During the first three months of the year, Oberthur Card Systems delivered 80.4 million microprocessor cards, a 44.5% increase compared to Q1 2006.
– Mobile Communications segment:
The SIM market demand continued to show robust growth with 44.6 million cards delivered, a 32% increase in volume, on a year-on-year basis. This is the second best performance ever for the company, after Q4 2006. During the quarter, Oberthur Card Systems recorded significant commercial gains in Middle East and Africa. The company also achieved a good performance in emerging Asian countries, with 80% of the regional volumes dedicated to the Indian market.
In America, volumes were similar to that of the same quarter a year ago. The US market went through a temporary period of decreased activity while South America demonstrated excellent growth, reflecting buoyant demand in the region.
Average selling price is roughly stable in all segments of cards sequentially. The Q4 2006 limited ASP erosion has been confirmed during the first three months of the year. Moreover, excluding the booming Indian activity, ASP was stable sequentially despite the favorable seasonality in Q4.
The proportional volumes of 16K and 32K cards increased between Q4 2006 and Q1 2007. Nevertheless, Oberthur Card Systems has once again confirmed its strong position in the high-end segment as more than 69% of SIM revenues were high-end cards, with 17% of sales coming from 128K deliveries.
Following a dedicated marketing effort, the scratch card activity recorded a strong performance with EUR4.7M sales, a 33% growth compared to Q1 2006 and a +13% growth sequentially. This huge market appears to have a strong potential for Oberthur Card Systems in the years to come. In the end, sales in Mobile Communications amounted to EUR45.2M, representing 34% of Oberthur Card Systems Q1 2007 sales.
– Payment segment(1):
Oberthur Card Systems registered a 48.5% growth in value in the payment smart card segment year-on-year, reaching EUR37.6M, due to a 70% growth in volume compared to Q1 2006. This is the company’s best performance ever with 27.5M units delivered. The UK, French, Italian and Asian markets contributed to this momentum.
The sequential ASP stabilization observed in Q4 2006 was confirmed during the first three months of the year, with even a slight increase.
In the meantime, conventional card business slowed down as expected with total sales amounting to 14.1EURM.
The segment, consisting mainly of personalization services, is roughly stable year-on-year. The strong European activity performance was offset by a significant reduction in the gift card personalization demand in the US. The whole payment segment, which represented 53% of Oberthur Card Systems Q1 2007 sales, amounted to EUR71 M, a 13.7% increase compared to Q1 2006.
– Identity & Security(2) segment:
Revenue for this product line for the quarter was EUR14.8M, up 27.9% compared to the previous year. Volumes for the Identity and Security segment reached 8.3 million units, a 47% growth pushed by strong demand in the Pay TV sector, a Banking ID card program for the Ivory Coast, US administration card deliveries and Moroccan ID card shipments. The ASP decrease was limited with -6.5% year-on-year.
Economic results
With the increase in sales, the impact of corrective measures initiated last year and the stabilization of ASP, the results in Q1 compare favorably to Q1 2006.
New management structure
Oberthur Card Systems is strengthening its strategy for development while focusing on innovation and improvement of industrial processes. In March, Oberthur Card Systems adapted its management structure:
– Sales remain organized in Regions which are now 3: Europe-Middle-East-Africa, Americas and Asia;
– 4 Product Lines have been created with a P&L responsibility. Combining marketing, R&D, product planning, they will drive product road maps, innovation, cost reduction and margin improvement.
– A Global Manufacturing entity has been created too, managing internal factories world-wide and subcontractors.
Outlook:
Oberthur Card Systems has seen, in Q1 2007, the confirmation of the better trend of Q4 2006 and is confident that it could continue during the year. Average selling prices seem to have entered a stabilization phase in all market segments.
Due to the finalization of the acquisition of I’M Technologies, in April, the company will strongly reinforce its mobile product line and R&D resources and will capitalize on I’M Technologies’ know-how in the management of manufacturing sub-contracting. This acquisition will also strengthen Oberthur Card Systems’ commercial position in the region. In the Payment, Identity and Pay-TV markets, Q4 2006 & Q1 2007 trend should be confirmed over the year thanks to a new ramp-up phase following a recovery in major markets such as UK and France but also due to EMV program deployments in the rest of Europe and in Asia. Building on its position as a personalization world leader with a strong position in Western Europe, Oberthur Card Systems will continue to expand in this activity in 2007 through new bureaus, partnerships and joint ventures throughout the world.
A manufacturing plan has been launched to notably increase volumes, enlarge the scope of activities in Asia and optimally allocate worldwide resources.
2007 has started on a positive trend compared to last year. Nevertheless, the company is not yet satisfied with the current level of indicators: price pressure has slowed down but still exists and the company wishes to go beyond this by further enhancing processes and profitability. Above the execution of the current cost control plan, a second wave of measures is under analysis. In addition to this, the program for the improvement of receivables and inventories will pay off all along the year.
About Oberthur Card Systems
With sales of 524.0 million Euros in 2006, Oberthur Card Systems is one of the world’s leading providers of card-based solutions, software and applications including SIM and multi-application smart cards as well as services ranging from consulting to personalization.v Innovative products, security expertise and high quality services ensure Oberthur Card Systems’ strong positioning in its main target markets:
– Payment & Services: 47% of 2006 revenues. A world leading supplier of Visa and MasterCard payment cards
– Mobile Communications: 37% of 2006 revenues, with open and interoperable solutions based on Java(TM) technology.
– Identity: strong positions in ID projects throughout the world
– Multimedia: leading position in the Pay-TV market with an end-to-end expertise in the value chain: software development, manufacturing and personalization
– Transit: focus in the high-end segment with a microprocessor-based offer
For complete details on Oberthur’s latest results visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
