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Jan 25th, 2009
 
Melexis business outlook
 
In line with our previous press release dated November 26th, 2008 Q4/08 sales are expected to reach approx. 33.5 million EUR.
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The drop in sales in Q4/08 with an expected continuation of this trend into Q1/09 has more to do with
industrial dynamics than consumer demand. Assume a car dealer who usually orders monthly 10 cars with a
lead time of 3 months and hence normally has 30 cars on open order. This car dealer may now have
reduced that number from 30 to 25. This translates into an order drop of 50% over 1 month time. In view of
this, the vehicle manufacturers and their suppliers have reacted. They consequently also decreased their
inventories by ordering less to the next party in the supply chain over the past 3 months. How much could
this total inventory reduction represent? Half a month with the car dealers? One month with the carmakers?
Somewhat more than a month with the different automotive suppliers? Imagine the combination of all
pipeline corrections would amount worst case to 3 months, this would result in zero sales for one full quarter,
just as a consequence of inventory reductions, and even with zero change in the quantity of cars sold to
consumers. The reduction we have experienced in the fourth quarter amounts to 1 month (approx. 30%).
Based on current visibility, Q1/09 may see continued effect while entrepreneur confidence remains
pessimistic. We expect the total effect on the supply chain to be 2 months. These inventory corrections are
the main cause of the lower sales of components to the automotive sector rather than the real drop in car
sales to the consumer.
The total number of new passenger car registrations in 2008 in Europe slowed down 7.8% in comparison to
2007. In Germany, new passenger car registrations dropped by 1.8% only while in Belgium it increased by
2.1%. BMW and Renault worldwide sales for FY2008 decreased respectively by 4.3% and 4.2% vs 2007.
Mercedes-Benz was better with minus 2.3% vs the previous year, whereas Audi even increased by 4.1%.
Those are not dramatic figures. Other positive factors that may jumpstart the auto industry and consumer
spending are the replacement cycle, falling oil prices, the return of credit thanks to government guarantees
and the outlook on government economic stimulus initiatives.
In order to adapt our expenditure to the current situation, management has decided during December on a
worldwide cost efficiency program that involves:
▪ a global workforce reduction of 10% vs September 30th 2008, the major portion of which will be
achieved in HY1/09;
• a manufacturing shutdown of 2 weeks in Q1/09 and the possibility of a 6 months’ reduced work time by
30% as of week 7 in our Erfurt factory (no such plans at this time in our 2 other manufacturing facilities,
nor in any of our other sites);
• the continuation and acceleration of efficiency & optimization programs started in 2008;
• a renewed review and streamlining of our cost structure.
Corresponding restructuring costs will not exceed 1 million EUR and will be provisioned in Q4/08. Initial
benefits from these actions are expected to start in the first quarter of 2009 and once fully implemented will
lead to sustainable cost savings of 4 mio EUR per year.
Rudi De Winter, CEO of Melexis stated:
"Melexis innovative technologies and products are a perfect fit for the greener cars the auto sector must now
focus on. We are poised to now reap the benefits of the R&D work we have been doing in that arena for the
last couple of years. Continued development and innovation will play major role in the global economic
recovery."

Françoise Chombar, CEO of Melexis added:
"We have reacted fast to the economic downturn and at the same time we are preparing the grounds for the
upturn. We equally are ready to flexibly address any significant change in circumstances. The actions we
have taken during Q4/08 and will continue to implement in the first months of 2009 have been defined and
will be executed in full respect of our values and 100% in line with our long-term strategy."

 

 
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