If a company is only able to grow when everything goes right, chances are pretty good that it's not going to grow. Because as companies like MEMC Electronic Materials Inc. know full well, things are bound to go wrong every once in a while -- and sometimes twice in one summer. But a few snags didnt stop the IndustryWeek's Best Manufacturers for 2008 from increasing second quarter net sales by 6% from first quarter results and over 12% from the same time last year.
In addition to higher product volumes that helped generate the increase, the St. Peters, Mo.-based makers of silicon wafers for the semiconductor and solar industries also signed two major contracts in the last few months. Most recently, MEMC inked a deal with Tainergy Tech Co. Ltd. to supply solar wafers set for the next 10 years starting with the third quarter of 2008. Details on the agreement, worth over $3 billion, were reported by IndustryWeek here.
But the larger story behind the company's solid quarter was that it followed potentially serious and unforeseen setbacks at two of its major production facilities. For one, MEMCs plant in Merano, Italy, experienced a premature failure of a relatively new heat-exchanger in June, which reduced second quarter polysilicon output by just under 5%.
Around the same time, a loose pipe fitting at its Pasadena, Texas, facility caused a fire that required a shutdown of half the silane production for about a week. While the facility recovered and was able to produce enough to fall within the targeted range, it still wasn't enough to completely offset the Merano shortfall.
At A Glance
MEMC Electronic Materials Inc.
St. Peters, Mo.
Primary Industry: Computers & Other Electronic Products
Number of Employees: 5,350
2007 In Review
Revenue: $1.9 billion
Profit Margin: 42.99%
Sales Turnover: 0.67
Inventory Turnover: 15.81
Revenue Growth: 24.74%
Return On Assets: 46.80%
Return On Equity: 70.80%
"While we are disappointed that we experienced an uncharacteristic event at our Merano facility, we are pleased that we were able to limit the impact to a few percent below the targeted revenue range," said Nabeel Gareeb, CEO of MEMC. "This was primarily a result of the accomplishments in the second quarter that helped to offset the Merano shortfall."
Updating MEMC's third-quarter outlook on Sept. 2, Gareeb said polysilicon production rates at the Pasadena facility have been at levels that -- combined with the strength of demand from solar applications customers -- could generate results in the "upper half" of its targeted financial range. However, he says there is increased softness in demand from semiconductor applications customers, primarily due to inventory reduction initiatives. So the outlook is cautious, but still optimistic.
"There continues to be the potential for unanticipated events to occur, which could affect our polysilicon production output, as we have experienced over the past year," Gareeb explained. "These elements warrant a continued degree of caution in our outlook given the amount of time left in the quarter."
Interested in information related to this topic? Subscribe to our weekly Leadership Insights From The IW 50 eNewsletter.