XP Power, a leading power-controllers manufacturer, has revised its outlook for operating profit in 2023 due to weaker end-market demand. The company anticipates that this trend will continue for the remainder of the year. As a result, XP Power has made the decision to suspend its dividend payments given the current circumstances.
The company now expects its operating profit for the year ending December 31 to be broadly in line with the previous year’s figure. In 2022, XP Power reported an operating loss of £24.1 million ($29.4 million), while its adjusted operating profit reached £42.9 million.
XP Power clarified that it has no plans to distribute further dividends for the year. However, it assured shareholders that the second-quarter payout, scheduled for October 12, will be honored. The company plans to reinstate dividend payments as soon as it deems it appropriate.
In a recent announcement, XP Power highlighted that weaker demand, largely driven by economic uncertainty in China, has negatively impacted its performance in the third quarter. The company experienced customer shipment deferrals into the following year, contributing to disappointing results. It expects revenue for the three months ending September 30 to total approximately £75 million, reflecting a 2% year-on-year decrease on a constant currency basis. Despite these challenges, XP Power emphasized that it is still achieving double-digit operating margins.
The current order book for XP Power stands at approximately £225 million, providing a promising outlook for customer demand in 2024 and 2025.
Regarding its financial position, XP Power disclosed that its net debt currently stands at around £163 million. It anticipates that this figure will increase by the end of the year due to higher-than-planned capital expenditure related to the relocation of its California site, lower-than-expected revenue and profitability, and a reduction in working capital that fell short of initial projections. To conserve cash, the company has temporarily halted the construction of its new Malaysian site and plans to resume it once there is greater clarity in the market outlook.
In conclusion, XP Power acknowledges the operational challenges posed by weaker market demand and economic uncertainty. Nevertheless, the company remains committed to delivering results and maintaining shareholder confidence.