EQS-News: Cherry SE resolves substantial realignment of keyboard switch business to strengthen international competitiveness and increase profitability in Components business unit

Cherry SE resolves substantial realignment of keyboard switch business to strengthen international competitiveness and increase profitability in Components business unit

Munich, November 3, 2023 – The Management Board of Cherry SE [ISIN: DE000A3CRRN9] has today resolved on a package of measures embedded in the ongoing Operational Excellence for the substantial repositioning of the Components business unit and is unlocking an annual savings and earnings improvement potential of around EUR 10 to 15 million by optimizing the entire value chain.

“Cherry needs a consistent repositioning in the switch business. We are strengthening innovation, market-driven pricing, competitiveness, profitability and the (OEM) sales approach. With these consistent measures, we will regain our relevance in the switch business. The Auerbach and Zhuhai sites are being developed into global innovation centers for our keyboard switches, among other things. As part of our measures, we are at the same time bringing our global organizational structure into the right shape and size,” commented Oliver Kaltner, CEO of Cherry SE.

“With the implementation of the measures, we are opening up an annual savings and earnings improvement potential of around EUR 10 to 15 million," adds Dr. Mathias Dähn, CFO of Cherry SE. "Of the expected total expense of around EUR 20 million, around EUR 14 million relates to effects affecting EBITDA, of which around EUR 11 million will be cash effective. The remaining EUR 6 million relate to non-cash impairment losses.”

"These measures will link the three locations Auerbach in der Oberpfalz (Germany), Zhuhai (China) and Vienna (Austria) closely and efficiently," adds Dr. Udo Streller, COO of Cherry SE. "The new collaboration partner in China will be responsible for the production of MX2 switches, which are sold in Cherry partner products in the international market."

In fiscal year 2022 and from January to September 2023, the switch business declined by 62.5% and 48%, respectively. Despite targeted countermeasures as part of Group-wide operational excellence, the Management Board expects a significant unplanned EBITDA charge in the 2023 fiscal year.

The reasons for this development are too low sales volumes with too low unit margins in the switch business, and the fixed costs are too high as a result of significant capacity underutilization. The Management Board currently estimates the resulting burden on earnings for the Cherry Group for the fiscal year 2023 at around EUR 10 million (adjusted EBITDA).

With ULP and MX2, we are meeting the expectations of our global OEM customers in terms of innovation, pricing and volume. We will realize additional sales potential via switch variants localized in China, while significantly reducing manufacturing costs. To secure the improvement potential, we are reducing fixed costs in the global Cherry organization. With the implementation of the measures, we will tap annual savings and earnings improvement potential of around EUR 10 to 15 million.

The company's own sites in Auerbach in der Oberpfalz (Germany), Zhuhai (China) and Vienna (Austria) are closely interlinked in the operational performance areas of development, production and logistics and adapted to customer requirements.

Auerbach location:

• Development and production of MX2 switches for use in own products in the international market.
• Development and production of ULP switches for the international market
• Innovation developments for the ULP and MX product lines.

Location Zhuhai:

• Production of office and gaming hardware for the international market
• Development and production of office and gaming hardware especially for the Chinese and other Asian markets
• Control and quality assurance of the production of MX2 switches for use in Cherry partner products in the international market in cooperation with a new external production partner
• Focus on product innovation and building engineering competence for innovative gaming products in China with local development teams and start-ups in China.

Collaboration partner in China

• Production of MX2 switches for use in CHERRY partner products in the international market.

In order to implement the measures, total expenses of around EUR 20 million are expected in the fiscal year 2023. The amount mainly comprises the socially responsible reduction of jobs and external costs totaling around EUR 11 million (cash-effective in the fiscal year 2024) as well as impairment losses on property, plant and equipment and inventories of around EUR 9 million (non-cash).

Based on the current planning status, the expected total expense of EUR 20 million has an EBITDA impact of a partial amount of EUR 14 million. This partial amount will be adjusted as a non-recurring non-operating special item and therefore has no impact on the Company's current forecast for the adjusted EBITDA margin for the full year 2023 of around 10%.

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More information on Cherry SE is available on the Cherry website at https://ir.cherry.de.

About Cherry

Cherry SE [ISIN: DE000A3CRRN9] is a globally operating manufacturer of high-end mechanical keyboard switches and computer input devices such as keyboards, mice, and headsets for applications in the worlds of gaming, e-sports, office and hybrid workplaces, industry, and healthcare. Since it was founded in 1953, Cherry has been synonymous with innovative, high-quality products developed specifically to meet the various needs of its customers.

Cherry has its operational headquarters in Auerbach in Germany's Upper Palatinate region and employs approximately 500 people in production facilities in Auerbach, Zhuhai (China), and Vienna (Austria) as well as in various sales offices in Auerbach, Pegnitz, Munich, Landskrona (Sweden), Paris, Kenosha (USA), Taipei, and Hong Kong.

More information is available online at: https://cherry.de/

Contact:

Dr. Kai Holtmann

Investor Relations

Rosental 7, c/o Mindspace, 80331 Munich, Germany

Postal address: Cherrystrasse 2, 91275 Auerbach, Germany

T +49 (0)175-1971503

F +49 (0)9643 20 61-900

E-mail: kai.holtmann@cherry.de