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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.

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