Wearnes' Nasdaq subsidiary Multi-Fineline reverses to a Q3 net loss of $39.9 million

Nasdaq-listed Multi-Fineline Electronix, which supplies flexible printed circuits to the electronics industry, has posted a third quarter net loss of US$31.5 million (S$39.9 million) compared to profit of US$3.8 million previously.

Net sales in the three months to June 30 were US$136.1 million, down 20 per cent, mainly due to lower sales to a key customer.

Revenues were below the company's expectations due to soft market conditions, as well as a number of new programmess that shifted out to the fiscal fourth quarter.

Gross margin during the third quarter was minus 3.1 per cent, compared to 9.2 per cent for the same period in the prior year.

The year-over-year decline was primarily driven by the reduced sales level and overhead under-absorption.

As a result of recent losses, the company took a hit of US$7.5 million in goodwill impairment charge plus a US$3.1 million charge to reflect a valuation allowance to reduce the value of certain deferred tax assets.

Due to the change in control that was triggered by the acquisition of the Multi-Fineline's majority shareholder, Wearnes, the company also recorded US$9.6 million in additional non-cash stock-based compensation expense.

Loss per share amounted to US$1.32, reversing from earnings of 16 US cents previously.

Despite challenging market conditions, Multi-Fineline increased its cash and cash equivalents by US$31.8 million year-to-date to US$114.1 million, or US$4.76 per share, as at end June.

For the fourth quarter, it expects net sales to be between US$195 and US$215 million and gross margin to range between 1 to 3 per cent based on production build plans, projected sales volume and anticipated product mix.

Chief executive officer Reza Meshgin said the third quarter results were a trough. Management anticipates a meaningful sequential improvement in revenue in the fourth quarter with continued momentum into fiscal 2014.

"As a result, we expect to return to profitability in the first quarter of fiscal 2014, as well as on a full year basis in fiscal 2014," he said.