ZTEST Electronics Monthly Corporate Update for January 2003
ZTEST Electronics Inc.'s (TSXVE: YZT) wholly-owned subsidiary, Permatech Electronics Corp., is an ISO 9002 certified Electronic Manufacturing Services (EMS) provider founded in 1982. Permatech's offerings include Materials Management, Printed Circuit Board (PCB) Assembly, Testing and Design services. Permatech operates from a 20,000 square foot facility in North York, Ontario, Canada.
Manufacturing Industry Activity and the EMS Sector
On February 3, 2003 the Institute for Supply Management, www.ism.ws/ISMReport/ROB022003.htm reported that economic activity in the manufacturing sector grew for the third consecutive month while the overall economy grew for the 15th consecutive month. The Purchasing Managers' Index (PMI) was calculated at 53.9 percent a decrease of 1.3 percentage points when compared to 55.2 in December. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. "The manufacturing sector continued its growth trend in January, though the rate of growth slowed when compared to December. It is encouraging that New Orders continued strong in January. Production also fared well, providing cause for optimism for an improving economy in the first quarter," commented Norbert J. Ore, C.P.M. chair of the Institute for Supply Management™
Looking at indicators which relate specifically to the Electronics Manufacturing (EMS) sector, the Semiconductor Industry Association, www.semichips.org/pre_release.cfm?ID=257, on February 3, 2003 reported that global semiconductor sales reached $12.5 billion in December 2002, bringing total revenue for the year to $140.7 billion, a 1.3% increase from the 2001 level of $138.9 billion. During the year's final quarter, revenue rose 1.9% sequentially to $37.6 billion from $36.9 billion, following increases of 5.6%, 5.8% and 8.2% in the first three quarters of 2002, and was up 23% over the corresponding quarter of 2001. SIA President George Scalise stated, "This is remarkable performance, in the face of lackluster demand in the Information Technology market. We expect further improvement across broad product sectors, positioning the industry for 19.8% growth in 2003, increasing revenues to $169.3 billion." Printed Circuit Board (PCB) assembly relates directly to semi-conductor chip sales as the PCB is populated with semi-conductors and other components. Therefore it is typically understood that increased semi-conductor chips sales will lead to higher PCB assembly.
Permatech Established Business
With Permatech's long operating history, it has built a core base of customers who provide a stream of consignment and turnkey assembly orders. This core customer base is well diversified in the Medical, Power, Computer, Telecommunication, Wireless, Industrial and Consumer Electronics markets, limiting therefore the company's exposure to any one industry. The charts below show on a rolling six-month basis:
The proportion of revenue generated by each market served
The proportion of revenue attributed to turnkey vs. consignment business,
New Business Development
ZTEST completed the development of the remaining three PCBs for an industrial customer and delivered a prototype run of assembled boards for an instrumentation company. This delivery was followed by a request to develop two more PCBs during the months of February and March.
Permatech completed their first production run for a new industrial customer, which led to quotes on multiple board orders for the same customer. The company also continues to solicit turnkey orders, and in February received a request from an existing client to deliver as a turnkey service boards that had been built previously in consignment mode.