Fiber laser giant IPG hit by 14- revenue decline in China

IPG Photonics Corporation (NASDAQ: IPGP) recently announced its financial results for the third quarter ended September 30, 2022.

"We are seeing upward momentum in emerging growth products, with a strong third quarter in welding, primarily in electric vehicle applications, clean, solar cell manufacturing, medical and 3D printing applications," said Dr. Eugene Scherbakov, CEO of IPG Photonics. "The operating environment remains challenging: including currency deficits, weak overall industrial demand in Europe and restrictions in China related to new crowns. At the same time, we are seeing accelerating worldwide investment in lithium-ion batteries used in electric vehicles and expect to benefit from continued high sales in electric vehicle applications over the next several years. In addition, our medical sales almost doubled compared to the same period last year as we are focusing on diversifying our revenues across end markets and applications and reducing the cyclicality and sensitivity of our business."

IPG's China revenue declined 14 percent in the first three quarters of 2022. IPG currently holds the largest share of the fiber laser market in China, followed by China's Rekor Laser. According to the third quarter report, Rekor Laser reported revenue of 2.321 billion yuan in the first three quarters, down 7.41% year-on-year; net profit attributable to shareholders of the listed company was 0.33 billion yuan, down 91.79% year-on-year.

01Financial Highlights

Condensed Consolidated Income Statement (Unaudited)

Condensed Consolidated Balance Sheet (Unaudited)

Condensed Consolidated Statement of Cash Flows (unaudited)

Third quarter revenue was $349 million, down 8 percent from the prior year quarter. The strong U.S. dollar reduced revenue by approximately $26 million or 7% compared to the same period last year. Materials processing sales, which accounted for 90 percent of total revenue, decreased 10 percent year-over-year, with sales growth in welding, cleaning and solar cell applications offset by lower revenue from cutting applications in China and Europe. Sales in other applications increased 10 percent year-over-year, primarily due to strength in medical, partially offset by lower revenue from the divestiture of the telecom transmission product line and lower sales in advanced applications. Sales of emerging growth products accounted for 43 percent of total revenue.

Revenue from high-power continuous wave (CW) lasers declined 14 percent year-over-year due to lower demand in high-power cutting applications, which was partially offset by strong growth in welding. Pulsed laser sales declined 6 percent compared with last year due to lower demand for cutting and marking (cutting and marking) applications, partially offset by growth in solar cell manufacturing and cleaning applications. By region, sales increased 1 percent year-over-year in North America, decreased 13 percent in Europe, decreased 14 percent in China and decreased 21 percent in Japan.

Amortized earnings per share (EPS) were $1.47, up 5 percent year-over-year. The gain on the sale of the telecom transmission business increased operating income by $22 million and increased amortized EPS by $0.32, which was slightly offset by restructuring charges of $1 million or $0.01 per share of amortized earnings, also related to the telecom business. Foreign exchange transaction gains added just under $1 million to operating income. The effective tax rate for the quarter was 21 percent, benefiting certain standalone items. During the third quarter, IPG generated $76 million in cash from operations; capital expenditures for the quarter were $25 million and stock repurchases were $71 million.

02Weak markets in Europe and China

"The order-to-shipment ratio was slightly higher than 1 in the third quarter as increased bookings for emerging growth products in most regions helped offset some weakness in the European and Chinese cutting markets." Dr. Scherbakov concluded, "Despite increased global economic uncertainty, we believe that macro trends such as electric vehicles, investments in renewable energy and automation, and a focus on energy efficiency due to increasing energy costs should continue to drive higher demand for our lasers."

For the fourth quarter of 2022, IPG expects revenues of $300 million to $330 million. The company expects a tax rate of approximately 25 percent for the fourth quarter. ipg expects to provide amortized earnings per share in the range of $0.70 to $1.00. The fourth quarter guidance range was reduced by approximately $28 million due to a foreign exchange deficit related to the current strength of the U.S. dollar compared to the fourth quarter of 2021.

However, actual results may differ from forecasts due to a variety of factors including, but not limited to, trade policy changes and trade restrictions with Russia, the COVID-19 pandemic, product demand, order cancellations and delays, competition, tariffs, currency fluctuations and general economic conditions.

About IPG Photonics.

IPG Photonics is a U.S. manufacturer of fiber lasers. IPG Photonics develops and commercializes fiber lasers for a variety of applications, including materials processing, medical applications and telecommunications. IPG has manufacturing facilities in the United States, Germany, Russia and Italy. Currently, the company is headquartered in Oxford, Massachusetts and has more than 25 facilities worldwide.

Reference Link：

https://www.globenewswire.com/news-release/2022/11/01/2545445/0/en/IPG-Photonics-Announces-Third-Quarter-2022-Financial-Results.html