Melexis Business Outlook

Press release: Melexis Business Outlook.
Ieper, Belgium ¨C January 19th, 2009 at 07.00 hrs CET

In line with our previous press release dated November 26th, 2008 Q4/08 sales are expected to reach approx. 33.5 million EUR.

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.

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Contact: Frances New

Phone:+86-755-8183 2961
Fax:  +86-755-2264 5259
Email:sumzi@sumzi.com
MSN:  sumzi_frances@msn.com
 http://www.sumzi.com