Sanmina Sees Earnings Below Estimates
finance.yahoo.com
SAN JOSE, Calif. (Reuters) - Sanmina Corp. (NasdaqNM:SANM - news) on Wednesday joined several other contract electronics manufacturers when it warned that results would miss expectations, as sluggish demand and high inventories rattle through the technology industry.
The company said it expects third-quarter earnings before one-time charges to be about 10 cents a diluted share. The consensus average of Wall Street analysts polled by Thomson Financial/First Call is earnings of 19 cents.
``Pushouts and cancellations have slowed both as a result of a decline in demand and what we believe is the beginning of the inventory correction,'' Sanmina Chief Financial officer Rick Ackel told analysts on a conference call. ``Unfortunately, it has not happened with the speed and breadth that we had hoped at the beginning of the quarter.''
He said the third-quarter charges are not material, but it is likely as the company restructures -- including possibly closing some of its 65 plants, executives said -- it would likely record further charges in the fourth quarter.
For the third quarter, ending June 30, Sanmina said revenues are now expected to be in the range of $760 million to $775 million. It will report third-quarter results on July 18.
In April, when it reported second-quarter results, Sanmina said it would earn 18 cents to 22 cents a share in the third quarter on revenue of $900 million to $1 billion.
``Although signs are showing that we are approaching a bottoming in this environment, it has not happened at this point in time,'' Ackel said. ``Our business is no exception to what our economy is experiencing.''
Shares of Sanmina fell 22 cents, or about 1 percent, to $20.08 in regular trade on the Nasdaq. In Instinet after-hours trading, the stock dropped to $17.90 before partly recovering to $18.57.
Over the past year, the stock has underperformed the Standard & Poor's 500 index by about 43 percent.
Sanmina also said it was nearing an agreement in principle to buy an advanced engineering and manufacturing facility from a leading communications equipment maker. It did not identify the selling company, but said details of the all-cash deal would be announced in the next several days.
The plant being purchased makes high-end communication products, including optical products, Sanmina Chairman and Chief Executive Jure Sola said on the call.
Lucent Technologies Inc. (NYSE:LU - news) is negotiating the sale of two manufacturing plants, but officials at the struggling telecommunications equipment giant declined comment on whether Sanmina was a buyer.
Ackel said the plant will add $200 million to $300 million to Sanmina's 2002 revenues and be slightly accretive to earnings.
Sanmina believes fourth-quarter results will be flat with the revised third-quarter numbers, added Ackel, who nevertheless would not call that an official forecast. Analysts were expecting Sanmina to earn 21 cents a share in the fourth quarter before the latest warning, according to First Call.
``We're not panicking here,'' Sola said. ``We're going to get through this.''
Other contract manufacturers also have struggled with the sluggish demand.
On Monday, the world's largest contract manufacturer, Solectron Corp. (NYSE:SLR - news) posted a net loss in its fiscal third quarter and sharply reduced its sales and profit targets for the current quarter.
Jabil Circuit Inc. (NYSE:JBL - news), another contract manufacturer, on Tuesday posted third-quarter results that met analysts' lowered forecasts, but said it cannot yet say when its business will bottom out.
A slowdown in technology spending has reverberated throughout the industry, decimating revenues of makers of everything from network switches to mobile phones to personal computers.
Ackel said Sanmina's operating margin in the third-quarter will be about 7 percent, below the April forecast of 10 percent. He said when revenues in a quarter fall below $1.2 billion, the company's ability to absorb overhead costs declines.
Nevertheless, Ackel said he expects cash and short-term investments to increase $50 million to $100 million in the third quarter, while inventories and receivables each are expected to decline a similar amount.
Ackel said the company expects to spend $30 million to $35 million in the third quarter and about half that total in the fourth quarter. In April, Sanmina said it expected to spend about $60 million in the last two quarters. |
