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Newport, Rofin-Sinar take a hit

08 May 2009

Financial results from the two companies demonstrate the severity of the economic slowdown across all sectors, but both find reasons for optimism.

Sales and orders fell drastically for Newport in the first quarter of 2009 across all of the company's primary end markets, reflecting wider deterioration of macroeconomic conditions. Total sales in Q1 fell by 22% to $89.5m (€65.9m) and the company reported a net loss of $4.8m, compared with net income of $2.5m in the equivalent quarter of 2008.

The most significant decline occurred in the company's microelectronics sector, with sales falling $18.9m or 50.8% in Q1 compared with the same period a year ago. This sector includes Newport's semiconductor and solar-cell customers, and in line with other industrial laser vendors the company noted the relative optimism in photovoltaic markets, where sales actually increased by $2.5m. That said, new orders from solar-cell manufacturing customers declined to only $1m (from $15m in Q1 2008) as those customers responded to difficulties in obtaining funding for new projects.

Sales to the scientific research, aerospace and defence markets were the most resilient in the company's portfolio, falling only 1.4% to $36.8m.

"Our financial performance in the first quarter of 2009 demonstrates our ability to reduce our costs in response to challenging market conditions," commented CEO Robert Phillippy. "By taking aggressive actions, we were able to reduce our first-quarter operating loss compared with the fourth quarter of 2008, despite a $17.9m reduction in sales. Although we expect our revenue to continue to experience downward pressure in the second quarter of this year, we fully expect that the actions we are taking will enhance our competitiveness when market conditions improve."

On the rebound?

The standout number in Rofin-Sinar's Q2 2009 results was a precipitous drop of 89% in net earnings, which tumbled to $1.1m from the $10.7m reported in the equivalent quarter of 2008. Sales dropped 45% to $76m.

"Given the strong decline in sales over the last six months, I think not losing money was quite a success," CEO Gunther Braun noted in an analyst call.

Positive signs from Asia, especially China, where Rofin's penetration is increasing according to Braun, and robust performance in niche markets such as smart cards and medical devices led the CEO to carefully float the notion that the worst might be over.

"In January and February we faced very low order entry across the board and across all industries we serve, but we saw a rebound in March and also in April," he said. "Normally, I wouldn't talk about the April order entry but I believe it is important to understand that business may be improving. It is too early to say that this is a trend, but we are cautiously optimistic."

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