It was a tough first half for AZ Electronic Materials (AZEM) , which sells ultra-niche chemical products to consumer electronics manufacturers. The semiconductor market, which drives the larger of its two business units, continued to weaken as tablets and smartphones replace computers, and some of the cutting-edge Korean factories AZ supplies experimented with reducing chemical volumes and substituting competitor copies.
Yet these problems mainly arose in the first quarter, prompting a profit warning in April that sent the shares tumbling by a third. Conditions have stabilised since, and the 12 per cent constant-currency decline in cash profits to $89.8m was in line with broker forecasts for the semiconductor division. At 36 per cent, the margin remains remarkably high, reflecting AZ's almost monopolistic command of a very specialist product area.
The company's smaller 'optronics' division, which sells chemicals that are spread on glass to create the pixelation effect required for TV and touch screens, fared better. Thanks to strong growth in demand for tablets and smartphones, revenues were up 9 per cent at constant currencies. At $31.7m, however, cash profits were 1 per cent lower, partly because the unit splashed out on research and development.
Brokerage Goldman Sachs expects full-year operating profits of $203m, giving EPS of 30¢ (from $233m and 35¢ in 2012), with catch-up growth back to 38¢ in 2014.
AZ ELECTRONIC MATERIALS (AZEM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 310p | MARKET VALUE: | £1.18bn | |
| TOUCH: | 309-311p | 12-MONTH HIGH: | 412p | 235p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 181¢* | NET DEBT: | 44% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 384 | 58.5 | 9.90 | 4.00 |
| 2013 | 364 | 51.9 | 8.20 | 4.00 |
| % change | -5 | -11 | -17 | - |
Ex-div: 28 Aug Payment: 11 Oct *Including intangible assets of $866m, or 227¢ a share | ||||
