OREANDA-NEWS. December 7, 2007. JSC SITRONICS (LSE: SITR), a leading provider of telecommunications, information technology and microelectronic solutions in Russia and the CIS, with a growing presence in other EEMEA emerging markets, today announced its summary unaudited consolidated US GAAP financial results for the third quarter and nine months ended September 30, 2007.

Summary Financial Results:

SITRONICS generated a 15% quarter on quarter increase in consolidated revenues to US$ 376.2 million in the third quarter, and year to date revenues of US$ 1,014.6 million. Total company assets increased by 11% year on year to US$ 1.78 billion at the end of the third quarter, compared to US$ 1.59 billion at the end of the same period of 2006.

SITRONICS' OIBDA for the third quarter was impacted by US$ 21.3 million of non-cash costs arising from the Company's previously announced stock option programme. The first stock awards under this scheme were made in July 2007.

The Company's adjusted OIBDA*, prior to this non-cash item, therefore amounted to a loss of US$ 47.6 million for the third quarter and a loss of US$ 86.2 million for the first nine months of 2007.   This compares with OIBDA profits of US$ 44.5 million and US$ 114.7 million for the third quarter and first nine months of 2006, respectively. 

SITRONICS therefore reported net losses of US$ 108.0 million in the third quarter and US$ 187.8 million for the year to date, compared to net income of US$ 21.1 million and US$ 37.0 million for the same respective periods in 2006.

Outlook:

As indicated at the time of the Company's half year results in September, year on year revenue growth and profitability levels are expected to improve further in the fourth quarter and into 2008.  The Company now expects full year 2007 revenues of more than US$ 1.5 billion, with an OIBDA profit in the fourth quarter of 2007. 

SITRONICS has won more than US$ 150 million worth of new public and private sector tenders and contracts between July 1, 2007 and today.  The majority of these contracts have been won by the Telecommunications Solutions division, which is expected to display positive dynamics in the fourth quarter and into 2008. The Microelectronic Solutions and Information Technology segments are also expected to meet Company expectations for the fourth quarter and deliver increased year on year operating profits.

Operating Review:

SITRONICS' Information Technology Solutions and Microelectronics Solutions divisions performed in line with expectations in the third quarter and reported substantially higher revenues year on year.  The Telecommunications Solutions business area reported a quarter on quarter increase in revenues but the year on year comparison reflected the fact that an anticipated large scale contract in the Middle East has not been awarded and that the launch of the 3G project has been hampered by unanticipated regulatory issues. The previously announced restructuring of the other business areas - Consumer Electronics and Electronic Manufacturing Services - is ongoing.

The Information Technology Solutions and Microelectronic Solutions segments reported year on year increases in operating income for both the third quarter and first nine months of 2007.  The Company's profitability levels for the first nine months of the year were adversely impacted by a loss for the Telecommunications Solutions segment, but the business did deliver a quarter on quarter reduction in operating losses. The Electronics Manufacturing Services and Consumer Electronics businesses each reported operating losses for the period as a result of on-going restructuring and reworking of the business models. However, the Electronics Manufacturing Services segment reported significantly reduced operating losses year on year.

Significant contracts have recently been signed in the Telecommunication Solutions business; effectively strengthening this segment's pipeline. These contracts include: an NGN contract with leading Greek internet provider Hellas Online and a contract with ZAIN Bahrain to deploy a WiMAX network. The Telecommunication Solutions segment also launched the first stage of the OSS/BSS FORIS NG billing project with Vodafone in the Czech Republic and continued to increase its presence in Africa. In addition to being selected - along with Ericsson - to provide 3G equipment and services to MTS in Russia and the CIS, the Company also established a strategic partnership with Jordan Telecom Group to deliver IP-TV services over JTG's Orange-branded ADSL network.

The Information Technology Solutions segment signed a contract to provide Consulting and Telecom Integration services to MGTS and also concluded a contract for IT services with the Russian Prosecutor General's office. In addition to working with the Russian government, the IT segment also signed contracts with the Turkmenistan Ministry of Education and Kazakhstan's largest pension fund.

In addition, following an intensive investment in human capital and on-the-job training, SITRONICS' subsidiary - Kvazar-Micro - received Cisco's "Golden Partner" status (which is valid across all CIS countries).

The Microelectronics Solutions segment also experienced a positive third quarter, extending its successful RFID ticketing technology project in the Moscow subway. The Company has now been contracted as the sole supplier for up to 25 million RFID tickets on a monthly basis beginning in 2008.  SITRONICS Microelectronic Solutions also won a tender with Ukrtelecom during the third quarter to supply USIM-cards, and signed a framework agreement with Nokia Siemens Networks for the delivery of microchips.

Comment from the President:

Sergey Aslanyan, SITRONICS' President and CEO, commented: "Our nine months results reflect the ongoing transition within the Company and a marked sequential improvement in the underlying performance of our core operating segments. We expect to see sustained improvement in the fourth quarter and into 2008, with our optimism backed up by a robust pipeline. We are currently assessing the Company's strategy and will announce the outcome of this comprehensive review in January. We have already identified several key actionable steps and have taken strides toward carrying them out."