II-VI cuts 2012 guidance; assesses flood damage

21 Dec 2011

Infrared optics and crystal manufacturer revises outlook in light of revenue losses from subsidiary Aegis Lightwave.

Crystal maker II-VI has cut sales expectations for its final quarter of 2011 and the current fiscal year, after assessing the impact of flood damage at a contract manufacturer in Thailand.

The diversified company, which is one of the largest producers of infrared optics for industrial CO₂ lasers and thermal imaging systems, now expects to post sales of between $127 million and $129 million for the closing calendar quarter of the year – having previously predicted $133 million to $138 million.

And for its full fiscal year, which ends in June 2012, II-VI is now predicting sales of $550 million to $560 million. That represents a second downward adjustment within the past two months – the company had initially predicted FY2012 sales of approximately $600 million, before cutting that forecast to between $575 million and $590 million.

Thailand-based Fabrinet manufactures products for the II-VI subsidiary Aegis Lightwave, acquired in July 2011 for $52 million, and the severe floods at Fabrinet’s Chokchai campus have damaged Aegis’ machinery, equipment and inventory at the site.

II-VI’s revised outlook incorporates the expected loss of revenues on Aegis products, as well as additional costs required for alternative manufacturing and assessing flood damages, and the write-off of damaged machinery, equipment and inventory. Aegis sells tunable optical devices and optical channel monitors used in telecommunications and industrial applications.

The new guidance also takes account of a sudden drop in the price of tellurium, which II-VI sells through its Pacific Rare Specialty Metals & Chemicals subsidiary, and which is attributed to volatility in the photovoltaics market, where tellurium is used in cadmium telluride (CdTe) thin-film panels – an element of the market that is dominated by First Solar.

The floods in Thailand have disrupted manufacturing of a wide range of electronic and telecommunications products. Companies such as Opnext have shifted optoelectronic module manufacturing to other sites as a result, while reduced production of hard disk drives is expected to slow the market for PCs in 2012.