27 October 2011

Aixtron’s Q3 revenue down nearly 50% due to Asian market correction and credit tightness

For third-quarter 2011, deposition equipment maker Aixtron SE of Herzogenrath, Germany has reported revenue of €89.8m (down 49% on €175.6m last quarter and 58% on €212.7m a year ago). Of total revenue, 86% came from equipment sales and 14% from spare parts and services. By region, 86% came from Asia, 4% from Europe, and 10% from the USA.

The sudden drop in revenue is attributed mainly to a small number of significant customer-delayed deliveries, which are also reflected in the order backlog adjustment (announced on 15 September). The previously high investment activities by Asian LED makers (driven by substantial government funding) have become restrained by an unscheduled but significant slow-down in demand, explains Aixtron. This partially resulted from insufficiently developed end-market demand, but is also evidence of some financing pressures on the Asian LED makers, including increasing credit tightness in the region, the firm adds.

Gross margin has fallen further, from 52% a year ago and 44% last quarter to 43%. EBIT (earnings before interest and taxes) operating profit has fallen from €82.6m (39% operating margin) a year ago and €54.3m (31% margin) last quarter to just €0.6m (1% margin). However, without non-operational currency-related effects, EBIT would have been €13m (14% margin).

Net income has fallen from €56.8m a year ago and €38.2m last quarter to just break-even. Free cash flow was –€29.3m, compared with €8.8m last quarter and €77m a year ago. Cash & cash equivalents plus cash deposits have fallen from €342.2m to €318.6m (down from €444.6m a year ago).

As a consequence of the slowdown in Q3/2011, equipment order intake was just €51.5m, down by 77% from €222.2m last quarter. During the quarter, equipment order backlog fell by 34% from €373.5m to €244.8m (after management revised down the backlog by €100m on 15 September).

Despite the current market correction, Aixtron’s management remains convinced that this temporary period of uncertainty will be followed by the development of a sustainable LED lighting industry. “There can be no doubt in anybody’s mind that the LED lighting investment cycle will come and will be the biggest end-market opportunity this industry has ever seen,” asserts president & CEO Paul Hyland. “It is not a question of ‘if’; it is only a question of ‘when’,” he adds.

“In the difficult market conditions we face today, we are exercising our operational business flexibility and have already initiated immediate cost-reduction measures to ensure that the margin effect of reduced shipping volumes is minimized,” Hyland notes.

“However, the shorter-term market challenges we face will not distract us from the longer-term market opportunities, into which we are continuing to extensively invest in, through our R&D programs,” he continues. “We have a comprehensive pipeline of product developments in progress which directly address the needs of our customers to produce the highest-quality products at the lowest possible manufacturing cost... the products in development, will reinforce our traditionally very strong positioning in all of the markets we serve,” he believes.

Aixtron confirms the revised guidance for full-year 2011 that it gave on 15 September, i.e. an EBIT margin of 25–30% on revenue of €600–650m (the €470.8m in actual revenue from Q1–Q3/2011, plus €118–168m shippable equipment orders out of the €244.8m backlog and €11m in assumed Q4 spares and non-equipment revenues). The firm’s original guidance was for EBIT margin of 35% on revenue of €800–900m.

See related items:

Aixtron’s revenue and margins dip in Q2 after China customer delays

Aixtron’s revenue drops 9% in Q1

Aixtron’s revenue grows more than 2.5-fold in 2010

Aixtron reports revenue up 11% in Q3 to record €212.7m

See: Aixtron Company Profile

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