AZ Electronics Pares Outlook on Slowdown in Demand for Computers

AZ Electronic Materials SA forecast a slower pickup in demand for products and chemicals used in computers and smart phones than it previously estimated as a consumer slowdown hurts production of electronic goods.

Sales in the first half fell 5 percent to $364 million, the Luxembourg-based company said today. Credit Suisse had predicted $369 million. Shares of AZ Electronic fell 3.9 percent to 304.9 pence in London trading as of 10:06 a.m.

Fewer sales of computers and flat-panel screens was compounded by Apple Inc.’s patents spat with Samsung Electronics Co. That’s disrupting the supply chain as the companies adjust production and suddenly switch suppliers of semiconductors, AZ Electronic Chief Executive Officer Geoff Wild said in an interview today. The company now anticipates a “softer” pick-up in demand for its products in the second half than previously.

“While into the second half the outlook remains mixed, we continue to look for a more supportive 2014,” David Mulholland, an analyst at UBS, said in a note.

Wild said he isn’t adjusting his earnings expectations for the full year as there’s growth in top-end smartphones and retinal screens, and AZ Electronic has gained share in some markets in Japan.

Organic Diodes

Promising areas of growth are the new flexible screens, solid-state memory used in cloud computing and organic light-emitting diodes, knowns as OLED, Wild said.

Earnings before interest, taxes, depreciation and amortization fell 12 percent to $110.7 million, against a prediction of $105 million from Credit Suisse. UBS said weaker-than-expected revenue will probably lead to a 2 percent to 5 percent cut in Ebitda estimates for this year.

“We’ve no plans to scale back R&D and investment,” Wild said. “This industry is still in its infancy. Customers are finding it more difficult to shrink their devices and collaboration with suppliers is getting much more intense than I’ve ever seen before.”

Before it's here, it's on the Bloomberg Terminal.