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NKT Integration to CloseNKT Integration to Close

Holding company to shut down loss-making optical components division, affecting 60 staff

November 13, 2004

3 Min Read
NKT Integration to Close

COPENHAGEN -- Against the background of the continuing very unfavourable market conditions for optical telecom components it has today been decided to cease operations in NKT Integration. The winding up will lead to one-off expenses of around 20 mDKK. The decision will result in a significant improvement of the Group's income. The Group's tax asset will be revalued by around 50 mDKK. Forecasted net profit for 2004 has been revised upwards to around 225 mDKK.

As mentioned in NKT's Quarterly Report 2/2004, the market conditions for suppliers of optical components and systems to the global telecommunications sector are extremely difficult. We have during recent months evaluated the strategic situation regarding NKT Integration. Among other things, this has led to a concentration of NKT Integration on the most active market segments, i.e. the metro and FTTH (Fiber-To-The-Home) markets. Furthermore, the possibilities of selling or integrating NKT Integration with other players in the industry have been explored. However, this has failed to open the way to acceptable future solutions.

Background to decision:

In summary, it is our assessment that the combination of the market prospects and the competitive situation will not make it possible to achieve profitable operation with NKT Integration in the foreseeable future. Supporting factors are the fragmented expansion of FTTH and lack of a uniform technological standard.

Developing a PLC-based Triplexer component that lives up to the defined technical specifications has proven challenging within the given time horizon.

Added to this, NKT Integration's activities represent a very high level of competence within a very narrow technological platform. This naturally creates a high risk profile that is compounded by a market situation where - more than three years after the sector downturn began – the majority of players continue to operate at a substantial loss.

The decision

The decision has therefore been taken to wind up NKT Integration's operations. We wish to stress our deep disappointment at being unable to continue the work that we – together with NKT Integration's employees – have put into the commercialization of optical chips and components.

The decision will affect NKT Integration’s 60 employees, some two thirds of whom are based in Denmark while the remainder work in the United States and Canada.

Earnings forecast 2004

The closure of NKT Integration's operations will lead to one-off expenses of around 20 mDKK that will affect liquidity in 2005 and relate to winding up the company's organisation, redundancies and other rundown costs. The expenses will be recognised in the income statement for 4th quarter 2004.

As notified in Quarterly Report 2/2004, a valuation of NKT Integration's fixed assets for accounting purposes was performed during the 3rd quarter. This valuation has led to a writedown of 65 mDKK in 3rd quarter 2004, corresponding to a net realisable value of 0 DKK.

NKT Integration's operating earnings before depreciation and one-off expenses (EBITDA) are expected to be (45) mDKK for 2004.

The winding up of NKT Integration will thus result in significantly increased income for the Group's joint-taxed Danish companies. This, combined with positive development in the Group's earnings, increases the probability for utilising the potential tax assets within the joint-taxed companies. From an overall perspective we thus expect to increase the book value of the NKT Group's tax assets by around 50 mDKK in 4th quarter 2004.

In the light hereof, and including the fact that the Group's other companies – viewed collectively –have performed as expected in 3rd quarter 2004 - we anticipate a Group net profit for 2004 of around 225 mDKK. NKT's Quarterly Report 3/2004 will be published on 23 November 2004.

NKT Holding

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