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Fabrinet optimistic as customers sign up to use new facility

16 Aug 2022

Photonics packaging service provider sees stock rise in value after posting 20% jump in annual sales.

Fabrinet, the Thailand-headquartered company that packages optics products on behalf of some of the biggest companies in the photonics sector, has posted record-breaking annual sales of $2.26 billion - up 20 per cent compared with the prior year.

That momentum also fed through to the company’s bottom line, with Fabrinet registering a pre-tax income of $207 million for the year, up 37 per cent over the same time period.

And after CEO Seamus Grady said he was optimistic about future growth and initial customer interest in a large new manufacturing facility, the Nasdaq-listed firm’s stock price rose in value by more than 10 per cent, and now stands close to an all-time high.

Fast-growing footprint
For the closing quarter of Fabrinet’s fiscal year 2022, which ended June 24, the company delivered a pre-tax income of $58.1 million on sales of $588 million - up from $40.3 million and $510 milion a year ago, respectively.

The latest level of profitability is better than had been expected, thanks in part to the relative strength of the US dollar, and with Grady pointing out that the solid figures had been achieved despite the ongoing challenges of the semiconductor component supply chain.

It now appears that there may be a glimmer of light at the end of that tunnel, with the CEO telling an investor conference call:

“While we have started to see some improvements in supply availability for certain parts, the most significant constraint to our growth continues to be the supply environment, which we are managing as effectively as possible.”

Capacity constraints are part of the reasoning behind a large new manufacturing facility called “Building 9” just opened by Fabrinet at its Chonburi campus near Bangkok.

“This one building expands our global footprint by approximately 50 per cent and provides us with ample capacity to continue growing our business over the next several years,” Grady said.

“We have already begun installing equipment for our first customer at Building 9, and expect that if all goes well we could start to see revenue from this facility by the end of the September quarter.”

Fabrinet is also in the process of installing equipment for two additional customers who are slated to start production at the 1 million square-foot site by the end of the calendar year, the CEO added.

Communications push
Driving the current period of growth are largely Fabrinet’s major customers in the optical communications sector, notably the likes of Cisco, Infinera, and Lumentum - each of whom account for more than 10 per cent of company turnover.

For the most recent quarter, optical communications accounted for $465 million in sales revenues, up 20 per cent on the same period last year and responsible for around four-fifths of the firm’s overall business.

Fabrinet attributed $151 million of its sales in the latest quarter to silicon photonics technology, with that total up nearly 40 per cent year-on-year.

The company also provides packaging services for industrial lasers, where revenues of $37.2 million were in line with its expectations.

Looking ahead, Grady and his executive team indicated that sales in the September quarter would rise again, to between $620 million and $640 million - although approximately $20 million of that total is due to the next accounting period being a week longer than normal.

“With strong ongoing demand trends, we are optimistic that we can continue to execute well and extend our track record of success in fiscal 2023 and beyond,” concluded the CEO.

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