still no signs of a turnaround. In spite of new products and heightened selling activities, we are still caught up in the difficult economic situation. Consequently, it is not likely that we will be able to achieve our goal of around 12 % growth this year. Sales are expected to fluctuate ± 5 % around the previous year’s level. The return on sales for the entire fiscal year will be higher than the semiannual figure. The company is healthy, and with its products and its people it is ready for the coming recovery.

Entering the DVD-growth market succeeded

In July 2002, we were able to sell a first DVD system to an established DVD manufacturer in Germany. This means that Pfeiffer Vacuum has now succeeded in entering this growth market. We anticipate that the opportunity of being able to see this reference system in action under real-life production conditions will have a positive impact on our ongoing sales negotiations with further customers inside and outside Germany.