AVX Corp. posted strong sequential and year-over-year growth in its fiscal third quarter ended Dec. 31, but the tantalum capacitor manufacturer sees a slowdown ahead and has cautioned its investors not to expect similarly strong growth in the current quarter.
The Myrtle Beach, S.C., company's net income soared 291%, to $166.1 million, or 94 cents a share, during the recently concluded quarter, from $42.5 million, or 24 cents a share, in the comparable 1999 period. The company's results exceeded the average estimate of analysts polled by First Call/Thomson by 4 cents a share and grew more than 6% from the immediately preceding month.
AVX's top executives said the company owed its strong performance to additional capacity added in the last year to meet surging demand from the electronics industry. With the global and U.S. economy slowing, AVX may not be able to sustain its previous growth pace, they said.
"Of course we owe a great deal of credit [for our success] to the strong market environment," said Dick Rosen, AVX's chairman and chief executive during a conference call with analysts. In a statement, he added that the successful implementation of the company's capacity expansion program contributed to the growth.
Rosen's warning about slower future growth is already evident in the latest quarterly results. While AVX's revenue grew 70%, to $709.5 million from $416.4 million in the December 1999 quarter, it increased only 2% from the $695.3 million posted in the prior quarter. Rosen cautioned that sales and earnings in the current quarter will be down compared to the third quarter, but higher than in previous years.
"We expect an excellent quarter and a good fiscal year," Rosen said. "The rate of growth will not be as great as we experienced in the past, but there will be growth, which is the important issue."
Inventory increased about 15%, to $446 million from $387.7 million in the second quarter. Of that total, $148 million is in raw materials, $157 million from work in progress, and $141 million in finished goods.
"It really is amazing how fast it jumped up and bit us," Rosen said, adding that he expects the issue to be resolved in the fourth quarter. "It's not in all the parts. It's mostly in the commodity products."
Rosen expects a pick up in consumer products to offset the weakness.
"In the consumer business, we have seen, starting in Japan, an increase in the production of products," he said. "[OEMs] were very optimistic about the coming year, particularly with digital products."
For the first nine months of the fiscal year, AVX's net income rose to $442.7 million, or $2.51 per diluted share, from $86.1 million, or 49 cents per diluted share, for the same period last year. Revenue for the first nine months of the fiscal year increased 78%, to $2 billion from $1.1billion for the same period last year.
"Although there are industry concerns about sales growth over the near term, our customers remain optimistic regarding the growth of their end product sales and, hence, their need for AVX components for 2001," Rosen said.