Bangkok--15 Aug--MPT
MPT announced the slow down in Q2’06 sales owing to the seasonally weakest quarter of the HDD industry, but having the confidence that performance in the later half of the year will be improving, on track to support the higher growth of the world HDD market and increase in orders from key customers
Magnecomp Precision Technology reported the slow down in orders of its main customers as compare to its forecast. Slow down can be attributed to Seagate-Maxtor acquisition related to the inventory clearance, which is expected to be resolved by the end of this year. In addition, as a result of write-off of obsolete inventory, impaired assets, and expenses from the plant shutting down of one of its manufacturing facilities in China, which are the main reasons affected the Q2’06 results to be much lower than the expectation. Nonetheless, the Company confirmed that these circumstances were temporary and prospect of the business during the second half of the year is better, it’s in line with the seasonally higher demand and the return of the long term purchase order from the main customer, Seagate, following the completion of its acquisition.
Mr. Albert Ong Kim Guan, Chief Operating Officer of Magnecomp Precision Technology had announced the financial performance of Q2’06, sales recorded Bt. 2,138.7 million, dropped by 7% comparing to the same period last year, which was Baht 2,294.3 million, gross margin was 7% dropped from the restated of 20% of the same period last year, which mainly due to the decline in order from customers. Utilization rate dropped to 65% from 85% in Q1’06, mainly due to the anticipated volume was delay to the later half. In addition, in Q2’06, the company recorded a write-off of inventories of products that unexpectedly went end of life and machines and equipments that were consequently made obsolete or and impaired as a result of the particular product. Additionally, there were severance charges and relocation expenses from the shutting down of one the factories in China, due to the shifting in demand to Thailand, as requested by the customers. These two charges are one time charges amounting Baht. 615.1 million. The company recorded this one time charges only in the second quarter, resulting to the loss of Baht 822.0 million in Q2’06’s performance, or Baht 0.39 per share compared to a net profit of Baht 79.5 million, or Baht 0.04 per share for Q2’05. Nonetheless, without the said one time charges, the company recorded a loss from the operation of Baht.206.9 million or a loss of Baht 0.10 per share.
Summary of half year performance: sales of Baht. 4,686.0 million, an increase of 12% from sales of Baht. 4,178.5 million reported for the corresponding period last year, net loss of Baht 680.3 million or a loss of Baht 0.33 per share. However, excluding the one time charges in the second quarter of Baht. 615.1 million, 1H’06 financial performance recorded an operating loss of Baht. 62.8 million or a loss of Baht 0.03 per share.
Nevertheless, despite the decrease in performance of the second quarter comparing to the Q1’06, which recorded a net profit of Baht. 141.76 million, we would like the investors to realize that the slow down in the abovementioned financial performance were mainly resulted from the one time charges of Baht. 615.5 million, in addition to the fact that the second quarter is a seasonally weak quarter of the HDD industry. Such slow down did not come from the loss in market share nor the lose of competitive advantage of the company or the slow down in overall demand of the world HDD. In the contrary, starting from the second half of 2006, the performance of the company will not only be improved, which due to the high seasons of HDD industry, but the higher demand of the usage of new model HDD in order to capture the market expansion of the HDD products i.e. 3.5-inch 160 GB and the new model of 2.5-inch HDD, which are the components in notebook computers and consumer electronic products i.e. Digital Video recorder (DVR), Personal Digital recorder (PDR), game console, set top box, etc. The company expected that the order from the core customers, will be improved and continue to grow. Expected shipment volumes in Q3’06 and Q4’06 will be around 80-90 million units and around 90-100 million units, respectively, increased from 74.3 million units in Q2’06. Owing to the positive factors in the second half of the year, the company expected that the financial performance for Q4’06, continuing to FY 2007 will be positive.
“It is the nature of HDD industry that the performance can be fluctuated according to the changes in demand in particular period of time, therefore, judgment on the performance of this business should be measured in long term average. Hence, we should not very much concerned about the increase or decrease in each quarterly. Q2’06 result was a temporary event, whereas, the effect from the merger of the customer, the preference of new HDD products, which is occurred very fast, are the unexpected events, resulting to the business plan in the second quarter. However, all these extraordinary circumstances are unlikely to repeat in the near time. In addition, these events can turn to be the positive factors that support the long term plan of the company for example the closure of the China plant will provide the increase in efficiency. The company believes that the lowest point has been passed and would like to ensure the investors the competitive advantage of the company remains, which comes from the existing strong fundamental in various areas, the management capability, the production efficiency, the new product launches, strong research and development, all these factors have already been reflected in the continuous growth during the past few years”, quoted by Mr. Steven Glenn Campbell, the CEO.
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