Agilent starts on the road to recovery

AGILENT Technologies, the US communications testing equipment and microchip maker that has a plant at South Queensferry, has shown signs of recovery after reporting smaller than expected first quarter losses.

For the three months to January 31, Agilent reported a loss of £93.6 million before restructuring charges and other costs, on turnover 44 per cent lower than last year at £1 billion.

This is a far cry from last year’s first-quarter profits of £162m, on turnover of £1.8bn. But analysts had been expecting far larger losses and lower turnover, while Agilent itself had forecast turnover around the £870m mark.

Chief financial officer Adrian Dillon said: "Forecasts are just that - forecasts. We have a lot more confidence than we have had in the past year, but at best these are educated guesses as to how the market will react."

"People are going to feel as though this was a turning point for them,"' said Goldman Sachs analyst Deane Dray. "It’s certainly better than what the previous guidance has been."

Agilent highlighted increasing order activity as a sign that the downturn may be over in certain sectors. It said there was modest strength in its chip products and the testing equipment it sells to wireless, defence and aerospace customers.

Compared with the previous quarter, test and measurement orders were up 23 per cent, chip orders leapt 33 per cent and life sciences orders were up slightly. Despite the growth in orders, sales in its testing business fell 12 per cent, while chip revenues dropped 12 per cent and sales in life sciences dipped three per cent.

Last November, as demand for its products aimed at the communications and semiconductor industries remained weak, Agilent said it would cut around 4000 jobs on top of the 4000 job losses announced in August, leading to an 18 per cent reduction in its global workforce.

The cuts saw 150 people laid off at the South Queensferry plant, which employs around 2000.

Union chiefs described the job losses as a "body blow" for Silicon Glen following the devastating loss of 3000 jobs at Motorola’s plant at Bathgate and 800 job losses at NEC in Livingston.

Agilent said it will complete its redundancy programme in the first half of this year, and the firm is on track to return to profitability sometime during its third financial quarter, according to chief executive Ned Barnholt, but he warned that business conditions "remain extremely difficult".

He added: "We are encouraged by early signs that the US economy is reaching the bottom, and we anticipate that a modest recovery in the overall economy will begin this spring."

Mr Barnholt said "visibility beyond three months remains very poor", but he is comfortable with analysts’ expectations for the company’s performance during the second half of the year.