November 3, 2010 / 11:17 AM / 7 years ago

UPDATE 2-ATS Automation Q2 profit lags estimates, shares fall

* Q2 EPS C$0.04 vs est. C$0.09

* Q2 rev up 9 pct to C$162 mln

* Says customers delaying investment decisions

* Shares fall 11 percent (Adds details, analyst comments, share movement)

By Bhaswati Mukhopadhyay

TORONTO, Nov 3 (Reuters) - ATS Automation Tooling Systems Inc (ATA.TO) posted quarterly profit that missed market expectations on lower average selling prices and weakness in its solar unit. Its shares fell 11 percent.

ATS, which makes factory automation systems and solar energy equipment, said volatile markets mean some customers are delaying investment decisions and lower feed-in tariffs for French and German solar energy will hurt selling prices.

"Solar power is, and for the foreseeable future will be, affected by and largely dependent on the existence of government incentives," it said in a statement.

Analyst Neil Linsdell, of Versant Partners Inc., said he expected margins to be depressed over the next few quarters.

"It looks like they are still in for a difficult period. There are little twinkles of growth resuming, but it is probably going to be a slow ramp up in the business," he said.

Linsdell said low-cost manufacturers have been ramping up production, and that would keep the prices of panels low.

"It is not a great pricing environment," he said.

ATS also said it had engaged independent advisers to help evaluate ways to separate its solar energy unit, Photowatt Technologies, which makes solar cells, wafers and panels.

ATS said in February it was working to split off Photowatt into a stand-alone company and might sell it.

SOLAR ENERGY UNIT A DRAG

The company reported second-quarter earnings of C$3.3 million ($3.3 million), or 4 Canadian cents a share, down from C$6.0 million, or 7 Canadian cents a share, a year ago.

Revenue rose more than 9 percent to C$162 million.

"The recovery in our industry will follow a U-shape and we will lag the general economic recovery," Chief Executive Anthony Caputo said.

Analysts on average were expecting earnings of 9 Canadian cents a share on revenue of C$153.7 million, according to Thomson Reuters I/B/E/S.

Sales from Photowatt fell 12 percent to C$45.1 million.

Revenue from its ASG unit, which designs and builds factory-automation systems for manufacturers in industries including telecoms, autos and pharmaceuticals, rose 21 percent to C$117.8 million, helped by an acquisition and a 48 percent increase in order bookings.

ATS shares were 79 Canadian cents lower at C$6.31 by late morning. The stock has lost 5 percent of its value so far this year. ($ = $1.01 Canadian) (Additional reporting by Bijoy Koyitty in Bangalore; editing by Janet Guttsman)

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