LONDON: AZ Electronic Materials, a maker of chemicals for Apple’s iPad displays and memory chips, warned that profit would be lower than expected in the first half, wiping a quarter of the value off its share price.
The company said on Tuesday that its core earnings margin for the first six months of the year would dip below 30 per cent, resulting in 2013 group margins coming in below normal levels. It forecast an improvement in the second half.
A weaker than expected performance in the part of its business which provides materials used in integrated circuits was to blame, said the company.
Shares in AZ Electronics crashed 27 per cent to 269 pence at 0843 GMT, hitting their lowest level for around nine months and leading the FTSE 250 losers board.
“Softness in demand patterns within the integrated circuit industry was compounded by increased pressure from dual sourcing by certain customers,” AZ said in a statement.
Analysts at Singer called the update “disappointing” and said that the lower than normal margin implied a possible 2013 earnings downgrade of over 10 per cent.
“We believe that a number of the challenges are likely to be short term, but we expect the shares to come under some pressure pending visibility of the anticipated second half recovery,” they said.
AZ said discussions with customers meant it was confident of a stronger second half. It also gave assurances on profit growth beyond 2013 citing encouraging progress on the development of new products.
About 80 percent of AZ’s sales come from Asia, and the company expects demand for its chemicals.