Cree Inc. executives expect the company’s Marcy facility to be on track to begin semiconductor production in early 2022 as the company tries to get ready to meet faster customer demand, they told financial analysts Tuesday.
“We’re going to see some big moving pieces here next four to six quarters as we start to make what we think is going to be significant progress there,” Cree Chief Financial Officer Neill Reynolds said during a conference call to report the company’s fiscal 2020 fourth-quarter results Tuesday.
For the quarter, Cree reported a loss of $39.5 million under traditional accounting practices. The company said revenue was down 18 percent to $205.7 million compared to the same quarter in 2019.
On a non-generally accepted accounting basis to better reflect its business, Cree said net loss was $20 million.
The losses are expected as Cree is spending heavily on boosting its manufacturing capability, particularly as it moves into silicon carbide semiconductor components, the product line to be made in Marcy.
The Marcy fab, as it’s called, is expected to employ more than 600 people when fully operational by about 2029, producing semiconductor components used in electric vehicles and other industrial segments. It is part of the company’s longterm plan to build its semiconductor business built on use of silicon carbide, which it says are more efficient and cost-effective than traditional silicon semiconductors. It also makes energy-efficient LED lighting products.
The project will represent the bulk of some $400 million in capital spending Cree expects in fiscal 2021. It is also modernizing and expanding its operations near its Durham, North Carolina headquarters. The coming fiscal year will be the peak of its capital spending, Reynolds said.
The quarterly financial results reflect several factors, including adjustments for the COVID-19 pandemic both in its own operations and those of customers, said Reynolds and Chief Executive Officer Gregg Lowe. One company was not designated an essential employer, so Cree was not able to ship to it, Lowe said.
Positive developments include Europe emphasizing electric vehicles for dealing with climate change, with one customer company planning an electric car and another planning electric buses.
The company has not yet received some $500 million in reimbursements from New York state, Reynolds said. The state promised that much in incentives to locate its facility in New York, and the timing of the payments may affect the ramp-up schedule, Reynolds added.
Other incentives include a payment-in-lieu of taxes arrangement with Oneida County and local governments and schools, and county and state help upgrading access roads and electrical service to the site, which is adjacent to the Utica campus of the State University of New York Polytechnic Institute.
Marcy construction progress is now easier to see, while plans are on track to begin production for some customers using equipment at the Albany campus of SUNY-Poly, Lowe noted.
“The fab is now going quote ‘vertical’ so there are steel girders that have been installed and walls are being installed and so forth,” Lowe said. “We’re really excited about that. There’s been excellent work at the prototype line in Albany, with some really good progress on that.”
The results beat Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for a loss of 20 cents per share.
Cree posted revenue of $205.7 million in the period, which also beat Street forecasts. Five analysts surveyed by Zacks expected $198.8 million. For the year, the company reported that its loss narrowed to $191.7 million, or $1.78 per share. Revenue was reported as $903.9 million.
For the current quarter ending in October, Cree expects its results to range from a loss of 24 cents per share to a loss of 20 cents per share.
The company said it expects revenue in the range of $203 million to $217 million for the fiscal first quarter. Analysts surveyed by Zacks had expected revenue of $205.6 million.
Cree shares have increased 48% since the beginning of the year. In the final minutes of trading on Tuesday, shares hit $68.44, a climb of 17% in the last 12 months.