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Zurich, Switzerland, 13 August 2004 – Tecan today reported second quarter and half-year results for 2004. Following first quarter sales in 2004 of CHF 70.7 million, second quarter sales were CHF 69.6 million for the Tecan Group. Compared with sales of CHF 80.2 million recorded in the second quarter of 2003, this represents a decrease of 13.2% or 11.5% in local currency and was primarily due to the delayed shipment of products. Despite a significantly higher order entry than this time last year, Tecan lowers its guidance to no growth in local currency for 2004. For the first six months of 2004, sales decreased by 6.5% or by 5.3% in local currency to CHF 140.3 million. Operating profit for the first six months reached CHF 12.8 million or 9.1% of sales, compared with CHF 12.7 million or 8.5% of sales in 2003.
Aitor Galdos, Chief Executive Officer of Tecan, commented: “Overall, we registered lower than expected sales for the second quarter of 2004. However, this performance was primarily due to delays in the shipment of some of our products which resulted from efforts needed to ensure regulatory compliance, the transfer of select application activities from Europe to Switzerland and some quality issues from our suppliers. The reduction in sales in the second quarter does not reflect the existing demand for Tecan solutions. Despite lower levels of sales, operating profit for the first six months, as a percentage of sales, increased from 8.5% to 9.1%, reaching CHF 12.8 million. This was largely due to our efforts to control cost and strengthening of the management of our internal operations.”
He added: “I am pleased to confirm that our efforts to strengthen internal operational efficiencies are starting to show real benefits. Our order backlog at the end of the second quarter is now higher than this time last year. Our sales in Diagnostics continue to make a good contribution to Tecan’s business. Despite the higher order entry, we are lowering our guidance for the full year to no growth in local currency due to the unexpected shortfall in sales for the second quarter.”
In the second quarter of 2004, Biopharma (Genomics/Proteomics/Drug Discovery) sales were CHF 36.4 million, which represents a decrease of 23.5% in Swiss francs or 21.6% in local currency. Drug Discovery sales accounted for a significant part of this decrease, declining by 32.8% in Swiss Francs, or 31.6% in local currency, to CHF 18.4 million. This decrease was largely due to continuing low market demand for drug discovery solutions as many pharmaceutical companies remain conservative in making new investments. For Tecan, sales in Genomics/Proteomics declined by 10.8%, or 7.7% in local currency, to CHF 18.0 million. This was mainly the result of delays in the shipment of certain products. The order backlog at the end of the second quarter suggests a better sales performance in this market for the second half of the year. For the first six months of 2004, sales in Genomics/Proteomics increased by 2.0% or 4.9% in local currency.
Sales in Diagnostics continued to register a good performance. With sales of CHF 33.2 million in the second quarter of 2004, Diagnostic sales increased by 17.6% compared with the first quarter of 2004 (CHF 28.2 million) and by 1.9% (3.1% in local currency) compared with the second quarter 2003. Sales in Diagnostics have consistently shown a good performance for the past 7 quarters. Second quarter sales in Diagnostics now represent 48% of overall sales, which is the highest level since the second quarter of 2002 (50.4%). However, this in part reflects the ongoing weakness Tecan is experiencing in Biopharma sales.
Sales of the Genesis FE 500 pre-analytical workstation, Original Equipment Manufacturing components and detection offerings have progressed well. Tecan is on-track in transferring long-term contracts and corporate accounts to the Freedom EVO platform. Freedom EVO sales were not affected by the additional efforts to ensure regulatory compliance which arose due to a software error in Tecan Clinical Workstations. This deficiency was quickly identified and rectified.
Our continuing focus on cost efficiencies has helped offset the effect of very weak sales in the second quarter. Operating profit was only slightly lower at CHF 6.4 million (9.1% of sales) versus CHF 7.5 million (9.3% of sales) in 2003. The financial result for the second quarter was negative (CHF -1.0 million) due to exchange rate effects (2003 financial result: CHF 1.5 million). Accordingly, net profit declined by 38.9% to CHF 3.9 million or 5.6% of sales (2003: CHF 6.4 million or 7.9% of sales). Earnings per share declined by 35.2% to CHF 0.35 during the second quarter (2003: CHF 0.54).
For the first six months of 2004, operating profit reached CHF 12.8 million, which represents 9.1% of sales, and was slightly higher than the CHF 12.7 million recorded last year (8.5% of sales). Subsequently, earnings per share in the first six months of 2004 increased by 1.2% to CHF 0.83 (2003: CHF 0.82) despite the lower recorded sales. This was due primarily to effective cost control measures and the strengthening of internal operations.
Tecan’s order entry during the second quarter of 2004 was significantly higher than the average orders received over the last two years, which should result in stronger sales in local currency in the second half of 2004 versus 2003. Due to the unexpected shortfall in sales in the second quarter and despite the high order entry, Tecan is lowering its guidance for the full year to no growth in local currency compared with the previous year. Tecan maintains its previous guidance of an operating profit margin of at least 11% of sales for the full year 2004.
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