19 Oct 2006
Despite the supposed growth of its core display and semiconductor markets, Micronic Laser Systems reports weak trading figures for 2006, especially in the third quarter.
Micronic Laser Systems, based in Täby, Sweden, has reported a significant decline in both sales and future orders in its third financial quarter. Profits in the first nine months of 2006 increased to SEK 114m (about $16m), up from SEK 10 million in 2005. However, in the third quarter the company posted a loss of SEK 112 million, compared with a profit of SEK 57m for the same period last year.
Net sales for the first nine months of 2006 totaled SEK 939 m, up from SEK 693m on 2005, but third quarter sales fell from SEK 303m in 2005 to SEK 98m in 2006.
These disappointing results reflect the fact that Micronic's order intake during the first nine months of 2006 reached SEK 544 m, less than half of the figure for the period a year earlier (SEK 1,143m). Orders worth SEK 113m were booked in the third quarter, compared with SEK 586m in the same period last year. What's more, the order backlog at the end of the period was SEK 425 million, about a quarter of the SEK 1,297m that had been booked at the same time in 2005.
"The third quarter was weak in terms of sales. Demand for our products can change rapidly," said Sven Löfquist, president and CEO. "This is also clearly visible in our order intake, which reached only SEK 113 million. The low order intake for display products is in line with our predictions for flat demand in the second half of 2006. In the semiconductor segment, both orders and sales fell short of expectations. We are now making an intensive effort to complete existing sales commitments in Q4."
He added that Micronic's "very low" gross margin of only 3% for Q3 was primarily attributable to soft sales and the product mix. Gross margin for the entire nine-month period was 55%. Due to the weak order level, Micronic will have to reduce costs, which will be achieved mainly by cutting the number of contract employees and consultants, but also by downsizing its own staff.
"The total effect of these measures will be an annual cost reduction of more than SEK 100 million [$13.6 million]," Löfquist added. "Despite a disappointing third quarter, operating margin reached 12% for the nine-month period and more than 20% adjusted for capitalization and amortization of development costs."
On a more positive note, the company says it expects a "strong" Q4 and to restore its key financial ratios. "We are now predicting sales in the range of SEK 1,300 to SEK 1,500 million. Placement in the upper end of this range will require another major sale with recognition of income during the year, which we have the potential to achieve, " he concluded.