 |
 |
30 Jul 2024
Fiber laser pioneer’s stock price takes a knock after it reports a 24% decline in quarterly sales.
IPG Photonics, the company that pioneered the development of industrial fiber lasers, says that weak demand across key markets has dampened hopes of a recovery in the second half of 2024.
Reporting a 24 per cent year-on-year decline in sales for the three months ending June 30, the Nasdaq-listed firm indicated that the drop would be even starker in the September quarter.
Sales of $258 million in the June quarter were down from $340 million in the same period last year, but that total is expected to drop to somewhere between $210 million and $240 million in the current quarter.
At the mid-point, that would represent around a 33 per cent year-on-year fall, an outlook that sent the firm’s stock price slipping in value by nearly 5 per cent in early trading following the update.
Profits have also taken a significant hit, with IPG’s operating income of $12 million well down on the figure of $72 million posted a year ago.
Widespread uncertainty
IPG’s recently appointed CEO Mark Gitin said in a release announcing the quarterly results: “Our book-to-bill was below one for the second quarter, reversing the sequential improvement we saw in the prior quarter.
“Uncertainty across all major geographies, which is impacting industrial and e-mobility markets, is likely to weigh on demand through the remainder of the year.”
While IPG is working to diversify its offering with new hand-held laser welding tools and novel applications in medical and industrial heating markets, the Marlborough, Massachusetts, company remains strongly reliant on more traditional laser materials processing deployments.
Its latest figures show that these accounted for close to 90 per cent of sales revenues in the latest quarter, although cutting applications in China now represent less than 5 per cent of IPG’s overall sales.
Discussing the latest developments in an investor conference call, Gitin - who took over from Eugene Scherbakov in early June - emphasized IPG’s recent success in electric vehicle (EV) battery welding, where the company offers additional “wraparound” solutions such as scanning and in situ monitoring, which help with quality control to ensure the safety of the batteries:
European demand weakens
However, with several car makers now delaying investments, some laser deployments that had been expected to come to fruition shortly will now have to wait until next year.
“While we believe strongly in the future of EVs, the well-publicized slowdown in EV adoption in Europe and the US has prompted several customers to delay further investment in battery capacity around the world," Gitin said.
"Our prior expectation for a rebound in demand in second half seems less likely to materialize, and we currently are not expecting to see a meaningful recovery in our laser sales until sometime in 2025.”
He and long-time CFO Tim Mammen also highlighted particular fragility in Europe, with Mammen saying that already weak conditions in the region now appeared to be deteriorating further:
"In Europe, sales decreased 27 per cent compared to the prior year," he revealed. "Similar to the trends we saw in North America, cutting sales were impacted by large OEM customers reducing purchases as they managed their inventories.
"Economic conditions in Europe seem to be deteriorating further and impacting investments in industrial and automotive markets."
Product launches incoming
Gitin, who has spent more than three decades in the laser industry with Coherent and then MKS Instruments following its acquisition of Newport, brings extensive experience from significantly more diverse operations than IPG, and highlighted efforts to broaden the fiber laser firm’s applications base.
The new CEO said that over the next two quarters IPG would be launching a series of innovative products intended to replace energy-intensive or chemical processes in the industrial sector, and for urology and skin-related applications in medicine.
"I am particularly excited about the new growth opportunities for IPG where fiber lasers can replace incumbent technologies," he told investors. "There are areas where we can innovate to provide solutions to specific problems in a way that is much better for the environment as we are replacing processes that are typically done with harmful chemicals or a significant use of electricity."
• Immediately following the update, IPG Photonics’ stock price dropped in value by around 5 per cent, to trade at around $83. Close to a decadal low, that equates to to a market capitalization in the region of $4 billion.
 |  |  |  |  |  |  |
| © 2024 SPIE Europe |
|
