austriamicrosystems expects to record significant negative financial result
for 2008 from EUR/USD hedging transaction accounting
Unterpremstaetten, Austria (November 28, 2008) — austriamicrosystems (SWX: AMS), a leading global designer and manufacturer of high performance analog ICs for communications, industrial, medical and automotive applications, expects to record a significant negative financial result for full year 2008 due to a charge for certain EUR/USD hedging transactions. The negative impact on the company’s financial result from these transactions is expected to be approx. EUR 10 million. austriamicrosystems’ expectation of full year 2008 EBIT to be around 10% below last year’s level remains unchanged.
The significant negative effect on the full year 2008 financial and net result is caused by the unexpectedly strong appreciation of the USD against the EUR in recent weeks. This development will require certain option-based EUR/USD hedging transactions to be recognized in the full year 2008 income statement at a negative value, based on IFRS accounting regulations. These transactions cover a portion of the company’s expected future USD revenues for 2009. All EUR/USD hedging positions have been closed at levels between EUR/USD 1.27 and 1.33 while downward protection for the amount covered by these transactions remains in place at levels between EUR/USD 1.38 and 1.60.
Recording this negative effect in the financial result for fiscal year 2008 will, however, allow austriamicrosystems to convert the future USD revenues covered by these transactions into EUR at the then prevailing market exchange rates. This will create a meaningful advantage for the company if the USD stays at or around current levels or appreciates further over the course of 2009.
Had the company used currency forward transactions instead, the USD revenues covered by these transactions would have been converted into EUR at the forward EUR/USD rates fixed for such transactions in 2008. These may be considerably weaker than the prevailing market exchange rates at the time of conversion in 2009. In this case, the company would record lower future USD-converted EUR revenues compared to the current situation which austriamicrosystems therefore regards as attractive.
austriamicrosystems has no further risk from these hedging transactions regarding the company’s full year 2008 and future financials.