 |
01 Nov 2022
But demand for green lasers used in solar cell manufacturing rebounds, and electric vehicle battery applications accelerate.
Applications in electric vehicle (EV) battery production now account for one-fifth of IPG Photonics’ sales, revealed the fiber laser vendor in its latest financial update.
For the three months ending September 30, the Massachusetts-headquartered firm reported revenues of $349 million, down 8 per cent on the same period last year - although that was largely due to the impact of the strong US dollar. Operating income of $93.2 million was down by a similar degree.
Despite that, and what CEO Eugene Scherbakov described as a challenging operating environment, with overall demand dropping in Europe and still impacted by Covid-related lockdowns in China, he remains positive - in particular when it comes to EV battery and solar cell manufacture.
“We continued to see upward momentum in our emerging growth products with strength in welding, primarily in e-mobility applications, cleaning, solar cell manufacturing, medical and 3D printing applications in the third quarter,” said Scherbakov.
“We are seeing accelerating investments in lithium ion batteries used in EVs globally, and expect to benefit from continued higher sales to EV applications in the next several years.”
EV investment cycle
Illustrating the momentum in the fast-growing sector, he pointed out that EV-related applications accounted for approximately 20 per cent of sales, or $70 million, in the latest quarter.
That proportion has increased from 10 per cent a year ago, with Scherbakov claiming that IPG’s quasi-continuous-wave lasers featuring an adjustable-mode beam were displacing more expensive blue and green laser options.
“To focus on global EV opportunities, we implemented some organizational changes and increased our sales and marketing capabilities.” the CEO told an investor conference call discussing the latest results.
“There are additional investments into EV batteries planned in Europe and North America and we are seeing increased activity in the US due to the recently announced government incentives.”
Scherbakov also pointed to industry estimates suggesting that global lithium ion battery capacity will triple by 2025 and may even reach 6 TW by 2030 - equivalent to a seven-fold increase over the 2021 total.
“We expect the EV investment cycle to continue and e-mobility sales to remain strong in the next 3-5 years, despite [a] less favorable outlook for the global economy in the near term,” said the CEO.
Medical demand; solar rebound
IPG is still in the process of diversifying away from its traditional cash-cow of laser-based cutting tools in China, with applications in photovoltaics, additive manufacturing, and medicine all offering growth at the moment.
“Our medical business also had another record quarter with revenue increasing more than 70 per cent year-over-year and showing continued growth in bookings,” Scherbakov reported, explaining how IPG’s thulium lasers were replacing older holmium laser technology in urology.
As a result, sales from medical applications look set to reach $70 million this year, up from $43 million in 2021, with recurring sales from consumable fibers contributing to revenue growth.
“We also saw strong demand in our green lasers for solar cell manufacturing applications,” pointed out the CEO. “This market is rebounding, driven by increasing investments in renewable energy solutions globally.”
Part of the reason for that rebound is the inflated cost of gas and oil resulting from Russia’s ongoing invasion of Ukraine - something that is about to have an additional impact on IPG’s own operations.
Russia options assessed
Founded in Russia by Valentin Gapontsev back in 1991, IPG still has operations near Moscow and in Belarus, and prior to the invasion it had employed around 2000 people in Russia.
IPG’s reliance on those sites has been scaled back since March, but the latest sanctions imposed on Russia, in response to increased targeting of civilian infrastructure across Ukraine, look like having a more severe impact.
“[The] new package of sanctions and new license requirements place even more limitations on trade with Russia, essentially curtailing our ability to import components to our European facilities and export items to our Russian facility, effective early January of next year,” Scherbakov told investors.
The CEO added that IPG’s contingency plans should see its dependence on Russian production eliminated before those new sanctions take full effect.
Company CFO Tim Mammen said that the firm was now assessing its options for the Russian operations, including its ability to recover the value of associated working capital and long-lived assets in the country.
“As of the end of the third quarter, we had approximately $44 million in cash and short-term investments and approximately $150 million in working capital, including $116 million in inventory in Russia,” Mammen added. “The net value of long-lived assets in Russia is approximately $95 million.”
Mammen also said that IPG would look at ways to further reduce expenses, including the sale of a corporate aircraft and two under-utilized buildings, to free up additional resources to invest in research and other core activities.
Looking ahead, the CFO indicated that IPG ought to post sales of somewhere between $300 million and $330 million in the closing quarter of the year. If correct, that would bring full-year sales to just over $1.4 billion, down slightly on last year’s record-breaking total.
• Shortly after the latest update, IPG’s stock price dropped in value by around 5 per cent on the Nasdaq. The company has now lost around half of its market valuation since the start of the year, with its capitalization now standing at around $4 billion.
 |  |  |  |  |  |  |
| © 2024 SPIE Europe |
|
