Elcoteq Launches Intensive Restructuring Plan

The Board of Directors of Elcoteq SE has decided to launch an intense restructuring plan during the first quarter to prepare the company for the exceptionally uncertain market situation and general economic development in 2009. The company said this plan is the next step in the company's drive to increase profitability, cost efficiency and operational excellence. The restructuring plan does not imply changes in the company's strategy; it merely consists of preparatory measures to adjust to the anticipated changes in the market conditions and to secure profitability in 2009 and beyond, the company added.

The plan contains several elements. The first measure is to close the plants in Arad (Romania), Richardson (USA) and S. Petersburg (Russia) as well as to consolidate the plant in Shenzhen (China) to the plant in Beijing (China). Secondly, Elcoteq has started the process of reducing personnel at several plants globally. It is anticipated that these measures together will result in personnel cuts of approximately 5,000. Elcoteq currently employs approximately 21,000 persons worldwide. Thirdly, the plan consists of several other cost savings measures, including selling machinery and equipment, terminating facility and machinery lease agreements as well as cutting external services. Even with these measures, Elcoteq said it will maintain its global footprint and continue manufacturing operations for its customers in Mexico, Brazil, Estonia, Hungary, China and India.

The plan targets annual savings in the range of 80 - 100 million euros. The savings will start having a positive effect gradually from the second quarter of 2009 onwards and will significantly improve Elcoteq's full year profitability, the company said. The total one-time costs related to the restructuring plan are approximately 24 million euros. The company estimates that 15 million euros will be booked in December 2008, and the rest during the first quarter of 2009. The estimated total cash effect is 10 million euros.

"When the market situation is as tight as it is at the moment, many companies start outsourcing more. The hard decisions we are making now will prepare us to be cost-competitive and ready to grasp these new business opportunities," says Jouni Hartikainen, President and CEO of Elcoteq.

www.elcoteq.com