MEMC Electronic Materials, Inc. (NYSE: WFR) reported a slight decrease in gross profits for the third quarter, ending September 30, 2008.
MEMC is a leader in the manufacture and sale of wafers and related
intermediate products to the semiconductor and solar industries.
Gross profit in the quarter was $269.7 million, or 49.4% of net
sales, compared to $282.8 million, or 53.2% of sales, in the 2Q08 and $238.8 million, or 50.5% of sales, in 3Q07. Compared to 2Q08, gross profit declined
primarily as a result of hurricane related impacts and a $9.0 million
charge related to the potential shortfall to the annual purchase
obligation associated with a take or pay agreement for raw material
supply to our Pasadena facility, the company said. Discussions with the supplier are
ongoing and a portion of this charge may be recoverable in the fourth
quarter.
The company reported 3Q08 net sales of $546.0 million,
which represents an increase of 2.7% from 2Q08 net sales
of $531.4 million, and an increase of 15.5% from 3Q07 net
sales of $472.8 million. The increase in net sales was primarily the
result of higher product volumes.
Other highlights from the quarter inlcude the repurchased 2.5 million shares and commenced wafer deliveries to Conergy and Tainergy under long-term agreements
"MEMC grew sales by 3% sequentially, 15% year-over-year, and increased inventory by approximately $7 million, in spite of nearly three weeks of production impact due to hurricanes alone," said Nabeel Gareeb, MEMC’s chief executive officer. "On the margin front, we posted gross and operating margins close to 50% and over 40%, respectively, even after absorbing the Pasadena shutdown, clean-up and start-up costs, the impact of underutilized facilities, lower wafer pricing, lower spot polysilicon sales volumes in the third quarter and a charge associated with the potential shortfall to a purchase obligation."
"As we look at the current quarter, solar application demand continues to be healthy, while semiconductor application demand is weak, mostly due to customer inventory reduction efforts in light of uncertain macroeconomic conditions," continued Gareeb. "This is resulting in significant sequential reduction in semiconductor wafer demand. While it takes quite a bit more polysilicon to make up the equivalent revenue by producing wafers for solar applications, our increased polysilicon production capability demonstrated in the third quarter and our market positioning should allow us to show continued sequential revenue growth in the fourth quarter, while improving our margin profile. As a result of these offsets in the face of uncertain demand, we are targeting fourth quarter revenue to be approximately $540 to $600 million. In addition, we are targeting gross margin to be over 50% in spite of reduced utilization of our wafer manufacturing facilities and price reductions. Operating expenses are targeted to be approximately $41 million."
About MEMC
MEMC is a leader in the manufacture and sale of wafers and related intermediate products to the semiconductor and solar industries. MEMC has been a pioneer in the design and development of wafer technologies over the past four decades. With R&D and manufacturing facilities in the U.S., Europe and Asia, MEMC enables the next generation of high performance semiconductor devices and solar cells.
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