22 December 2010

Emcore’s net loss slashed to $0.9m as quarterly revenue grows 16%

For fiscal 2010 (to end-September), Emcore Corp of Albuquerque, NM, USA, which makes components and subsystems for the fiber-optic and solar power markets, has reported revenue of $191.3m, up 8% on fiscal 2009’s $176.4m. By segment, Fiber Optics was $121.7m (up 7% on $114.1m) and Photovoltaics was $69.6m (up 12% on $62.3m).

For fiscal fourth-quarter 2010, revenue was $54.1m, up 16% on $46.6m last quarter and up 34% on $40.5m a year ago. By segment, Photovoltaics rose 30% on $15.1m last quarter to $19.7m (36% of total revenue, up from 33%), driven mainly by base solar power generation products. Fiber Optics rose 9% on $31.5m last quarter to $34.4m (64% of total revenue, down from 67%), driven mainly by higher sales of integrable tunable laser assemblies (ITLAs), active optical cable (AOC), and CATV products. This was despite the effects of the US International Trade Commission (ITC) issuing a limited exclusion order and a cease and desist order on parallel optics device products found to have infringed patents belonging to Avago Technologies.

However, gross margin has fallen from 27.5% last quarter to 23.6%. By segment, gross margin was 29.3% for Photovoltaics (down from 30.7%), due mainly to higher manufacturing expenses and certain contract losses, partially offset by leverage from higher volume. Gross margin for Fiber Optics was 20.4% (down from 25.9%), due mainly to higher material costs and an unfavorable shift in product mix as customers migrate towards newer technology platform (margins will continue to be under pressure until new products begin to ramp in the latter part of this year).

Nevertheless, net loss has been cut from $16.3m a year ago and $9.2m last quarter to just $0.9m. For full-year fiscal 2010, net loss was $23.7m, cut from $138.8m in fiscal 2009, due partly to gross margin improving from minus 3.6% in fiscal 2009 to 26.5%.

During the quarter, cash and cash equivalents rose from $14.4m to $19.9m, and working capital rose from $33.1m to $34.9m. Compared with consuming $29.6m of cash in fiscal 2009, in fiscal 2010 Emcore generated $3.4m in cash from operations, due mainly to the improved operating performance and working capital management, as well as an increase in customer deposits and advanced payments.

During fiscal quarter Q4, order backlog rose 6% from $67.6m to $71.3m, including $52.9m for Photovoltaics (up 25% on $42.5m, due to significant wins in the satellite business) and $18.4m for Fiber Optics (down 27% from $25.1m, due mainly to the parallel optics device business).

For fiscal first-quarter 2011 (to end-December 2010), Emcore expects revenue to fall slightly, to $50–53m, due mainly to a drop in Fiber Optics business (a short-term effect, due to the ITC ruling).

During fiscal 2010, management implemented a series of measures and continues to evaluate opportunities intended to align the cost structure with its revenue forecasts.

The end of July saw an agreement for the establishment and operation of the joint venture Suncore Photovoltaics Co Ltd in China, owned 40% by Emcore and 60% by San’an Optoelectronics Co Ltd of Xiamen, Fujian province, China, for developing, manufacturing and distributing Emcore-designed concentration photovoltaic (CPV) receivers, modules and systems for terrestrial solar power applications (under license from Emcore). All operational activities and business for CPV receivers, modules, and systems currently residing at both San’an and Emcore’s Langfang, China manufacturing facilities will eventually be transferred to Suncore.

Also, an agreement in early December with Huainan municipal government of Anhui province calls for Emcore and San’an to register Suncore (for engineering, manufacturing and distribution operations) in the Economic and Technology Development Zone of Huainan City. Suncore is expected to establish a total of 1000MW of manufacturing capacity at the site over the next five years, including 200MW to be ready by the end of 2011, 300MW by the end of 2013, and the remaining 500MW by the end of 2015. Total capital expenditure and working capital investment is estimated to be RMB8bn ($1.2bn).

To support start-up and on-going operations, Huainan will provide a land grant of 263 acres, extended tax holidays, and other financial incentives. Also, within three days of the start of plant construction, Huainan will provide a cash grant of RMB500m ($75m) for capital equipment purchases. For the first 1000MW, Huainan will also provide a RMB1.4 ($0.21) cash rebate for every watt of CPV systems manufactured in Huainan and sold in China.

While Emcore will continue to make CPV cells in Albuquerque, Suncore will serve as Emcore’s primary low-cost/high-volume manufacturing base for CPV receivers incorporating its CPV solar cells, and for CPV modules and systems to support both Emcore’s and San’an’s worldwide sales efforts. With production expected to begin in September, Suncore will start work on supplying immediate demand for 12MW of CPV systems for San’an’s current customers and 3MW of CPV components for projects sourced by Emcore. Also, Emcore and San’an are pursuing multiple CPV project opportunities in China’s emerging market, including the 280MW solar energy plan in six western regions of China recently announced by the Chinese government.

“With the JV taking on the execution of manufacturing as well as the business development in China, Emcore can focus on continued development of our next-generation CPV products and solar business development in North America and Europe,” notes president & CEO Dr Hong Q. Hou.

With respect to measures taken to improve liquidity, in November Emcore entered into a three-year $35m asset-backed revolving credit facility with Wells Fargo Bank, which can be used for working capital, letters of credit, and other general corporate purposes (such as funding the construction space of the firm’s terrestrial solar project).

See related items:

Emcore revenue shrinks 3% as it concludes accounting review

Emcore losses slashed as revenue grows 14%

Emcore revenue recovers a further 5%, driven by space PVs and CATV

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