ASML orders fail to meet forecasts

ASML of the Netherlands said on Wednesday it would ship fewer chip-making machines than expected this year, and had scrapped plans to enter a new market supplying tools to flat-screen display makers.

The news led shares to shed 4.6 per cent in early trading, despite record second-quarter net earnings of €112m ($137m), compared with €65m a year earlier, and company assurances that it would meet full-year profit targets. However, the shares recovered to end up 2.2 per cent on the day at €14.

The company's goals would be achieved through a “continued focus on cost-reduction and efficiency”, ASML said.

It sold 51 systems in the second quarter but received only 24 new orders. Eric Meurice, chief executive, forecast third-quarter sales of 38 systems, at an average price of €11.8m.

The average selling price for a machine in the second-quarter was €13.3m. That decline, reflecting a difference in product mix, would clip a percentage point off third-quarter gross margins, now forecast at between 35 and 37 per cent.

Mr Meurice said he expected more orders in the current quarter, remarking on “encouraging signs” in booking activity and rising capacity utilisation at customers' factories.

Analysts said the company needed at least 35 new orders in the current quarter to support shares, which have risen 24 per cent since late April on hopes of a semiconductor sector recovery. It would ship 75 per cent of its order backlog of 80 new and used machines this year, at an average price of €12.3m.

However, that meant sales of between 180 and 200 machines in 2005, compared with expectations of 200-220.

“It's a bit lower than previous expectations, but we're making good money, and that's a big difference with the past,” said Peter Wennink, chief financial officer.