IPG hopeful of second-half recovery after weak start to 2024

13 Feb 2024

Fiber laser pioneer says that some major customers have delayed orders amid 'challenging' market conditions.

LightWeld family

IPG Photonics, the US-listed company that is synonymous with industrial fiber lasers, has warned of a sharp decline in sales in the opening quarter of 2024, in what it called a “challenging” start to the year.

The Oxford, Massachusetts, firm said that although it remained hopeful of a rebound towards the end of the year, customers in its key markets of cutting and electric vehicle (EV) battery welding were delaying orders.

As a result, sales in the current quarter are likely to come in at somewhere around $250 million - down nearly 30 per cent on the same period in 2023.

CEO Eugene Scherbakov told investors: “As we enter 2024, our visibility is still limited and macroeconomic conditions and global industrial demand remain challenging.

“These uncertainties are further compounded by large OEM customers delaying orders and managing inventories and e-mobility investments remaining soft. Some of our more mature markets are also seeing increased competition.”

That outlook appeared to send the company’s Nasdaq-listed stock price down by around 10 per cent, its lowest valuation since November.

Rebalancing
Scherbakov and IPG’s CFO Tim Mammen also reported the company’s latest full-year financial results, which saw sales of $299 million in the closing quarter of 2023 bring the annual total to $1.29 billion.

Those two figures each represented a drop of 10 per cent on the prior year, even though the IPG executive team said that there had been something of a rebound in laser welding demand in North America, and for EV applications outside of China.

“In 2023, we focused on diversifying and growing our revenue outside of flat sheet cutting and away from China,” reflected Scherbakov. “Many of the emerging growth products delivered strong results and displaced other laser and non-laser technologies.”

The CEO outlined IPG’s ongoing efforts to rebalance the business, with Mammen pointing out that sales to China represented only 24 per cent of revenues in the closing quarter of 2023 - the lowest proportion in a decade.

Among the current growth areas are sales of IPG’s handheld “LightWeld” product for laser welding, with the company also optimistic that it will gain traction in relatively new areas like laser cleaning and laser drying.

Miller Electric deal
IPG is also focusing on the sale of new subsystems - rather than separate lasers and other components - for those markets, and has hired senior sales staff in key locations as it looks to penetrate the emerging applications.

“The increase in welding this quarter was driven by higher sales in our handheld laser welder, and growing adoption of our real-time weld measuring tool, which is becoming an industry standard for automated process monitoring and quality control,” Scherbakov told an investor conference call.

“Customers understand a significant value proposition of real-time welding process monitoring, which can significantly reduce scrap and improve yields.

“We are also seeing higher sales of integrated laser welding systems, and complete solutions for high-speed automated laser welding, which includes laser, scanner, vision, and controllers that are easy to integrate in a manufacturing process.”

Those efforts should be boosted by the firm’s agreement with Miller Electric announced last November, which is designed to promote laser welding to a large network of welders currently using conventional MIG and TIG tools.

“We believe that most welding applications can be addressed by laser, including the handheld market, and there is a tremendous productivity improvement that lasers enable,” noted Scherbakov.

The CEO also expects demand for laser welding equipment from makers of EV batteries in China to recover in the second half of this year.

“Overcapacity in battery production in China, after a strong investment cycle in 2021 and 2022, continued to provide a short-term drag on our growth, but we remain optimistic in the future revenues for this important application as new EV sales continue to grow worldwide,” he said.

Mammen added: “We expect e-mobility investments to pick up in China in 2024, but only in the second half of the year. While it will be a challenging start to the year, we believe demand will improve as the year unfolds.”