EVOX RIFA GROUP OYJ STOCK EXCHANGE RELEASE
on October 31, 2002 at 10:00 a.m.

EVOX RIFA GROUP INTERIM REPORT 1.1. – 30.9.2002

July – September 2002 compared to the previous quarter:

• Net sales in the third quarter increased 16% and were EUR 19,6 million (EUR 16,9 million in the second quarter of 2002)
• Operating loss decreased to roughly half of the loss of the second quarter and was EUR -1,2 million (-2,2 million). The loss before taxes was EUR 1,7 million (loss EUR 2,3 million)
• Operative cash flow during the third quarter was EUR -2,3 million (EUR -0,1 million).
• The refocused strategy of the company divides group´s activities into two business areas based on the main product groups: the business area of aluminium electrolytic capacitors and the business area of film capacitors.
• Integration of the acquired British company (BHC Components Ltd.)into the rest of the electrolytic business has been completed with success. The rights offering for financing the acquisition was carried out as planned.

January – September 2002 compared to the corresponding time period in 2001:

• Net sales for the three first quarters of 2002 were EUR 49.9 million (EUR 55.4 million during the corresponding time period in  2001)
• Operating loss was EUR 6.1 million (loss EUR 1,0 million in 2001)
• Loss before extraordinary items was EUR 6.6 million (loss EUR 2.4 million in 2001)
• Earnings per share was EUR -0.054 (EUR -0.028)
• Order backlog on September 30, 2002 was EUR 14.9 million (EUR 13.3 million)
• During the three first quarters of 2002 Evox Rifa has strongly restructured its European production units and according to its strategy, has invested in production in Asia.
• The new factory in China started capacitor production in April.
• Restructuring has lowered the cost level in the second and third quarter.

ECONOMIC DEVELOPMENT

The financial information of the acquired BHC Components Ltd. (former BHC Aerovox Ltd.) has been consolidated in Evox Rifa Group´s figures from the beginning of May.

Net Sales

Evox Rifa´s net sales in the third quarter of 2002 grew by 16% compared with the second quarter of 2002. In July - September 2002 the net sales were EUR 19,6 million, whereas in April - June 2002 they were EUR 16,9 million.

Net sales of the Group during the three first quarters of 2002 were EUR 49.9 million, which is about EUR 5.5 million less than during the corresponding period in the previous year. The figure also includes five months´ net sales (EUR 8,7 million) of BHC Components Ltd.

Sales to the automotive industry, lighting industry and industrial electronics kept up quite well. Demand by the telecommunications sector remained weak.

Evox Rifa Group´s biggest product group, aluminium electrolytic capacitors, still increased its share of total sales - partly due to the acquisition - and made up 47% of the total net sales during the third quarter.

Profit

The cost saving projects and other rationalization efforts that have been taken to improve the Group´s performance in 2002 resulted in the third quarter as smaller losses compared with the second quarter. The operating loss of the third quarter (EUR 1,2 million) was half of the loss of the second quarter.  The Group´s loss during the three quarters of 2002 was EUR 6.1 million (loss EUR 1.0 million in 2001).  The loss before extraordinary items was EUR 6.6 million (loss EUR 2.4 million in 2001). The five month profit of EUR 0.3 million of BHC Components Ltd. is included.

Earnings per share was EUR -0.054 (EUR -0.028) and shareholders´ equity per share was EUR 0.143 (EUR 0.323).

Order backlog

Evox Rifa Group´s order backlog was EUR 14,9 million at the end of the third quarter (EUR 13,3 million in 2001). This includes BHC Components´ figures.

FINANCIAL STATUS AND CAPITAL EXPENDITURE

The rights offering which was carried out to finance the BHC acquisition was concluded during the first part of the third quarter. Group´s financial situation became slightly tight due to the increase in the working capital caused by the growing sales volume. The working capital of the new Chinese factory increased by EUR 0.6 million. Cost saving programs and activities to improve the turn-over of working capital are continued.

The Group´s liquid assets were EUR 8.8 million at the end of the reporting period and the Group´s equity ratio was 37.7%.

Gross capital expenditure into fixed assets amounted to EUR 7.2 million. The main part of this were investments into the acquisition of BHC Components Ltd. and into the Chinese joint venture. Capacitor production at the Chinese factory started in April, 2002.

SHARES AND SHARE CAPITAL

The nominal value of the shares of Evox Rifa Group Oyj is EUR 0.05, the number of shares was 173.371.018 on September 30, 2002 and the share capital was EUR 8.668.550,90.

PERSONNEL

The average number of personnel in the Evox Rifa Group during the three quarters of 2002 was 1307 (1358 during the corresponding period in 2001). The acquisition and the start-up of the new factory in China increased the number of people employed - but personnel in other Evox Rifa units have been reduced at the same time.

Evox Rifa continues to adapt costs to current demand. Temporary personnel lay-offs will be continued at the Suomussalmi factory in Finland and further actions are planned in other units according to the development of the order backlog. Transferring of film capacitor production from Europe to the Indonesian factory will be continued during the winter, which means that a need for reducing the number of personnel in Europe still exists.

The Chief Financial Officer of Evox Rifa Group Oyj was changed in the third quarter. Ms. Tuula Ylhþinen has been the responsible financial officer of the Group from the beginning of September. She was previously employed at the Ahlstrom Packaging where she gained first hand experience in the development of financial control systems both in Finland and abroad.

REFOCUSED STRATEGY AND NEW ORGANIZATIONAL STRUCTURE

Evox Rifa refocuses its business strategy. The company´s global activities are divided into the business area of electrolytic capacitors, and the business area of film capacitors.  Both business areas concentrate on the market sectors which are most promising to them.

This structural change is made to improve profitability and to better exploit internal synergies in order to reach a competitive cost structure. Increased internal efficiency is expected to enhance sales activities, to improve customer service and to facilitate cumulative know-how.

The new Business Areas

The Business Area of electrolytic capacitors operates on growing markets. Evox Rifa is the largest manufacturer of screw terminals in Europe and one of the largest in the world.  Screw terminals are used in demanding applications, such as in drives for electric motors and UPS devices.

Automotive electronics is the fastest growing market sector for electrolytic capacitors.  Automotive electronics continuously applies new technology.  The amount of electronics in cars is strongly growing as mechanical solutions are replaced by electronic ones in order to improve performance, safety, manoeuvrability and driving comfort.  The amount of passive components in a car has more than doubled during the last years of 1990´s.

The strategic goal of the Business Area is - through exploiting the acquisition-related internal synergies - to increase its market share by introducing new products, efficient customized product design and improved technical know-how and productivity.

In response to the growing market demand, the business area has already  started additional production of electrolytic capacitors in China and active marketing efforts in Asia.

Mr. Lars-Gšran Stenberg is the director of the Business Area Electrolytics.  He has been responsible for the Evox Rifa electrolytics unit in Sweden for the past three years and he has a solid background in industrial managerial positions in Sweden.

The second Business Area covers film capacitors (including interference capacitors). The main product lines of the Business Area Film are metallized paper capacitors and plastic film capacitors. Paper capacitors are high-quality, so called niche products.  They are used in product applications where safety regulations are strict, e.g. as interference capacitors. Evox Rifa is the world market leader in paper capacitors.  Manufacturing takes place in Sweden.  Plastic film capacitors are manufactured in Finland, Sweden and Indonesia. Evox Rifa is one of the leading manufacturers of plastic film interference capacitors (RFI). Evox Rifa supplies pulse capacitors which are used in TVs, monitors, power supplies, and as general purpose capacitors used in several electronic applications, to a large number of customers in all parts of the world. Evox Rifa is one of the largest manufacturers of plastic film encapsulated surface mounted capacitors in the world.

The Business Area´s strategic goal is to achieve profitable growth by lower manufacturing costs, better delivery times, wider product selection and better availability of customized products. Flexibility of organization and excellent customer service are the basic targets of Business Area Film.

Manufacturing costs are lowered by transferring production from Europe to Asia, especially to Evox Rifa´s Indonesian factory where labour and raw material costs are lower.  The unit also uses contract manufacturing to increase volumes.  The product range has already been expanded through partnership agreements.

The European factories will continue developing and manufacturing customized products. Production will be increased in Asia, but Europe and the US will still be the main market areas of the unit - without forgetting the enormous growing homemarkets in Asia.

Mr. Wee Cheng Hoon is appointed the Director of Film Business Area. He has been the Managing Director of the Evox Rifa Asian unit until now.  Mr. Wee has over twenty years of experience as the leader of Evox Rifa´s production and marketing activities in Asia.

OUTLOOK FOR THE YEAR 2002

Evox Rifa´s field of industry has experienced an unforeseen reduction in market demand during this and the past year. This has considerably decreased Evox Rifa´s sales and production volumes which in turn has caused financial losses. Weak demand continued during the third quarter of 2002 and there are still no signs of a change into better in the market place.

The clear positive development of the performance during the second and third quarters demonstrates Evox Rifa´s ability to adjust its operations to market conditions. The Group believes that the on-going cost reductions, the new refocused strategy and structure will all affect the business and profitability positively.

QUARTERLY FIGURES

INCOME STATEMENT OF EVOX RIFA GROUP

Unaudited

BALANCE SHEET OF THE GROUP

Unaudited

EVOX RIFA GROUP KEY FIGURES

Unaudited

DERIVATIVE CONTRACTS

The company uses forward contracts and currency options to hedge foreign currency denominated balance sheet items against exchange rate fluctuations. The maturity of forward contracts and currency options vary from 1 to 3 months.

The market values of off-balance sheet derivative contracts made to hedge the exchange rates fluctuations (1000 EUR):

 

 

In Espoo on October 31, 2002

EVOX RIFA GROUP OYJ

Harri Launonen
President

For further information please contact:
Evox Rifa Group Oyj, Harri Launonen, President, tel. +358 9 5406 5001
harri.launonen@evoxrifa.com

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