IQE expects revenue growth in second-half 2012 following Q2 recovery
According to an interim trading update for first-half 2012, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK expects to report first-half revenue of about £34m and EBITDA (earnings before interest, tax, depreciation and amortization) of £4m with net debt of less than £8m.
IQE's board says it remains confident of meeting its full-year expectations, given the notable second-half bias in revenues this year as a consequence of the destocking in second-half 2011 and first-quarter 2012, and the transfer of the in-house molecular beam epitaxy (MBE) epiwafer manufacturing operation of RF Micro Devices Inc of Greensboro, NC, USA to IQE this July.
As anticipated, the inventory correction related to market share swings at two major wireless customers in the latter part of 2011 impacted first-quarter 2012. However, sales and customer order patterns returned to normal in Q2/2012, and IQE exited the half-year strongly. Customer qualifications have progressed well, says IQE, and the outlook for wireless remains strong, driven largely by the increasing penetration of smartphones and 4G/LTE technology.
Major developments during first-half 2012 were the completion of two strategic transactions: an exclusive supply contract and strategic investment in Solar Junction Corp of San Jose, CA, USA, which manufactures III-V multi-junction solar cells for concentrating photovoltaic (CPV) modules, together with the acquisition of the RFMD's in-house epitaxial business.
In February, IQE made a strategic investment and exclusive wafer supply agreement with Solar Junction, marking a significant step in its strategy to become a supplier of CPV wafers for the solar power markets, the firm says.
Following the Solar Junction deal, project announcements include a 450MW installation in Mexico, confirming that the CPV market is rapidly gaining traction, reckons IQE. Solar Junction and IQE have received initial production orders and expect to capture a substantial share of this emerging market. The installation of tools at IQE is progressing in line with the board's expectations, and will be followed by a technology transfer. Once qualified, the tools will be used to meet existing production orders.
As well as acquiring RFMD's in-house MBE epitaxy manufacturing unit, IQE also secured a seven-year wafer supply agreement with RFMD. This is expected to deliver a step increase in IQE's revenue and profitability in second-half 2012. It also complements the Solar Junction investment by bringing spare capacity to service the high-growth CPV market, says IQE.
IQE adds that it continues to make good progress across its optoelectronics and electronics businesses in development projects spanning emerging high-growth opportunities.
''The deals with Solar Junction and RF Micro Devices represent significant milestones in the execution of our growth strategy and will significantly enhance both our short- and long-term growth,'' says chief executive Dr Drew Nelson. ''They are highly complementary, extending our critical mass and global leadership in wireless and bringing spare capacity to service the emerging high-growth CPV market,'' he adds.
''The outlook for the group's core wireless markets continues to look strong and, with our capacity expansion program nearing completion, we are well positioned to deliver strong sales growth and return to free cash generation,'' Nelson concludes.
IQE expects to report its full interim results in the week beginning 24 September.
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IQE Company Profile
IQE
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