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Zurich, Switzerland, 6 May 2003 - Tecan, a leading player in the Life Science supply industry, today reported first quarter sales of CHF 69.9 million, compared with CHF 86.7 million in the same period of 2002. This represents a decrease of 19.4% or 10% in local currencies. Operating profit amounted to CHF 5.2 million or 7.5% of sales (2002: CHF 13.5 million or 15.6%). Net profit for the first quarter reached CHF 3.5 million or 5.0% of sales (2002: CHF 9.9 million or 11.4%).
Emile Sutcliffe, Chief Executive Officer of Tecan, commented: "Lower spending in the Life Science markets and unfavorable currency effects are still significantly affecting overall sales and profit. The fall of the Dollar versus the Swiss Franc reduced our sales by about 10% and lowered our operating profit by CHF 3.6 million or the equivalent of more than 40% of our operating profit decrease. Since unpredictable spending patterns amongst our clients in all markets persist, and despite a noticeable increase in our order book entry, we remain cautious in our immediate outlook for all business areas."
Sales in Genomics/Proteomics amounted to CHF 18.4 million in the first quarter 2003, a decrease of 5.1%, but an increase of 10.0% in local currencies (2002: CHF 19.4 million). Drug Discovery sales reached CHF 23.5 million, a decrease of 17.9% or 5.7% in local currencies (2002: CHF 28.7 million). Compared with the fourth quarter 2002 (CHF 35.5 million), this represents a decrease of 33.6% which is largely attributable to the continued slowdown in the Life Science market and reflects the uncertain spending patterns of pharmaceutical and biotechnology companies.
Sales in Diagnostics decreased by 27.8% or 22.3% in local currencies to CHF 27.9 million (2002: CHF 38.7 million). This decrease reflects a high base effect in 2002 as well as the continued lower spending pattern in this market, especially for corporate accounts. First quarter 2003 Diagnostic sales were in line with sales recorded in the third and fourth quarter 2002 in this business area (CHF 29.9 million and CHF 29.2 million, respectively).
The change in revenue recognition, implemented on January 1, 2003 to recognize sales based on acceptance rather than on delivery, had a negative impact on company´s first quarter sales level, especially in Drug Discovery, representing an estimated CHF 6 million. A significant number of solutions, were pending installation and, therefore, are not recorded as sales in the first quarter 2003, unlike last year.
The fall of the US dollar versus the Swiss Franc had a significant impact on Tecan´s sales in the United States. Half of the 30.2% decrease in sales was attributable to negative currency fluctuations. Sales in the United States reached CHF 30.1 million (2002: CHF 43.0 million). In contrast, sales in Europe declined by 6.4% or 4.0% in local currencies to CHF 31.6 million (2002: CHF 33.7 million). Sales in Asia reached CHF 7.5 million (2002: CHF 8.1 million), a decrease of 7.7% or 1.4% in local currencies. Sales in Tecan´s remaining markets (rest of the world) declined by 58.2% from CHF 1.8 million to CHF 0.8 million.
Tecan´s gross margin remained stable at a high level of 68.8% (2002: 69.3%) indicating that Tecan was able to maintain the price level for its products. Tecan´s gross profit margin reached 52.4% of sales in 2003 (2002: 55.8%), reflecting the impact of negative currency fluctuations (representing 2.1% of sales) as well as an unfavorable combination of geographical and product sales.
The implementation of Tecan´s cost reduction program continued to have a positive impact. During the first quarter of 2003, selling and marketing expenses as well as general administration costs declined by 18.3% and 23.6%, respectively. During the same period, R&D expenditure increased by 14.9% to CHF 10.0 million, representing 14.3% of sales. For the full year 2003, Tecan R&D expenditure will remain within the long term objective of 10 to 12% of sales.
Taking also into account a 14.1% increase in the amortization of intangible assets, operating profit decreased by 61.3% to CHF 5.2 million or 7.5% of sales (2002: CHF 13.5 million or 15.6% of sales). The depreciation of the US Dollar versus the Swiss Franc had an impact of CHF 3.6 million on Tecan´s operating profit, representing 5.1% of sales.
The income tax rate for the first quarter 2003 was reduced to 25.0% (2002: 29.0%). Net profit for the first quarter reached CHF 3.5 million or 5.0% of sales (2002: CHF 9.9 million or 11.4% of sales). Diluted earnings per shares amounted to CHF 0.28 (2002: CHF 0.77).
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