Progress in a challenging year

2008 was an eventful year. On the one hand, the operating companies Eltek Valere and Nera Networks performed well, grew their businesses and strengthened their positions as leaders in their segments, and NeraTel delivered to expectations. On the other hand, increased capital requirements as a result of the growing level of business, negative currency developments, abrupt management changes and the onset of the global financial crisis clearly affected the Eltek Group.

I joined the company in August of 2008. This was after a transition period with temporary management, following the resignations of both the former CEO of Eltek ASA and Eltek Valere, and the CEO of Nera Networks. It is obvious that such events are challenging for any organization. However, when joining, I met an organization full of ambition and fighting spirit, with leading technological expertise and a strong will to succeed in the market place. It has been inspiring to become part of this culture, and I believe our more than 3 500 employees around the world can be proud of their achievements in 2008.

Both Eltek Valere and Nera Networks managed to grow the top line, improve underlying operating profit and win market share. Both companies also successfully introduced new and attractive products in the market place, which offer our customers greater efficiency, more flexibility and reduced operational costs and environmental footprint. NeraTel is an important channel for distribution of Nera Networks’ products in Asia/Pacific, and posted an increase in operating profit despite a small decline in revenue.

However, the growing business volume increased the capital requirements and put a severe strain on the Group’s liquidity. This was further accentuated by the rapid change of the exchange rate between NOK and both USD and EUR. It was necessary to take steps to improve the Group’s liquidity position, which of course was a challenging task in the midst of the global financial crisis. In cooperation with the key shareholders and our banks, I believe we found a good solution through the increase in share capital and a rescheduling of the debt repayment structure.  The process and the solution clearly demonstrate the shareholders’ commitment and belief in the great potential of the Eltek Group.

Going forward, we will continue to build on the unique characteristics that have fuelled the growth of the Eltek Group so far:  a sharp focus on customer needs, technological leadership, a highly competitive and entrepreneurial spirit and an intimate knowledge of local cultures and markets around the world.

We will combine this with a focus on improving the management of working capital and cash generation, including programs to reduce days of sales outstanding and increase inventory turnover. We have already implemented hedging strategies that will make the Group less exposed to abrupt currency fluctuations.

We will also continue to streamline operations to maximize cost-efficiency. This is necessary to withstand the continuous pressure on margins in our highly competitive markets. Greater standardization and a more modular-based product line will be a key to achieving this.

As the Group CEO, I am committed to increasing value for our shareholders.  I believe the best way to achieve this, will be to strike the balance between the creativity and fighting spirit that are the hallmarks of the Eltek culture, and a more systematic approach and structured way of operating as a global corporation. Our customer relationships, our products and our people make us well positioned and our goal remains to achieve above market growth.