Even after analysts repeatedly raised theirlatest quarterly profit estimates for Kemet Corp., the capacitor manufacturer still exceeded Wall Street's expectation by up to 35% as sales volume rose and the average selling price of the company's products improved strongly.
Kemet's fiscal 2000 third quarter profit rose 881% to $18.2 million, or 45 cents per share, in the period ended Dec. 31, from $1.9 million, or 5 cents per share, in the corresponding 1998 quarter. Although the company's sales rose more than 50% during the period, most of the gains came from improved gross margin, whcih strengthened to 30.4% from 24.7% in the year-ago period. Kemet's sales rose to $215.1 million, from $141.9 million, largely on higher sales of surface-mount capacitors.
Sales for capacitor manufacturers have improved significantly in the last two quarters as demand for their products surged above current capacity and helped to eliminate the soft pricing condition. The tight supply situation resulted in many manufacturers putting their customers on allocation even as they rushed to add extra capacity to meet rising demand from telecommunications and data communications OEMs. Unfortunately for many of the OEM customers, most of the new manufacturing plants are not expected to come on line until sometimes in the second quarter of this year, analysts said.
"Our strong earnings reflect improving margins as average selling prices return to more normal levels, manufacturing cost efficiencies increase, and palladium usage in our multilayer ceramic capacitors is reduced," said Kemet's chairman and chief executive David Maguire, in a statement. "Our continuing capital investments, even during the recent market price decline, have enabled us to move quickly in adding new capacity to better meer our customers' needs."
Greenville, S.C.-based Kemet said sales in its more mature leaded capacitor unit rose 10.1% to $27.1 million, from $24.6 million, in the third quarter of its fiscal 1999, while sales of surface-mount capacitors climbed to $188 million, up 60.2%, from $117.3 million, in the comparable year-ago period. The surface-mount capacitor unit contributed about 87% to total fiscal third quarter sales, the company said.