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M-Flex's 2007 Q2 Results Drop
Written by Tracy Heffner
Thursday, 10 May 2007
ANAHEIM, CA – Multi-Fineline Electronix Inc. reported that net sales for the second quarter of fiscal 2007 ended March 31, 2007 decreased by 8%to $113.4 million from $123.8 million for the second quarter of fiscal 2006, primarily due to decreased sales to the company's largest customer. Net income for the second quarter of fiscal 2007 decreased 75% to $3.1 million compared to $12.5 million for the same period in fiscal 2006. This year-over-year decrease in net income was due primarily to lower product pricing compared to the prior year. The company's gross margins for the second quarter of fiscal 2007 were approximately 11%, as compared to 21% in the prior year, and within the near-term gross margin range of between 10 to 15% announced previously by the company. Sequentially, net income declined 16% from the first quarter to the second quarter of fiscal 2007. On March 28, 2007, M-Flex announced that it had revised its earlier expectations for sequential growth between the first and second quarters in fiscal 2007 in anticipation of less than expected sales volume to its largest customer, a handset maker. For the first six months of fiscal 2007 ended March 31, net sales decreased approximately 10% to $237.3 million from $263.5 million during the same period in fiscal 2006. Net income decreased to $6.7 million compared to $29.9 million in the same period in fiscal 2006. The principal reason for the substantially reduced net income is a reduction in gross margins for the first six months of fiscal 2007 to 11.7% from 22.5% for the comparable period in the prior fiscal year. According to Phil Harding, M-Flex's CEO, the company's sales to its largest customer declined approximately 30% during the second quarter of fiscal 2007 from the same period in 2006. Compared to the first quarter of fiscal 2007, sales during the second quarter of fiscal 2007 to this customer decreased 20% as a result of less than expected shipments. However, sales to M-Flex's second largest customer, another handset manufacturer, grew sequentially 12% from the first to the second quarter of fiscal 2007.
"Despite the disappointing performance due to the slowdown in shipments to our largest customer during the second quarter compared to our earlier expectations for sequential growth, we are pleased with the overall success of our customer diversification efforts,” Harding said. "In anticipation of the need for additional manufacturing to satisfy the demand from our more recent customers and new programs that we expect later in fiscal 2007, we have initiated a capital expansion plan of approximately $33 million. We expect these expenditures to be used primarily to increase our assembly capacity in the expanded MFC2 facility in Suzhou, China, and in several satellite locations in Suzhou as well."
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