Vice President of Finance & Administration Planning, ADTRAN HOLDINGS INC
ADVA-CFO Ulrich Dopfer: "Breite Basis des Wachstums stimmt uns zuversichtlich"
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About Ulrich Dopfer
Ulrich Dopfer, Vice President of Finance & Administration Planning at Adtran Holdings, has commented on the company's financial performance and market position in recent interviews. In 2020, Dopfer stated that the company expected revenue of 580 million euros or more and a further increase in profitability of five percent or more. He noted that the company was shifting production out of China to avoid tariffs, a relocation he said should be completed by mid-second quarter. Dopfer described Adtran as "one of the few remaining European players focusing completely on the optical industry" and advised investors to invest despite stock price drops, attributing the company's products as foundational for future technologies like autonomous driving and artificial intelligence. In earlier comments from 2016 and 2017, Dopfer characterized 2016 as a year of "mixed feelings" due to strong revenue growth of 28 percent but a sharp fall in operating results, which he attributed to one-time costs from an acquisition and restructuring. He expressed optimism for 2017, stating that while growth would be weaker than 2016, the company expected "extremely strong profitability." Dopfer identified cloud and mobility as major growth drivers and said the company was "running on all cylinders" with a broad base of growth across all customer groups and products. He also noted that the company was actively scouting for potential acquisitions but provided no specific updates on that front.
Transcript (15 segments)
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Interviewer0:08
Welcome to the Aktionär TV interview. Adva Optical has presented its figures for the past fiscal year. We already got a first glimpse of the balance sheet yesterday, and now I want to discuss the balance sheet with Ulrich Dopfer from Adva Optical. Good day, Mr. Dr. So, Adva is feeling the effects of the coronavirus, we have learned. You therefore expect a negative pro forma operating result margin in the first quarter. What exactly are the problems here?
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Ulrich Dopfer0:33
Good morning. First, I would like to express our sympathy for the communities and people affected by the coronavirus, and of course for those working around the clock to contain and fight the virus. The effects for Adva are difficult to estimate at the moment, but as you could gather from our profit warning, we are affected by the bottlenecks coming from the region. In the EU, the region is the center of the optical industry, not just for Adva but for many companies. Many components and contract manufacturing are located there, and the shutdown of production naturally affects us. Perhaps I can add that when the virus broke out, it was Chinese New Year, and companies traditionally closed. We used that time to prepare. We normally have enough inventory and had purchased supplies in advance to bridge this period, perhaps for two weeks longer. But the slow ramp-up of production to maybe 5, 15, 20, 30 percent capacity naturally means that not all components needed for delivery in the first quarter will be available. That is the problem.
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Interviewer2:18
And how are you dealing with this problem? What measures can be taken? Is there anything that can be done in this case?
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Ulrich Dopfer2:27
We are, of course, trying to source alternative components from other sources. But that is all very simplified because many important manufacturers are actually located in the region, and then there are issues of certification and such. You can't just build any similar components into our systems. We are trying to buy up as much as possible, as many have said. We hope, of course, that the situation continues to ease and that we can work at full speed around the clock to keep damage as low as possible.
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Interviewer3:04
You have also adjusted your forecast. Instead of only for the coming quarter, you are now issuing targets or forecasts for the full year. What are the reasons for this adjustment?
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Ulrich Dopfer3:12
The reasons are quite simple. We have been approached by analysts and investors over the last few years who said it is no longer appropriate to give quarterly guidance for European markets, while the US still gives quarterly guidance. We have always been asked about this. Our quarterly figures do not really reflect our company structure, product structure, or philosophy. We are very volatile, heavily involved in project business. You can see the fluctuations between individual quarters in the past. That makes quarterly guidance very difficult and has often caused irritation. Based on the feedback we received from outside, we are now focusing on annual guidance. Last year, we issued annual guidance and even slightly exceeded it. For revenue, we had forecast constant growth of almost 11 percent, and we achieved that. In terms of profitability, we also met our targets. We will continue to report our actual figures quarterly, but we will refrain from giving quarterly guidance.
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Interviewer4:47
And what do you expect for the full year 2020?
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Ulrich Dopfer4:51
We expect revenue of 580 million euros or more in the current environment, and we also expect a further increase in profitability of 5 percent or more.
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Interviewer5:03
Let's look at the figures for the past year. In 2019, you significantly increased revenue. You also speak of one of the best results in the company's history. What were the growth drivers?
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Ulrich Dopfer5:15
The growth drivers for us last year were, in principle, all customer groups and all products we have. It was very broad-based, and that is something that makes us very optimistic. In previous years or quarters, it was often very focused on only one specific customer group or even one specific customer. This broad base of growth gives us confidence for the coming year or the current year.
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Interviewer5:49
In the past year, the trade dispute was a major topic. Phase 1 was recently signed. What role does this topic still play for the company?
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Ulrich Dopfer6:00
It doesn't play a major role for us because we were hit hard last year. The entire telecom industry was severely affected by tariffs of 25 percent or up to 25 percent. In principle, everything we imported into the US that originated in China was subject to 25 percent tariffs from mid-October. It cost us around five million euros in additional expenses in the second half of the year alone. Last year, we started shifting production out of China to other countries to circumvent these tariffs. This relocation is still ongoing but should be completed by the middle of the second quarter. Then the majority of tariffs will be avoided.
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Interviewer6:59
The Adva share fell significantly yesterday. What do you say to investors? Why should they still invest in Adva?
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Ulrich Dopfer7:07
I say invest in Adva today. First, because of the new technologies the world is talking about: autonomous driving, smart factory, artificial intelligence. All these technologies or this future of energy are built on an absolutely high-performance, secure network, and Adva products deliver exactly that. We provide products that lead to the networks of the future. And you can say there are not many companies left in our industry. Over the last 25 years, many companies have disappeared, many large ones. Think of Siemens, Nokia Siemens Networks, Alcatel, Marconi, Nortel. Many large companies have disappeared. There are only a few players left that focus completely on the optical industry, and Adva is one of the few. And Adva has the charm of being the remaining European player in this entire industry. That's why I think we have a future.
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Interviewer8:28
Then I say thank you very much for the interview. Have a nice day. It was great that you were with us. Feel free to tune in again next time. Keep it short. Goodbye.