Xaar announces "cost actions" following ceramics underperformance
Wednesday, June 27, 2018
Xaar looks set to make an unspecified number of job cuts after announcing "cost actions" following lower than expected sales in its legacy ceramics business in the first five months of the year.
In a trading update released today (27 June), the Cambridge-headquartered inkjet developer said: “We had previously indicated that the increasing proportion of total revenue represented by new products would mean a stronger second half weighting in full-year sales; we now expect that weighting to be even more pronounced.
“We now consider it likely that our full-year expectation of revenues in the ceramics market will not be achieved. To mitigate this, we have announced cost actions, subject to employee consultation, that will better align capacity in the legacy business with the expected future demand.”
Xaar said it expects its full-year profit to remain in line with its expectations following the implementation of the cost savings.
The company added it has continued to make progress on its strategy of diversifying the business, by introducing a broader range of products across a wider range of market sectors and developing partnerships to exploit the on-going analogue to inkjet conversion within print markets.
Chief executive Doug Edwards told PrintWeek: “We're going through a consultation process [with affected employees], we can't specify numbers, and the process will take as long as it needs to take. The reason we're doing it is to shore up earnings for the year because we're seeing decline in our legacy ceramics business and we're really just aligning the resources and the capacity now with the future demand we see for that business.
“We're continuing to support all of our new business areas, particularly 3D and thin film products and product research. As our legacy business declines, our new businesses are growing and we're at a point of inflection.”
Xaar has been striving to diversify its offering in order to reduce its reliance on the ultra-competitive ceramics market, traditionally Xaar’s largest market but now largely converted to digital.
It has now reached a point where close to 80% of its product revenues are coming from recently-launched products, and from the EPS direct-to-object business acquired in 2016.
“We've got seven new printhead products that we're at various stages of introducing and we've got the two new businesses areas in 3D and the EPS business,” said Edwards.
“We're very happy with those businesses and a lot of the new products are doing reasonably well so it's about trying to offset the decline in the legacy while we're trying to grow these new things, which is not always as predictable as we would like.
But he added some opportunities remain in the ceramics business.
“Some of the issues we were seeing in the first half were associated with our replacement business, our 1003 [printhead]. We were expecting our channels to be restocking this month and we haven't seen that restocking.
“But we've got the 2001 product which is going into new printer installs in ceramics. That's been a bit slow to get traction but it is now getting traction and as that starts to grow I think we're going to be able to start slowing this decline rate down.”
Xaar will report its interim results on 5 September. The company’s share price was down by 13% in early trading to 239p and stood at 236p at the time of writing.