Nasdaq subsidiary of WBL Corp reverses into the red for Q1

A NASDAQ subsidiary of WBL Corporation has fallen into the red.

US-based Multi-Fineline Electronix, which provides flexible printed circuits and assemblies, today reported a first quarter net loss of US$9.3 million, or 39 US cents a share.

It chalked up a net income of US$8.3 million, or 35 US cents a a share in the same period last year.

Net sales for the three months ended Dec 31 fell by 27 per cent to US$211.7 million.

The decline was primarily due to lower net sales to a key customer, partially offset by a doubling of net sales to the company's newer customers to about US$48 million. \Net sales to the newer customers represented some 22 per cent of total net sales.

Gross margin during the first quarter was 1.2 per cent, down from 8.5 per cent previously, primarily driven by under-absorbed overhead as a result of the reduced net sales level and excess manufacturing capacity.

Multi-Fineline generated US$8.3 million in cash flows from operating activities during the quarter and had cash and cash equivalents of US$111.9 million, or US$4.65 per share, as of Dec 31.

It continues to maintain a strong balance sheet with no debt.

For the second quarter, the company expects net sales to be between US$120 and US$135 million and gross margin to range between minus 13 per cent and minus 11 per cent based on production build plans, projected net sales volume and anticipated product mix.

Multi-Fineline chief executive Reza Meshgin said that while the company continued to build momentum with newer customers and anticipated strong contribution from this group for the second quarter, this would not be sufficient to offset the reduced near-term demand from key customers and, "we therefore anticipate a net loss for the quarter".

The company has undertaken a review of its manufacturing capacity to align its cost structure with net sales levels while maintaining the long-term capacity necessary to support its growth objectives.

"We have developed our implementation plans and are in the process of finalization of those plans. We expect to be in a position to communicate the details of the planned restructuring later this month," he added.

In the meantime, the company anticipates its second quarter results to reflect significant impairment and restructuring charges, of which the cash component is expected to be less than US$20 million.

This would be partially offset in future quarters from proceeds arising from asset disposals.

"Once the restructuring is completed, we expect to have a significantly improved cost structure to support consistent profitability and competitiveness," said Mr Meshgin.

"With approximately $112 million in cash at Dec 31 and no debt, we believe we have a very strong balance sheet to support us through this transition period."

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