While Nam Tai Electronics crushed analysts' estimate when it released first-quarter numbers Monday, the market still punished its stock as the company announced it had halted flexible printed circuit (FPC) production and may stop producing its core product, liquid crystal display monitors (LCM) for mobile electronic devices.
Nam Tai shares fell almost 32% Monday. Altogether, Nam Tai fell 38% before Tuesday's market opening.
In the first quarter, Nam Tai more than doubled revenues to $177.5 million from the same time the previous year. That translated to $0.11 earnings per share; analysts were only expecting $0.05. Driving the top line and bottom line was the company's production of high-resolution liquid crystal display modules (LCMs) for smartphones.
However, the market seemed to take in the bad news more than the good.
After evaluating its Q3 2012 performance, Nam Tai halted production of flexible printed circuits in March. Since beginning production, the FPC line had generated losses, the company said. In making this choice, Nam Tai said it has also decided that if any of its products cannot generate a steady stream of income, it will halt production to minimize losses and preserve cash.
Currently, the company is experiencing "adverse market conditions" and is worried about its LCM operations. Thus far, Nam Tai has had problems with customer order cancellations and changes. The company said in its press release that it "may have to halt its best quality LCM production operations service in both its Shenzhen and Wuxi manufacturing facilities by the end of June 2013 in order to minimize further losses and preserve cash."
Nam Tai said its efforts to maintain its LCM operations include strategic or technological alliances with complementary business operations, such as backlight and touch key panel manufacturers. Looking forward, Nam Tai said its gross profit will be under "substantial pressure" in 2013.
The article Nam Tai Doubles Revenue, Faces Uphill Battle originally appeared on Fool.com.Fool contributor Kevin Chen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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