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LONDON (Alliance News) - Gooch & Housego PLC said Wednesday the US-China trade war has resulted in a downturn in demand and the company now believes its excess inventory "may take longer than expected to normalise".
Shares in the photonics product manufacturer were down 25% in early morning trading at 1,120.00 pence each.
Gooch & Housego said demand has decreased in the first four months of its financial year, especially for components used in industrial lasers for microelectronic manufacturing. The company blamed the downturn on decreased demand from China.
The company stated it has "long been aware" of the potential risks of the cyclical nature of the microelectronics sector, especially with the added pressure of the US-China trade war resulting in tariffs.
Gooch & Housego said: "The demand in the microelectronics sector was expected to weaken compared with the record levels in financial 2018, but uncertainty, particularly in the Chinese market, has meant that excess inventory in the supply chain may now take longer than expected to normalise. We expect the industrial laser market to pick up in the second half of financial 2019."
The company's financial year ends September 30. The company is guiding for low single-digit growth on last year.
In financial 2018, Gooch & Housego reported pretax profit of GBP10.1 million on revenue of GBP124.9 million.
Gooch & Housego, however, noted the demand for fibre optic products and hi-reliability fibre couplers used in undersea cable networks has "strengthened further".
Speaking at the company's annual general meeting Wednesday, Chief Executive Mark Webster said: "Elsewhere in the group progress has been good and our fibre optic business is performing particularly strongly. We remain confident in the potential of the industrial laser sector and our other markets to provide attractive long term growth.
"G&H is committed to greater diversification and moving up the value chain. We will continue to invest in R&D and where appropriate make acquisitions in order to meet these strategic objectives."
The company believes hi-reliability fibre couplers are "about to experience a multi year growth phase", and will invest to increase its capacity in the area.
The company said one third of its business is now in the Aerospace & Defence sector but its Life Sciences division is expected to double in financial 2019 following the acquisition of VITL Ltd at the end of 2018.
At January 31, Gooch & Housego's order book was GBP91.4 million compared to GBP89.7 million at the same time last year.
