AEM Holdings 1Q earnings fall 19.7% to $6.6 mil as main customer pares orders

SINGAPORE (May 7): AEM Holdings, the provider of equipment systems solutions and manufacturing services, reported a 19.7% fall in 1Q19 earnings ended March to $6.6 million from a year ago on fewer orders from its main equipment systems customer.

Earnings per share for 1Q19, after adjustment for the 2018 bonus issue, was 2.43 cents, compared to 3.05 cents for 1Q18.

No dividend was recommended.

Revenue, primarily generated by the Equipment Systems Solutions (ESS) business, fell 19.7% to $52.7 million. The decrease was due to the initial ramp phase for the group’s high-density test handlers entering a mature stage. By business segments, ESS revenue decreased by 19.2% y-o-y to $51.5 million. Precision Components (PCS) business generated revenue of $1.2 million in 1Q19 compared to $1.9 million in 1Q18.

Raw materials and consumables costs, taking into consideration changes in inventories and excluding reversal for inventory obsolescence, decreased by 25.4% to $32.5 million in 1Q19.

Net profit margin remained stable at 12.5% in 1Q19 from a year ago.

In its outlook, AEM says as the initial ramp phase of its high-density handler for the group’s key customer has entered a matured stage so future new equipment sales will be driven by the customer’s new platform launches, their market share, and the commissioning of new manufacturing sites.

Meanwhile, the group expects continued new equipment sales in 2019 though at a lower rate than in 2018. It also expects continued sales of its kits and pans which go into the installed base of equipment at its customer’s sites.

The group also secured follow-on projects from its key customer to develop hybrid extensions to the group’s existing handlers. These new projects are expected to deliver meaningful revenue in 2020 and beyond, while AEM’s current handlers continue to be deployed.

As announced on April 25, the group’s sales orders for delivery in 2019 have grown to $209 million. With these additional sales orders, the group has revised upward its revenue guidance for FY19 to be between $225 million to $250 million. Capital expenditure is expected to be between $4 million to $7 million for the year to support engineering and business development for future customer programmes.

Further to the initial order from Huawei in October 2018 for AEM’s optical fibre cable-test solution to be developed for qualifying high-performance short reach cabling links for Huawei’s 5G backhaul network, AEM has received acceptance from Huawei for its test equipment and solution and a further sales order for equipment delivery in 2019.

In addition, its R&D efforts were recently recognised by Intel Quantum Computing which commissioned Afore Oy, together with Bluefors, to developed a first-of-its-kind tool for wafer level probing at cryogenic temperatures of below 4 Kelvin. The programme will have the potential to help grow into new markets in the quantum computing field that require testing and characterisation at temperatures near absolute zero.

AEM closed 1 cent higher at$1.09 on Tuesday before the results were announced.