Our July contrarian call on Xaar (XAR) has gone badly wrong. The shares were marked down by more than a third in a single day's trading after the ink-jet printhead manufacturer announced that it was cutting a fifth of its workforce in response to the downturn in Chinese construction.
Cambridge-based Xaar revealed that revenues for this year would be 5-10 per cent under the current lowball estimate of £115m, while 2015 revenues would drop below £100m. Revenues had climbed in recent years on the back of ceramic tile demand in the People's Republic - the group's key marketplace - but conditions have continued to deteriorate. Xaar's ink-jets are used extensively in the production of the tiles, but despite promising new product launches in the offing, the fall-away in Chinese construction demand now seems entrenched.
