Product category:
DC/DC Convertors
News Release from: Emerson Network Power - Embedded Power
Edited by the Electronicstalk Editorial
Team on 28 July 2005
Artesyn to close Hungarian plant
Artesyn Technologies has reported financial results for the second quarter ended 1st July 2005.
Artesyn Technologies has reported financial results for the second quarter ended 1st July 2005 Sales for the second quarter of 2005 were $108.1 million compared with $105.5 million for the corresponding quarter in 2004
This article was originally published on Electronicstalk on 4 Feb 2000 at 8.00am (UK)
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For the first six months of 2005, sales were $210.5 million compared with $202.0 million for the same period last year.
Total orders received during the quarter were $100.2 million, yielding a book-to-bill ratio of 0.93.
Backlog at the end of the quarter was $77.7 million with approximately 91% shippable during the third quarter.
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During the second quarter, Artesyn had 27 major design wins that the company estimates will realise approximately $221 million in lifetime project revenues.
For the first six months of 2005, the company had 57 major design wins and estimates lifetime project revenues of approximately $575 million to be realised in the next two to four years.
Net income for the second quarter of 2005 was $0.1 million, or $0.00 per share, compared with net income of $3.1 million, or $0.08 per share in the second quarter of 2004.
Included in net income for the second quarter were $3.3 million of restructuring charges associated with an initiative to reduce operating costs.
The restructuring charges, net of tax, totalled $2.7 million, or $0.07 per share, during the quarter.
Net income for the first six months of 2005 was $2.0 million, or $0.05 per share, compared with net income of $5.0 million, or $0.13 per share for the same period in 2004.
The company expects a total of $5.0 million of restructuring charges in 2005, associated with the cost reduction initiative mentioned above.
As part of this initiative, Artesyn also revealed that it will be closing the Tatabanya, Hungary manufacturing facility, and intends to award European manufacturing services work to Celestica, a global electronics manufacturing services (EMS) provider.
Most of the products currently being manufactured in Hungary will be transferred to Celestica's Romanian factory in Oradea.
This transition is expected to be complete by the end of 2005.
Savings in 2006 from this closure are estimated to be $6.0 million.
Discussing more about the factory closure, Artesyn's CEO and President, Joseph O'Donnell, stated: "The decision to close the Hungarian facility was difficult, but necessary to protect our competitive position while improving profitability".
"Unfortunately, since opening the plant in 2001, our customers have reassessed their regional sourcing needs resulting in an under-utilised facility".
"Our intent to outsource production to Celestica is primarily based on their larger purchasing power and ability to leverage economies of scale from a larger manufacturing base".
"Additionally, Celestica's global manufacturing structure will open up sourcing options in different geographic locations as we grow our global wireless infrastructure business".
"The new relationship with Celestica gives us the ability to leverage our cost structure, as well as improve gross margins and overall profitability".
Second quarter sales for the Power Conversion segment grew 5% to $92.1 million compared with $88.0 million for the second quarter of 2004.
Sales for the first six months of 2005 were $173.4 million compared with $171.4 million for the same period last year.
Revenues in the wireless division increased as several new rectifier programmes began shipping during the quarter.
However, Artesyn's largest market sector, servers and storage, continued to have slower than expected growth, negatively impacting sales and operating income for the segment.
Included in this segment's operating costs are restructuring charges of $3.1 million discussed in detail above.
As a result, the power conversion segment had an operating loss of $0.7 million for the second quarter and a loss of $1.8 million for the first six months of the year.
"Rectifier programmes have begun to add revenue to our wireless infrastructure business and we expect to see a positive impact for the remainder of the year".
"The server and storage business, however, will continue to be slow for the rest of 2005 due to some large programs ending sooner than anticipated and before many of the new program wins are rolled out".
"Based on three sequential quarters of large design wins in this market, we anticipate significant growth over the next two years", O'Donnell said.
Second quarter sales for the embedded systems segment decreased 9% to $15.9 million compared with $17.5 million for the second quarter of 2004.
Sales for the first six months of 2005 were $37.1 million compared with $30.7 million for the same period last year.
The decrease in sales is a result of two important wireless customers significantly reducing their demand due to operator delays of 3G rollouts in China and North America.
Operating income was $4.0 million for the second quarter and $11.0 million for the first six months of the year.
O'Donnell commented on the embedded systems second quarter results: "While sales for the segment were significantly less than planned this quarter, costs continued to be leveraged to maintain a healthy operating income".
"Unfortunately, large operator plans are sometimes pushed out, as was done this quarter and most likely for the remainder of the year".
"While this is disappointing, we do continue to anticipate significant growth for 2006".
The company expects the second half of 2005 to improve sequentially each quarter.
Sales growth for the second half of 2005 is expected to range between 8 and 10% compared with the first half of the year.
Second half operating costs may increase approximately $0.03 per share as a result of manufacturing inefficiencies associated with the transition of Hungarian manufacturing.
There will also be restructuring charges of approximately $0.02 per share in the second half.
Including these nonrecurring costs and restructuring charges, earnings per share for the second half of 2005 will range between $0.19 and $0.23 per share.
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