A message from Bruce Hoechner, CEO, Rogers Corporation:
Read the corporate financials news release: Rogers Corporation Reports 2013 First Quarter Results
During the first quarter of 2013, Rogers continued to see positive impacts from our transforming initiatives that began in 2012. Building off our streamlining results in 2012, we expect to achieve an annualized cost savings in 2013 of approximately $20 million and we continue to seek further opportunities for cost savings. A portion of these savings are being reinvested in growth enabling initiatives in Sales, Marketing, and Research and Development, as well into improving our infrastructure capabilities in Information Technology and Operations.
A key indicator of our progress is the improvement in our gross margins in Q1 2013 to 33% from 30.3% in Q1 2012, reflecting our improved operating discipline. Looking forward, we expect that, as sales increase through the rest of year, our streamlining savings will hold and our gross margins will continue to improve. We have a very positive outlook for Rogers’ full year, both on the top line and bottom line.
Our megatrend focus areas of Internet Growth, Clean Technology, and Mass Transit drove 55% of net sales in the quarter with applications in automotive and industrial also adding to our growth engine.
We are seeing robust growth in Wireless Telecom Infrastructure. Sales for our printed circuit materials in this market were up about 12% for the quarter vs. Q1 2012. We believe we are seeing the much anticipated ramping of 4G installations around the world. This is good news for Rogers where, in this segment, we have greater than 90% market share in High Frequency circuit board technology used in 4G base station applications.
In Mobile Internet Devices, sales were essentially flat in the category due to seasonal inventory adjustments. Specifically in tablets, growth was moderated by a market shift in the quarter to smaller format tablets and continued supply chain yield improvements. We continue to be confident in our leadership position in sealing and impact protection for handheld electronics and are developing and launching new, innovative materials to address the needs of next generation platforms.
In Clean Technology markets, sales were up 4% over Q1 2012, and up 14% over last quarter. We generated strong growth in power electronics solutions in Hybrid Electric Vehicles and modest gains in Solar and Smart Grid applications, offsetting lower growth for industrial variable frequency drives. However, we have seen a significant increase in backorders and are ramping up production to meet what we believe is increased, sustainable demand as industrial capital spending increases.
In Mass Transit, with sales 6% below Q1 of last year, we anticipate improvement in demand when the Chinese government implements its announced investments in rail infrastructure. Based upon our assessment of the Chinese Ministry of Rail plans, we expect to see demand in this sector increase as we move through 2013.
In addition to our opportunities in the Megatrends, growing adoption of automotive safety sensors continues to be a bright spot for Rogers. For these radar-based safety applications, Rogers generated significant growth year-over-year (79%) and quarter-over-quarter (51%) in high frequency printed circuit materials. We continue to be the leading provider of circuit materials technology to support both the 24GHz and 77GHz designs.
Across our markets, particularly in Asia and North America, growing consumer confidence is helping to drive demand for Rogers’ products in a wide variety of consumer and industrial applications, from sports protective gear to automotive and industrial gasketing and sealing.
We grew our pipeline of design opportunities by 10% for the quarter vs. Q1 2012, diversified across our markets. At the end of the first quarter, we were tracking a cumulative total of 749 major design opportunities of which 425 have already been designed in. At the same time, we moved more than twice the number of opportunities from design into production vs. the same quarter of last year (37 in Q1 2013) vs, 16 in Q1 2012). We believe this is a strong indicator of our future growth opportunities.
Business Segment Performance
Our net sales were $126 million, up 5% over last year’s first quarter.
Our Printed Circuit Materials business generated approximately 11% growth due to strong performance in wireless infrastructure and auto safety sensor applications. We expect this momentum to carry forward throughout the year as service providers, particularly in North America and Asia, continue to invest in additional 4G capacity.
The High Performance Foams business was up 5% with growth in consumer and industrial applications, offsetting flat demand in mobile Internet devices for the quarter.
Our Power Electronics Solutions segment was down slightly vs. Q1 of last year, but up 5% over last quarter with Hybrid Electric Vehicle applications driving our growth. Although demand was still below Q1 2012 for Variable Frequency Drives and Rail propulsion system applications, both segments showed modest sequential improvement over Q4 of 2012. While European markets remain soft, we continue to see indications of growing customer confidence in the power electronics arena as infrastructure and capital spending starts to make a comeback in Asia and North America.
We entered 2013 in an environment of continued global economic uncertainty. We cannot control the external environment but we are aggressively managing Rogers to ensure we perform well in the short term and build a foundation that provides sustainable top line and bottom line growth for years to come. We are encouraged by our continued progress in cost streamlining and our Q1 improvements in gross margin. We are confident in our strategies and our ability to execute, and believe that, as 2013 unfolds, we will see our markets improve. We believe that the long anticipated build out in 4G infrastructure is here and will help drive strong results for our Printed Circuit Materials business. We see positive signs of recovery in the markets for our Power Electronics materials and are confident in the continued market leadership of our High Performance Foams business. With our portfolio diversified across many markets, we have demonstrated our ability to perform well in the face of changing economic and market dynamics.
As global economies get moving again, demand is increasing for better ways to power, protect, and connect our world – and Rogers is a leader in unique, innovative materials solutions to address these challenges. We see many opportunities for growth ahead in 2013 and beyond and remain focused on delivering value to our customers and consistent results for our shareholders.