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29 Oct 2024
Fiber laser firm makes a move up the value chain as latest results show cost of Russia exit.
IPG Photonics has signed a $75 million deal to acquire one of its customers, in a move that sees it enter the market for laser cleaning systems.
The agreement to buy Germany-based cleanLASER, which IPG has supplied with fiber lasers for nearly 25 years, was revealed alongside the Nasdaq-listed company’s latest financial results.
They showed that IPG posted sales revenues of $233 million for the three months ending September 30, slightly better than forecast but still down 23 per cent on the same period last year.
Muted demand
“We continue to believe we are bouncing along the bottom of a muted demand environment,” observed CEO Mark Gitin, who also highlighted the firm’s complete exit from Russia, where IPG’s technology originated through the research of founder Valentin Gapontsev.
“We completed our exit from Russia and are strengthening our position in fast-growing high-precision laser cleaning applications with the announced acquisition of cleanLASER,” Gitin added.
“These moves, along with progress in our innovation pipeline and actions underway to gain efficiencies across our business, underscore that we are controlling what we can control as we position for demand recovery.”
The lower revenues seen in the current year are largely attributed to a dip in demand from the industrial laser sector, and from manufacturers of electric vehicles (EVs) in particular - where several car firms are holding off investments and delaying manufacturing ramps as consumers are buying fewer EVs than expected.
IPG is hoping to boost its sales by moving up the value chain and into cleaning systems, with the cleanLASER deal scheduled to close by the end of this year.
Based in Herzogenrath, near Aachen and close to the Belgian border, the firm is said to be a pioneer in the use of lasers for industrial cleaning, with an installed base of approximately 2000 systems worldwide and around $30 million in annual revenues.
“Cleaning is an important opportunity because traditional cleaning applications often rely on high levels of environmentally unfriendly consumables, such as acids and abrasives that must be disposed of,” Gitin told an investor conference call discussing the latest results, during which the purchase price was revealed to be $75 million.
Fraunhofer connection
Founded as Clean-Lasersysteme in 1997 by Edwin Büchter and Winfried Barkhausen, both from the nearby Fraunhofer Institute for Laser Technology (ILT), cleanLASER offers systems ranging from a backpack-style 12 W to a fridge-sized 2 kilowatt unit, with long optical fibers and high-specification processing optics designed to make the systems both flexible and precise to use, either as hand-guided or automated processing stations.
“The company serves a broad range of customers across the automotive, industrial, aerospace, medical, food, and other markets,” IPG said.
“Laser cleaning systems have emerged as a precise, cost-effective, and environmentally friendly alternative to traditional industrial cleaning solutions, offering a highly energy-efficient process that requires no cleaning media and significantly reduces process waste.”
cleanLASER announced that Büchter would continue to head up the unit as its managing director. “It was important for us to find a competent strategic investor and technology partner with whom we can jointly take laser cleaning technology to a new level in the medium and long term,” he said.
“We share a common technology-driven strategy as well as a passion for laser technology and its diverse areas of application. We see great potential in the highly efficient IPG fiber lasers.”
The fiber laser sources deployed by the company for cleaning applications are primarily manufactured by IPG‘s German subsidiary IPG Laser GmbH & Co. KG, which is based in Burbach.
Russia write-down
Earlier filings revealed that IPG had sold its Russian operations for gross proceeds of $51 million, partly to the management team at the IRE-Polus location near Moscow, and the firm’s latest figures indicated the financial impact of that exit to be around $200 million.
“This was not an easy task,” the CEO told investors, adding that IPG was now focused on optimizing its global manufacturing footprint while ensuring it has sufficient capacity to manage any future uptick in demand.
“We are working to decrease the cost of our products with a new generation of laser diodes that will also enable a significant reduction in the form factor of our high-power fiber lasers,” Gitin added.
Partly as a result of write-downs relating to its former Russian operation, as well as anoter $27 million in asset impairment charges relating to recent European Union trade restrictions on IPG's operations in Belarus, the fiber laser firm posted a pre-tax loss of $243 million for the quarter. That compares with a pre-tax profit of $67.8 million this time last year.
There appears to be little sign of a recovery in demand in the closing quarter of the year, with Gitin and his executive team expecting sales revenues of somewhere between $210 million and $240 million.
• News of the cleanLASER deal and the latest outlook appeared to have a positive impact on IPG’s stock price, which ticked up by around 10 per cent in early trading shortly after the announcements.
At around $86 - still down on the 12-month high of $110 reached in December 2023 - the stock price currently equates to a market capitalization of around $3.8 billion.
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