Global power technologies company, American Superconductor Corporation announced steps to put its house in order. The moves were precipitated after its revenues were impacted due to business and contractual issues with its largest customer in China -- Sinovel Wind Group Co. Ltd. Sinovel also was unable to pay for past shipments worth $56 million.
Earlier, American Superconductor’s revenue growth largely depended on its customer Sinovel, China's largest and the world's third largest wind turbine manufacturer. However at the inception of April 2011, Sinovel bogged down by high inventory levels refused to accept further shipments from the company.
Sinovel represented approximately 75% of American Superconductor’s total revenue for the nine month period ending December 31, 2010. The company is yet to report its financial results for the quarters ending March and June 2011. The company also has not yet released its restated financial statements dating back to the quarter ending September 30, 2010.
As a result, American Superconductor since March 31, 2011, cut 150 jobs or 30% of its global workforce to better align costs with its revenue expectations. The reduction in workforce has also resulted in a reduction of the company's annualized expenses by about $30 million since March 31, 2011. The company also indicated that it expects to report a significant net loss on revenue of less than $10 million for the quarter ended June 30, 2011.
American Semiconductor also expects to incur restructuring charges of $3 million to $4 million for severance and related expenses in the quarter ended September 30, 2011.
American Superconductor offers an array of proprietary technologies and solutions spanning the electric power infrastructure -- from generation to delivery to end-use. American Superconductor is a lead player in megawatt-scale wind turbine designs and electrical control systems.
American Superconductor also offers a host of smart-grid technologies for power grid operators that enhance the reliability, efficiency and capacity of the grid, and seamlessly integrate renewable energy sources into the power infrastructure. These include superconductor power cable systems, grid-level surge protectors and power electronics-based voltage stabilization systems.
Consequently, we advise investors not to take any long term position over the Underperform rated American Superconductor stock. In the near-term the Zacks #3 Rank (Hold) for the stock indicates exit at an opportune moment. As of now American Superconductor’s Zacks #2 Rank (Buy) peers, like Rogers Corporation (ROG - Snapshot Report) and Kyocera Corporation (KYO - Snapshot Report) look attractive.