IQE tumbles after profit warning

IQE tumbled on Thursday as it warned that a drop in customer orders was set to dent revenues.

In an update on current trading, it said management's expectations for FY22 results remain in line with the update it issued in January.

"Since that update, the group has seen an acceleration of the trends anticipated, with weaker demand leading to inventory build-up throughout the supply chain," it said. "This reduction in customer orders and forecasts is expected to result in a decline of approximately £30m in reported revenues for H1 2023 year-on-year."

The company - which supplies advanced compound semiconductor wafers and materials solutions - said similar trends are evident across the industry, with the US Semiconductor Industry Association (SIA) reporting an 18.5% year-on-year decline in global industry sales in January.

Chief executive Americo Lemos said: "The current inventory cycle is temporary. Ours is an industry that has consistently demonstrated growth over many decades. We expect IQE to return to growth in the second half of the year and remain excited about the future as we continue to execute our diversification strategy."

At 1125 GMT, the shares were down 31% at 32.10p.

Russ Mould, investment director at AJ Bell, said: "A second profit warning in three months means shares in silicon chip wafer-maker IQE are taking another hammering, but the latest earnings setback could also have wider implications for the global economy and financial markets.

"IQE cites an inventory bulge at customers across the $600 billion-plus global semiconductor industry, which is a fair proxy for worldwide economic activity and, if past performance is any guide, a useful measure for stock markets’ risk appetite."

Mould said the warning from IQE suggests there is little or no chance of the company meeting analysts’ sales forecasts for 2023, where consensus coming into today had pencilled in revenue growth of 8% to £180m and a modest increase in profits using the company’s preferred metric of EBITDA.