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Financial Review: Ensto grows in a challenging market

ENSTO GROWS IN A CHALLENGING MARKET

Investments in Sales and Customer Service Shrink Operating Profit

During the first half of the year, the 50-year-old Ensto has continued to grow. The Group’s turnover reached EUR 120.7 million in January-June showing an increase of 5.4% compared to the first half of 2007. In Finland, the growth in turnover corresponded to general growth in the market. In East and Central Europe region, sales decreased in Hungary and in contrast, increased notably in Russia. In total, sales growth during the first half of the year did not achieve the set goals.

Operating profit for the first part of the year came to EUR 7.1 million, falling 19.9% from the previous year due to, for example, higher raw material costs that could not be compensated for through price increases. In addition, Ensto invested significantly more in sales and customer service than last year, which reduced the overall profit. These investments are expected to be realised in higher sales figures within the next few years.

Operations According to Values

Due to the occurrence of malfunctions detected in a switch model in 2007, Ensto decided to recall these switches. The replacement of switches was still ongoing during the period. Thanks to open communication and close cooperation, this work has progressed well with both consumers and electricians, and approximately half of the switches have been replaced.

Investments Reveal Future Trends

In accordance with previously made investment decisions, the Porvoo factory has been equipped with additional capacity for extensive automation and, during the spring, new machinery for the manufacture of underground cable accessories was installed. The new production equipment, specially tailored according to Ensto’s needs, manufactures aluminium and brass components for overhead and underground cable accessories.

The opening of a production line manufacturing electrical heaters, worth EUR 2.5 million, will be held in September. Although the Finnish housing construction market is declining, Ensto believes the investment will be profitable in the future. In addition to Finland, the main market areas for the heaters are Russia and Sweden. Due to low energy construction, the easy adjustability and controllability of the heater and the possibility to use it as an additional source of heat, sales of the heater are expected to develop favourably.

Ensto’s new concept of tailored enclosure solutions has attracted major interest. Thanks to the Cubostics concept, Ensto has been recognised as the forerunner in the enclosure mass tailoring industry and has won significant new sales accounts. During the first half of the year, Ensto decided to invest further in the concept's product and production technology.

Ensto Invests in New Technology

During the early part of 2008, EUR 3.2 million was invested in product development. This spring, being the first in Finland, Ensto tried out the distribution of direct current in the public network with the help of new technology. The test network was created in Pernaja in cooperation with Porvoon Energia. This long-term development work aims to find new solutions for improving the energy efficiency of electric energy systems and the quality of electricity distribution.

In June, alongside a deal for the underground cable accessory cold-shrink technology business operations, Ensto founded a new production facility in Italy. This new technology will expand Ensto’s underground cable accessory range and offer potential for growth in all markets.

The Company Believes in Steady Growth

For the rest of the year, the company’s prospects remain stable. The insecure financial situation in the Nordic construction market is expected to affect the market and demand in the electrical industry. The construction of utility networks is expected to remain unchanged, while growing in Russia and other CIS countries in particular.

Porvoo, 4 September 2008

Ensto Group

Jukka Koskinen
CEO

Further information:
Jukka Koskinen, CEO, Ensto Group, tel. +358 204 76 2204

Financial Review and Key Figures, January - June 2008 (pdf, 39 KB)