Elamex 1997 Sales Up 11 Percent to $131.9 Million; EPS $0.99

29 January 1998

    EL PASO, Texas, Jan. 29 -- Elamex S.A. de C.V.
reported today preliminary unaudited numbers for fiscal 1997
year showing an 11 percent rise in sales to $131.9 million compared with sales
of $118.9 million in 1996, net income of $7.3 million compared to $7.9 million
in the prior year, and earnings per share of $0.99 in 1997 compared to EPS of
$1.15 reported in 1996 ($1.07 based upon an equal number of shares).
    Sales for the quarter were 31.4 million down marginally from $32.2 million
in 4Q96. Gross profit for the quarter was $3.8 million, compared to $4.2 in
4Q96. Net income for the quarter was $1.8 million, versus $2.1 million for
4Q96. Fourth quarter earnings per share were $0.24 compared with $0.29 per
share the prior year.
    "Increased activity with new 1997 customers, allowed us to compensate in
the fourth quarter for most of the sales impact caused by previously reported
ending projects," Hector Raynal, Elamex's CEO said today. "For the year,
although we faced the postponement of two important projects until 2Q98 due to
product redesign by customers,  we were able to increase our revenues by 11
percent."
    Operating income decreased from 8.7% in 1996 to 6.8% in 1997, due mainly
to wage inflation that was not offset by depreciation of the Mexican peso,
increased overhead expenses due to plant expansion that is not yet fully
utilized and competitive pressures in the business. Going forward we see a
steadier depreciation of the Mexican peso, in accordance with underlying
economic factors; better operating leverage as our new projects increase in
volume; and improvements in our competitive position derived from a planned
strong capital investment program that gives us more capacity and economies of
scale. Management directives to control cost during 1997 led to increased
productivity of SG&A expenses, which went down from a 7.0% of sales during
1996 to a 6.6% in 1997.
    During the quarter Elamex sold an underutilized building it owned in
Guadalajara.  Mr. Raynal said: "we are not in the business of owning brick and
mortar and decided to accept an attractive offer. We are now seeking leased
space better suited to the requirements of our local on-going operations".
This asset sale contributed $0.3 million to the fourth quarter's Other Income.
    Net income for the Quarter came out better than anticipated, as a result
of a smaller income tax provision, due mainly to exchange rate adjustments.
    Liquidity of $17.1 million was available at Quarter end to fund planned
growth, as the Company remains committed to pursue the start-up of new
programs, as well as complementary growth through acquisitions.
In a significant operating development, Elamex also announced today the
acquisition of 51 percent of Optimag, Inc.,  a California based start-up non-
invasive inspection technology company which will become a subsidiary of
Elamex.
    Mr. Raynal said of the acquisition: "Today's electronic products are
shrinking in size while growing in complexity.  As a manufacturing service
provider, Elamex has a strong interest in automation that improves production
efficiency. Optimag's Executives and Engineers have had extensive experience
in developing successful inspection products, including X-ray inspection of
printed circuit boards, high-speed optical inspection of film webs, and
computerized X-ray inspection products used in the testing of disk drive
components."
    Mr. Raynal added, "Long term, we see Optimag's inspection products
addressing a growing market place, as well as potentially benefiting our
production and test operations. In the near term this relationship gives us
access to a strong engineering team which  can support inspection and test
technology, an area that is becoming increasingly important in electronics
manufacturing."
    David T. Cornaby, Optimag's President and CEO, declared:  "Optimag is
dedicated to developing cost-effective, reliable, high-throughput optical and
electronic inspection test equipment.  Our initial products will focus on
optical inspection of small, complex parts such as disk drive heads and
semiconductors."
    Elamex's initial investment in Optimag is estimated at $1.3 million, of
which $0.6 million was recently funded. This investment is expected to be
incurred as an R&D expense during 1998. Although we are very optimistic about
the long term potential of this investment, the project is not expected to
generate revenues during 1998.
    Elamex is a Mexican contract manufacturing service provider.  The Company
delivers high quality finished assemblies to U.S. and Canadian Original
Equipment Manufacturers (OEM's) in the consumer, telecommunications, computer,
industrial, medical and automotive industries. Elamex participates in an
accelerating growth industry, where its unique competitive advantage results
from its demonstrated capability to leverage low cost, highly productive
labor, strategic North American locations, recognized world class quality, and
proven ability to combine high technology with labor intensive manufacturing
processes.
    This press release includes forward-looking statements that involve risks
and uncertainties, including, but not limited to, risks associated with the
company's future growth and profitability, the ability of the Company to
continue to increase sales to existing customers and to new customers and the
effects of competitive and general economic conditions.

                    ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
                     Consolidated Statements of Earnings
                              (In U.S. Dollars)

                       13 weeks ended December 31,    Year ended December 31,
                               1997          1996          1997          1996
                         (Unaudited)                (Unaudited)
    Net sales          $ 31,420,370    32,160,838   131,934,436    118,918,913
    Cost of sales        27,651,827    27,973,792   114,248,733    100,236,384

      Gross Profit        3,768,543     4,187,046    17,685,703     18,682,529

    Operating expenses:
      General and
       administrative     1,918,160     2,318,372     7,994,450      7,630,870
      Selling               240,326       155,110       749,739        685,544
      Total operating
        expenses          2,158,486     2,473,482     8,744,189      8,316,414

    Operating income      1,610,057     1,713,564     8,941,514     10,366,115

    Other income (expense):
      Interest income       359,077        63,951       669,418        255,362
      Interest expense      (73,057)      (84,051)     (223,842)     (944,003)
      Other, net            344,874       303,592       779,965        825,076
         Total other income
           (expense)        630,894       283,492     1,225,541        136,435

     Income before
       income taxes       2,240,951     1,997,056    10,167,055     10,502,550

     Income tax provision   468,945      (146,679)    2,846,776      2,575,079

     Net income         $ 1,772,006     2,143,735     7,320,279      7,927,471

     Net income per
       common share          $ 0.24          0.29          0.99           1.15
     Weighted average
       shares
       outstanding        7,400,000     7,400,000     7,400,000      6,880,548

    See accompanying notes to consolidated financial statements.

                    ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                              (In U.S. Dollars)

                                                December 31,      December 31,
                                                       1997              1996
                                                 (Unaudited)
    Assets
    Current assets:
       Cash and cash equivalents               $ 17,149,972       $ 6,269,825
       Receivables:
          Trade accounts, less allowance for
            doubtful accounts ($528,250 in
            1997 and $525,029 in 1996)           14,190,710        13,944,948

       Other receivables                          2,292,198         2,047,019
          Total receivables                      16,482,908        15,991,967

       Inventories, net                          13,415,409        16,200,149
       Prepaid expenses                             806,731           492,933
          Total current assets                   47,855,020        38,954,874

    Property, plant and equipment, net           28,326,923        28,610,719
    Other assets, net                             1,060,655           410,460
                                               $ 77,242,598      $ 67,976,053

    Liabilities and Stockholders' Equity

       Current liabilities:
          Notes payable                                $ 0                  0
          Accounts payable                       7,422,295          8,886,613
          Accrued expenses                       3,266,951          2,292,682
          Current installments of long-term debt         0                  0
          Current obligations of capital leases    414,134            564,216
          Taxes payable                          1,589,849          1,286,132
          Deferred income taxes, net             1,379,783          1,379,783
          Due to related parties                    45,480             86,743
             Total current liabilities          14,118,492         14,496,169

    Long-term debt, excluding
       current installments                             --                 --
    Capital lease obligations, excluding
       current obligations                         736,517            923,273
    Other liabilities                              245,704            212,403
    Deferred income taxes, net                   4,957,798          2,480,399
             Total liabilities                  20,058,511         18,112,244

    Stockholders' equity:
      Preferred stock, authorized
        50,000,000 shares, none issued
        or outstanding                                  --                 --
     Common stock 22,500,000 authorized
        and 7,400,000 shares
        issued outstanding                      35,010,468         35,010,468
     Retained earnings                          22,173,619         14,853,341
          Total stockholders' equity            57,184,087         49,863,809

     Commitments and contingencies                      --                 --
                                              $ 77,242,598       $ 67,976,053

SOURCE  Elamex S.A. de C.V.