RSTI

Rofin-Sinar Technologies, Inc. (RSTI)

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Rofin-Sinar Technologies (RSTI)

F3Q08 (Qtr End 6/30/08) Earnings Call

August 6, 2008 11:00 am ET

Executives

Gunther Braun - CEO

Ingrid Mittelstadt - CFO

Analysts

John Harmon - Needham and Company

Charles Murphy - Sidoti & Company

Mark Miller - Brean Murray, Carret & Company

Tobias Loskamp - Landsbanki Kepler

Ian Fleischer - Friedman, Billings, Ramsey & Company

Greg Halter - Great Lakes Review

Kerry Kelly - Ironworks Capital

Jenny Jones - Schroder

Presentation

Operator

Welcome to Rofin-Sinar's 2008 third quarter results conference call. Today's call is hosted by Mr. Gunther Braun, Chief Executive Officer and Ms. Ingrid Mittelstadt, Chief Financial Officer. Following management's comments, you will have the opportunity to ask questions. Please go ahead.

Gunther Braun

Thank you. Good morning or good afternoon to everyone. I am here in Germany now [marking] headquarter together with Ingrid, our CFO. I hope you all got the press release containing our third quarter results. We will give you some comments about our business and performance and then we will open it up for questions.

Now before we start, I would like to make the usual statement about the information you are getting in this conference call.

Based on the fair disclosure regulations of the SEC, we will also include a summary of our own financial estimates for our next quarter and the fiscal year 2008. This guidance is only an estimate and is of course subject to all the risks and uncertainties as summarized in our Safe Harbor statement which I will read to you shortly.

I would like to encourage you to perform your own market investigations and research and not to place undue reliance on our estimates.

Safe Harbor statement, our discussions may include predictions, estimates or other information that may considered forward-looking. These forward-looking statements represent our best current judgments on what the future holds. They are subject to risks and uncertainties that could cause actual results to differ materially.

Throughout our discussion we will attempt to discuss important factors relating to our business that may affect our predictions. You may also want to review our last 10-Q and 10-K filings for a more complete disclosure of financial risks.

Now, let's start with the nine months results.

In the last nine months, we shipped laser systems, including service parts and components for a total of $421 million, which results in an increase of 21% or $71.8 million from the comparable period of fiscal year 2007.

The difference in US dollar exchange rate increased sales by approximately 11% or $37.5 million, but this is part of our business and nothing unusual for a global company with significant sales in foreign countries.

Net income in the nine months period amounted to $43.8 million and represents an increase of 13% from the comparable period in fiscal 2007 and I think the nine-month net income profitability with 10% of sales is acceptable, given our second quarter results.

The nine-month sales allocation between macro, micro and marking, and components was 43% for macro. Micro and marking did 47% and 10% was for components.

The geographical split, Europe in the nine months, 52% versus 57% in the last year period; US North America, 24% versus 23%; and Asia, 24% versus 20% for the nine-month period.

The thriving geographical market behind our sales growth in the first nine months was the Asian market, which increased by approximately 46% to $100.2 million. Semiconductor and electronics industry were the main reason but also supported by still reasonable shipments for our lasers to the machine tool industry.

The European markets increased by approximately 11% to $220.2 million, supported mainly by the machine tool, automotive and solar cell industry, and in addition by our component products.

The North American business increased by 23% to $100.5 million due to the additional sales we got from our recent acquisition, which represents approximately 8% of the increase. The other 15%, half of it can be more or less attributed to the solar and semiconductor industry, and the other half is across the industries.

We are very happy with the results achieved in North America, of course given the overall economic climate in this region.

The breakdown of the nine months laser sales by industry is as follows. Automotive and subsuppliers, 11% versus 7% in '07; machine tools, 35% versus 37% in '07, and you see already it's a little bit slower; semiconductor, electronic, 26% versus 21%, up highlight of course solar cell business, but also semi and electronics wasn't too bad in the first nine months; others is 28% versus 35%, and you all know medical device, jewelry and flexible packaging are the main industries we serve there.

Now the third quarter results. As you have seen from our press release, we had a very strong quarter with a new record in sales of $149.7 million. We did not make the other $300,000 to get to $150 million, maybe next time. This is $28.3 million or 23% higher than in the comparable quarter in fiscal 2007.

The change of the dollar exchange rate mainly compared to the euro had the effect of increasing our sales by $10.9 million or 9%, and I think this is in line with some of our competitors which have also a similar global sales distribution. As a result, the organic growth rate for the third quarter was remarkable 14%.

Net income increased by $1.8 million to $16.1 million or approximately 11% of net sales. As a result of our share buyback program, net income in absolute numbers increased in the range of or by 13%. But if you look to EPS, this improved even by 20%, and this is due to lower interest income.

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