In what is traditionally a slow period and in comparison with already record sales in the first quarter of 2005, the mobile and ID segments delivered growth with an unrivalled level of smart card shipments.

During the first three months of the year, Oberthur Card Systems has delivered 56 million microprocessor cards, a 29.4% increase year-on-year.

In the Mobile segment, volumes reached a record level at 33.8 million units, showing a 70.7% growth compared to Q1 2005, essentially pushed by significant deliveries in North America, Middle-East and India, where the company has increased its market share substantially. Oberthur Card Systems has achieved a tremendous performance in emerging markets, which should migrate to high-end products in the near future. As a consequence, the product mix has temporarily been modified due to the great increase of middle range card volumes. Oberthur Card Systems has once again confirmed its strong position in the high-end segment as more than 50% of SIM volumes are high-end cards, a 37% increase of high memory cards compared to Q1 2005. Stronger competition in the market combined with a modified product mix this quarter led to a 40% decrease in the average selling price. Sales in Mobile Communications continued to grow and amounted to €39.4M, a 2.7% increase at constant exchange rate compared to Q1 2005.

Sales of payment cards amounted to €24.7 M, a 23.4% decrease at constant exchange rate compared to Q1 2005, with 16 million cards delivered vs. 19.6 million for the corresponding period last year. Oberthur Card Systems is satisfied with the sequential trend: the company delivered a remarkable and unusual performance this quarter as volumes remained stable. In addition to this, the average selling price showed a 3.6% increase compared to Q4 2005, due to an improved product mix in Europe and exchange effects in the United States. In the meantime, the contactless payment card segment continued to develop favourably in the first quarter with deliveries of several million units, driven by large-scale deployments in North America.

Sales for Identity and Security segment reached €10.6 M, up 18.9% on a year-on-year basis. Volumes for the Identity and Security segment reached 5.9 million units, a 61.1% growth pushed by strong demand in the Pay TV sector and e-passport, Moroccan ID card deliveries. The ASP decrease was mainly attributable to the expected price pressure in the pay TV sector.

Sales in the Other Cards Segment – magnetic stripe cards, scratch cards and memory cards – amounted to €20.6 M, showing a 5.0% increase year-on-year. Magnetic stripe card volumes were stable in the United States while experiencing a strong growth in the MARS[1] region, mainly due to the acquisition of Africard (€1.4 M sales).

Sales of Services and Solutions – €26.4M – are up 14.0% compared to Q1 2005. This segment, consisting mainly of personalization services but also licensing fees for €2M, has been boosted by a dynamic North American market.

Outlook:

Oberthur Card Systems' sales should increase during the full year 2006 and growth should accelerate from the coming months:

Mobile Communications should become a strong engine for growth in the months to come. Due to the consolidation of the industry and its even more sustained efforts in the segment, Oberthur Card Systems is in a good position to gain market share in this area. In parallel, capitalizing on recent innovations in products and applications – GIGAntIC, AngelIC, Mobile TV - the company should benefit substantially from the willingness of European operators to move forward the digital convergence planned for the second half of the year.

The Payment market, which has recently seen slightly lower levels of activity, should enter a new ramp-up phase with program launches in Europe and Asia. Building on its position as a personalization world leader with a strong position in Western Europe, Oberthur Card Systems continues to gain market share in this activity through new bureaus, partnerships and joint ventures throughout the world, most recently in Spain, Asia, Central America, Eastern Europe and the Middle East.

In the "Identity & Security" segment, Oberthur Card Systems will continue to broaden its participation in an increasing number of projects across the five continents. In addition, the roll-out of major programs in North America and Europe should sustain growth this year.

In a still highly competitive and changing market, Oberthur Card Systems pursues its strategy for development, innovation and streamlining of industrial process to remain in the best position to leverage, in the mid-term, a favourable situation.