Novanta says that its photonics division - including the likes of Laser Quantum, Cambridge Technology, and recent acquisition Arges - will launch a series of new product platforms this year, as it looks to bounce back from a sales decline in 2019.
The Boston-headquartered firm has just reported total sales of $160 million in the final quarter of 2019, up slightly on the same period in 2018. However, the photonics division’s contribution to that total declined 6 per cent year-on-year, to $58.4 million.
For the full year, revenues attributed to the photonics division stood at $230 million, down 8 per cent from $249 million in 2018. Novanta said its UK-based Laser Quantum division saw a double-digit decline in revenues, partly the result of a dip in demand for its solid-state lasers used in DNA sequencing equipment.
Target areas
But in a conference call with investors, Novanta’s CEO Matthjis Glastra struck a positive tone, saying that the company’s “innovation pipeline” in photonics was “the best it has ever been”, and that it had been accelerated by last year's acquisition of beam delivery system specialist Arges.
Target application areas for the new lines of photonics products include laser additive manufacturing, micromachining, and electric vehicle battery welding, the combination of which are expected to deliver an overall additional market opportunity of around $150 million.
Boston-headquartered Novanta said that sales of those new products likely wouldn’t filter through until early 2021, after being launched in the latter part of this year.
At last month's SPIE Photonics West exhibition, Laser Quantum launched the latest version of its "gem" laser series, offering a new 640 nm wavelength for applications in super-resolution and confocal microscopy.
Like other companies in the industrial photonics space, Novanta indicated that it had seen some signs of recovery in the market shortly before the outbreak of the Covid-19 virus, in particular for applications related to the roll-out of 5G communications in China.
And while Glastra said that the company’s Suzhou operations were now running at 90 per cent capacity, suppliers and customers in the country are only coming “back online” slowly, and there will inevitably be an impact on sales in the current quarter.
“This epidemic is expected to have a temporary impact on our sales of products sold directly to China, which represent just over 10 per cent of our company's total sales,” noted CFO Robert Buckley, quantifying the sales hit at between $10 million and $15 million for the current quarter.
UK investment
However, the company has decided to stick with its full-year financial guidance of $645 million-$660 million for 2020, up from $626 million in 2019 and indicating that it expects the effects of Covid-19 to be temporary - notwithstanding any significant further spread of the disease.
Glastra added in the investor call: “What you read in the news and what we feel on the ground in terms of our customer activity in China, particularly, is very different. We see a lot of strong interest.”
This year should also see a significant uptick in the firm's own capital expenditure, with Buckley telling investors that around $20 million of investment overall would include close to $10 million spent on a new facility in the UK.
Wrapping up the investor call, Glastra added: “While the short-term outlook is uncertain with the health epidemic, we're investing into the headwinds and remain focused on the long-term growth drivers in our business on the back of the macro trends in Industry 4.0, precision medicine, and minimally invasive surgery.”
