Kudelski profits plunge

Despite increased sales, company boss André Kudelski had to announce a loss for the first half of the year swissinfo.ch

The Swiss digital broadcast technology group, Kudelski, posted a net loss of SFr17.9 million ($11.9 million) for the first half of 2002.

The company blamed its poor results on the strong franc, saying “it had a significant impact on operations results.”

The Lausanne-based company, which turned a profit of SFr21.8 million a year ago, had issued a profit warning in August.

Kudelski, a leader in its field, saw revenues increase by 4.5 per cent to SFr167.7 million, due mainly to increased sales in Asia.

“The first six months of 2002 were marked by much lower revenues from digital television operators in Europe in general,” the company said in a statement.

But rising costs in the digital television sector and higher integration costs pushed margins down.

The company forecast that full year 2002 results would fall below last year’s, saying it expected a net profit of SFr5-25 million.

“The result was as bad as expected. This is a big minus for the shares,” said Claude Zender, analyst at Zurich Cantonal Bank.

In an interview with swissinfo, director André Kudelski insisted that the firm remained on a sound footing, during what he described as “difficult times”.

However, he warned that the group, which employs around 1,200 staff, might still have to make sacrifices.

“We cannot exclude job cuts. We might also be forced to sell off parts of the company,” he said.

Sharp deterioration

“At the end of August 2002, the sharp deterioration in the short-term order book in the digital TV sector will have a disproportionately negative effect on the year 2002,” the statement said.

Kudelski slashed its profits and sales outlook last month due to deferred client orders for smart cards and televisions access systems.

Problems at a key chip-supplier meant that smart cards would not be ready before 2003.

“Inventories will build up and the firm’s whole future is uncertain,” added Zender. “The question is are these orders going to come next year or are they cancelled.”

Although last month’s profit warning was expected, the size of it took markets by surprise, driving down the company’s stock price by almost 50 per cent.

Analysts say the profit warning has damaged the credibility of André Kudelski, son of the founder and majority owner.

He has maintained an upbeat outlook but analysts are questioning why Kudelski stuck to his previous forecast for so long.

Kudelski, which originally made a name for itself by producing high-quality magnetic tape recorders for radio journalists and the film industry, had seen its stock recover in recent weeks but is now trading at a four-year low.

swissinfo with agencies

Key facts

Kudelski, headquartered in Lausanne, employs around 1,100 worldwide.
The company has offices in Asia, Europe and the United States.
Founded in 1951 as a producer of recording equipment.