Shares of Anaheim’s Multi-Fineline Electronix Inc., a maker of flexible printed circuit boards for cell phones, were hammered by investors Tuesday after the company said it expects to take a slew of charges for its cost-cutting program during the current quarter.
The stock plunged nearly 22% in afterhours trading on a recent market value of about $660 million.
Investors seemed to shrug off Multi-Fineline’s positive June quarter results and take issue with shrinking profit margins and higher-than-expected costs.
Profits declined 15% from the March quarter to the June quarter because of higher-than-expected costs in ramping up production at M-Flex’s plants in China.
“Our gross margin was negatively impacted by investments to expand our production capacity and temporary inefficiencies caused by adding and transferring manufacturing personnel to programs that are ramping in volume,” said Chief Executive Reza Meshgin.
Multi-Fineline, also called M-Flex, reported June quarter sales of $168 million, up 61% from the same period a year earlier and beating analysts’ expected $165 million in revenue.
The company said it saw a boost in sales from its three biggest customers. It didn’t name them but it’s been reported that they include Nokia Corp., Motorola Inc. and BlackBerry maker Research In Motion Inc.
M-Flex said it saw more of its products bought by makers of smart phones, which helps to balance out slower sales of traditional cell phones.
It’s also likely the company has seen some gains from the recent roll-out of Apple Inc.’s third-generation iPhone.
It swung to a profit of $9 million, reversing a loss of $7 million a year ago and in line with analysts’ expectations.
M-Flex is set to continue its cost-cutting plan.
It’s been slowly closing U.S.-based plants and sending the bulk of its manufacturing work to China.
At the same time, the company has been expanding and updating its operations there and leasing other sites to keep up with demand.
The company said it plans to shutter a plant in Tucson, Ariz., and move some of the operations to its local headquarters in Anaheim.
The move is set to save the company about $2 million to $3 million a year.
M-Flex said the move will cost about $2 million, a charge that will show up in the current quarter.
The company said it’s set to add another manufacturing site to its campus in Suzhou, China. Expansion of the new plants is expected to cost a total of $22 million.
Roughly $5 million was recorded in the June quarter and the balance is set to be accounted for during the current quarter.
For the current quarter, the company said it also expects to take charges of $6 million to $8 million for tax expenses related to the plant consolidation.
The company didn’t give estimates for the September quarter, but said it “expects net sales to be significantly higher” than the June quarter.
