Benchmark Electronics Inc. plans to sell its manufacturing plant in Sweden to concentrate on expanding operations in Ireland and the United States.
In the next two months, Benchmark, an Angleton, Texas, midtier contract electronics manufacturer, expects to shed the 50,000--sq.-ft. Katrineholm, Sweden, plant it inherited last year as part of its acquisition of Avex Electronics Inc.
The boom in telecom and communications products has created the need for Benchmark to re-examine the disposition of its plants, said president and chief executive Donald Nigbor.
"We're seeing growth potential in certain areas," Nigbor said of the company's plans to double the size of its Dublin, Ireland, plant and make significant additions to three stateside facilities.
By the fall, Benchmark's Ireland plant will be increased from roughly 50,000 sq. ft. to more than 100,000 sq. ft. to make room for new telecom, networking, and communications OEMs knocking on the CEM's door.
In the United States, Benchmark will increase manufacturing capacity at its plants in Huntsville, Ala.; Hudson, N.H.; and Beaverton, Ore.
"We're seeing demand in many areas-medical and test and instruments-along with computer sectors," Nigbor said.
But Benchmark, which is still in the process of integrating Avex into its operations, will sell the Sweden plant, which operates at 70% capacity and serves just one customer, he said.
The company is moving quickly to please its telecom and networking customers, which helped boost its fiscal 2000 first-quarter sales.
For the quarter ended March 31, sales jumped 138%, to $349 million from $146 million during the same period in 1999. Benchmark's net income fell 60%, to $1.9 million, or 12 cents a share, compared with $5 million, or 43 cents a share, in the corresponding 1999 quarter.
During the quarter, Benchmark transferred some of its production to Avex sites, which helped increase capacity usage for the combined company to 70% from 57%, said Herve Francois, an analyst at Credit Suisse First Boston in New York.
Telecom accounted for 33% of Benchmark's sales in the first quarter, followed by computers (36%), audio/visual (11%), industrial controls (9%), test and instruments (6%), and medical (5%).
"Analysts are starting to pay attention to Benchmark. Their book-to-bill ratio is 1.5," said Stuart Bogard, an analyst at Stephens Inc. in Little Rock, Ark. "For every $1 they ship, they're bringing in $1.50. That's huge for the industry."
Benchmark has seven new customers, and two others are expected to sign on soon to further improve its balance sheets.
"We're beginning to see the fruits of our aggressive sales and integration efforts to backfill the underutilized capacities of our last acquisition," Nigbor said. "As a result of significant booking activities, the company is expanding in several locations to accommodate new programs."
Avex improved Benchmark's global presence with a much-needed low-cost manufacturing site in Malaysia. At the same time, observers say the CEM is working hard to overcome the shadow cast by the Avex purchase. The deal is the subject of a lawsuit between Benchmark and Avex's former parent company, J.M. Huber Corp., over the acquisition price, which Benchmark claims was too high.
"A lot of Avex's facilities had lower utilization capacity than Benchmark facilities," Nigbor said. "We're in the process now of building up utilization, adding new customers."
Among Benchmark's new customers are two small medical OEMs that are each expected to generate between $5 million and $7 million in revenue. Two telecom customers are slated to bring in contracts worth a combined $25 million. A test and instruments customer, Nigbor said, could generate between $150 million and $175 million next year.
Now, with the pending sale of its Sweden location, Nigbor believes Benchmark is on its way to becoming a top-tier CEM, with just less than $2 billion in revenue projected for this year.