Published
by Rogers Corporation
Corporate
In the second quarter of 2019, Rogers achieved quarterly net sales of $242.9 million, an increase of 1.3% over Q1 2019.
In advanced connectivity, we are encouraged by the strong 5G demand that we saw in Q2 and the growth opportunity associated with the expected 5G build-out over the next several years. A number of recent data points validate that the long-term global 5G rollout is moving forward. For example, in early June, China granted 5G spectrum licenses to the country’s major telecom operator. There have also been signals that 5G deployments in the U.S. could accelerate. Recently, the FCC approved the auction of an unused portion of the 2.5-gigahertz band. Until now, the availability of mid-band spectrum, which is critical to widespread 5G deployment, has been limited. Near-term visibility to wireless infrastructure demand is clouded by the collateral effects of the restrictions on Huawei and its impact on the rate of 5G deployment in China. It is uncertain whether Huawei will be able to access critical components needed to continue with 5G deployments and to what extent they may try to utilize Chinese suppliers. Also not clear yet is how Huawei’s share of the China market may be impacted. Despite these uncertainties, we are encouraged by the ongoing 5G orders as we move into Q3. Rogers is well positioned to benefit from the 5G deployment due to our design wins with all major telecom equipment providers.
Turning to advanced mobility, the outlook for EV/HEV growth remains strong, and we continue to see this as a substantial long-term opportunity. Year-to-date, our EV/HEV power semiconductor substrate business has continued to grow at a double-digit rate compared to 2018, and market demand remains much stronger than the conventional automotive market. Automakers are also increasingly shifting their future production plants to encompass more EV and HEV models. The longer-term outlook for ADAS demand growth continues to be robust, despite the near-term slowdown in global conventional automotive sales. IHS market forecasts that automotive radar units will grow at nearly 20% compounded annual growth rate over the next 5 years as ADAS penetration of new vehicles grows and as the number of sensors per vehicle increases.
Advanced Connectivity Solutions (ACS) achieved record net sales of $93 million in the second quarter, a sequential increase of 15%. As mentioned, these strong results were driven by 5G and 4G wireless infrastructure demand and strength in ADAS applications. This is the second consecutive quarter that ACS has achieved record quarterly revenue. This is due in great part to our emphasis on developing innovative solutions to meet our customers’ 5G performance requirements and the strategic investments which have enabled us to support a rapid increase in demand. Our operational excellence initiatives, combined with improved utilization, have also helped to drive significant improvements in operating margin. In addition, we believe that the weaker auto market will have some impact on ADAS sales. For the full year, we expect ADAS to grow at high single digits relative to 2018.
Elastomeric Material Solutions (EMS) net sales were $94 million, a slight increase compared to Q1. The higher revenue was a result of growth in portable electronics, EV/HEV and mass transit applications, which was mostly offset by weaker demand for general industrial and conventional automotive applications. We are especially pleased with the performance of applications for EV/HEV battery pads and battery pack sealing systems. 2019 year-to-date sales in this segment are up over 40% relative to 2018. This growth has been driven by significant design wins in battery pad applications and the performance of our innovative products, such as our new PORON EV extend material which enhances lithium-ion battery life. In addition, EMS operating performance improved meaningfully in Q2. Our efforts to optimize the operations of acquired companies is progressing well, and gross margins are improving as a result.
Power Electronics Solutions (PES) second quarter net sales were $52 million, a decrease of 14% from Q1. The decline in PES revenue was primarily due to weak end-market demand for power semiconductor substrates and industrial power and vehicle electrification applications for conventional automobiles. Operational improvements in PES remain a top priority, and we are executing the detailed recovery plan that we previously developed. However, we did not make the progress expected in Q2, for two primary reasons. First, the pace of implementing our recovery plan was disappointing and, as a result, we made several key organizational changes. Second, the lower production volume compounded the operational challenges and more than offset the progress we did make. To mitigate the impacts of the lower demand, we are flexing our cost structure to minimize the margin impact.
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Investor Relations
Published on Aug 01, 2019
