French memory maker Dane-Elec has forecast that it expects to make a profit of at least FF60 million for the year despite turning in a loss of FF17 million for the first half of 1999.
The manufacturer and distributor last week reported turnover of FF793.1 million for the six months ended 30 June compared with FF507.2 million for the first half of 1998. Profit from the same period a year ago was FF8.6 million.
Dane-Elec, which has not reported a year-end loss in 15 years, blamed the poor first-half figures on the difficult market conditions in the memory sector, which represents about 84 per cent of the company's sales.
Alan Stanley, general manager of Dane-Elec in the UK, said: "Memory prices came down rapidly in the early part of the year. When you are a large company you have to keep large amounts of stock to make sure you can satisfy your customers. The speed at which that stock devalued while it was on the shelf was one of the reasons for the first-half results."
Conversely, the recent events that saw memory prices skyrocket are the main contributory factor behind Dane-Elec's predicted year-end profit figure.
"We have now been in the position where cheap stock that has been sitting on our shelves has risen rapidly in value. The net effect is nothing spectacular but it is certainly better than turning in a loss," said Stanley.
During the first six weeks of the period, the company finished its first wave of investments in the Irvine production unit in California, which can produce 400,000 memory modules a month. The company also suffered acute pressure on margins from sales in its US subsidiary. Despite this, the distribution company is optimistic about the future.
"Following the results being posted, our share price has risen by 10 per cent a day on average. Our profit forecast is a conservative estimate, and analysts believe our share price should be about 33 euro and not the 26 euro it is now," added Stanley.
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