Volex Plc (VLX), a U.K. maker of power cords for computers and devices including Apple Inc. (AAPL)’s iPhone, fell the most in more than four years because of an unexpected drop in demand from its largest customer in the consumer sector.
Analysts at Jefferies Group Inc. and Investec Plc cut their earnings estimates for the current fiscal year by 30 percent following the London-based company’s unscheduled trading statement today.
“This is the second time within recent months where Volex has been caught out by scheduling and production issues at its largest customer,” Michael O’Brien, an analyst at Canaccord Genuity, said in a note to clients. “For a business where a large part of the investment case was predicated on improving margins by closer customer engagement, greater visibility and increased value add,” the news is disappointing, he said.
The shares slumped 27 percent, the biggest decline since January 2008, to 187.5 pence in London trading, the lowest price since July 2010. It was the worst performer today on the FTSE All-Share Index. The volume of Volex shares traded was more than 60 times the three-month daily average.
Louise Hadcocks, a spokeswoman for Volex at the Buchanan communications firm, declined to identify the customer involved.
Canaccord Genuity’s O’Brien titled his note “A chill wind in the Big Apple,” and Investec said Volex is adapting to new product specifications from a client. Among design changes to Apple’s latest iPhone is a different charging-dock connector.
“These lower growth expectations are driven primarily by a delay in product launches and a change in product component strategy by our largest customer,” Volex said in the statement. The company has “initiated a program of material cost reductions” and is introducing higher-margin products, it said.
In July, the company said it expected sales in the year ending March 31 to be ahead of previous management forecasts. Volex said today that revenue would only be about 5 percent more than last year’s $518 million. Before today’s announcement, revenue was predicted to be $577.5 million, according to the median estimate of eight analysts surveyed by Bloomberg.
While Investec lowered its stock recommendation to hold from buy and reduced its price prediction to 240 pence from 320 pence, analyst Chris Dyett said Volex is “very robustly financed” and will increase sales in each of the next three years.
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