Wolfson cautious despite sales increase

Published on Tuesday 28 July 2009 21:36

WOLFSON Microelectronics reported a strong recovery in second-quarter sales yesterday, but warned that it may not be sustainable.

The Edinburgh-based company, which makes audio components used in mobile phones and other consumer devices, gave no sales guidance for the rest of the year, saying its outlook for the economy was too uncertain.

Its Q2 sales of $33.2 million (20.2m) were 38 per cent down on the same period last year, but marked a 32 per cent increase over the first quarter and were ahead of market forecasts.

Chief executive Mike Hickey said it was unclear if the quarter-on-quarter rise represented a genuine recovery in demand, or if customers that had been selling excess stock at the start of the year were simply restoring inventories.

Wolfson's order backlog – the best measure of future demand – is $26m, a 6 per cent increase on three months ago. Finance director Mark Cubitt said he would usually expect sales to rise by about 15 per cent in Q3 ahead of Christmas, but said this year's rise was likely to be below that level. "It looks like it's going to be a single digit up in the third quarter," he said.

Hickey said customers were making orders based on short-term demand trends, and if consumers spending increased then Wolfson would "scramble" to fulfil orders. Despite making a pre-tax loss of $4.9m in the first half of the year, Wolfson generated $8.5m in cash after stripping costs out of the business.

Hickey said Wolfson would be in good shape when sales recovered, with more new products launched in the first half of 2009 than in the whole of 2008.

Last month, the group disclosed that its audio components were not in the latest Apple iPhone. However, Nokia is, for the first time, using a Wolfson chipset in one of its phones. Wolfson's shares opened 5 per cent lower, but clawed back some ground to end down 2.2 per cent at 113.25p.