In a press release update on the company's full-year 2021 expectations, Asetek notes that disruptions caused by new and ongoing Covid-19 shut-downs in China disrupting Asetek'supply chain the company has decided to exit the High Performing Computing (HPC) market.
The update also reflects wider supply chain challenges and non-recurring costs related to a sharpening of Asetek's data centre segment to improve profitability.
Andre Sloth Eriksen, the CEO of Asetek says: ‘The shut-downs, component shortages and shipping bottlenecks are challenging the supply chains of both Asetek and our customers. This impacts our revenue and cost expectations. We have highlighted the risk related to Covid-19 and component shortages over time. As the situation now unfolds, we will adapt to the current environment, reduce spending and focus on delivering on the strong underlying demand we have experienced over time.’
Asetek's operations have been affected by shut down in the Tongan District in China, hindering sub-suppliers deliveries of components, and a challenging Covid-19 situation in Xiamen, hindering deliveries of components to Asetek's contract manufacturers and consequently their shipments to Asetek. In addition to the new Covid-19 effects in China, continued components shortages and increasing logistics costs are affecting both Asetek and the company's customers and partners, leading to increased uncertainty related to sales and costs for the remainder of the year.
‘Asetek has a clear strategy of profitable growth. Since our HPC area continues to burn cash and has not delivered meaningful returns, we decided to exit HPC. We maintain our long-term dedication and exposure to sustainable data centres with a focused approach while improving our shorter-term profitability. The time was right to make a decision since we were facing a milestone with an external HPC partner involving binding commitments’ Eriksen adds.
Coinciding with the Covid-19 effects in China and the wider supply chain challenges, Asetek has decided to sharpen its data centre business segment and exit the High Performing Computing (HPC) niche. The decision was taken to protect Asetek's future profitability from increasing HPC investment needs, lacking revenue from the HPC area and an upcoming milestone with an external HPC partner involving binding commitments.
Asetek will prioritise the general data centre market and support legislation increasing adoption of the company's sustainable data centre solutions, capitalizing on the company's liquid cooling technology and long-term investments in the data centre business segment. On August 12, Asetek announced its second-quarter report with full-year 2021 expectations including revenue growth of 20-30% compared with 2020 and an operating income of $8-12 million.
Based on the current situation and outlook, Asetek's updated full-year 2021expectations are:
- Group revenue growth of 10-20% compared with 2020
- Operating income between $0-2 million compared with $11 million in 2020
The reduced operating income expectation is explained by reduced sales due toChina lock-downs, increased shipping and component costs, as well as non-recurring costs of $2.5 million associated with the sharpening of the data centre segment by exiting the HPC niche. Asetek will report its third-quarter results on October 28, 2021. Today's update is based on new and currently available information, and the company will provide further updates on its business and outlook via interim reporting and other disclosure when relevant.
