- NXP Semiconductors posted $2,021 million revenue for the first quarter of 2020 (Q12020)
- Company’s chief financial officer mentioned about $1.5 billion revolving credit
- Many countries including India, continue to be on government-imposed lockdown
NXP Semiconductors (NXP) has updated its performance expectations for Q12020, keeping business impact caused by the novel Coronavirus (COVID-19) in picture. This pre-announcement, as the company informed is currently the best estimate but may change following the completion of NXP’s first quarter financial closing procedures.
“While the demand environment is challenging, NXP continues to have a strong balance sheet and excellent liquidity. We expect our cash balance to be $1.1 billion as of the end of March, and in addition we have an untapped revolving credit facility of $1.5 billion, should we need it,” stated Peter Kelly, NXP chief financial officer.
The estimates, as NXP informed, reflect a worse than anticipated impact from the COVID-19 pandemic versus what the company had anticipated on second March 2020.
Disruption in the supply chains
The spread of Coronavirus has made many governments take preventive measures. Lockdowns, shutting manufacturing plans temporarily and restricting cargo movements through air and water are some of the toughest measures taken so far.
“Additionally, the impact to our first quarter results due to COVID-19 were more significant than we anticipated on March 2. While the supply chain disruption experienced post Lunar New Year in China appears to be subsiding, the end market demand trends in the rest of the world have started to significantly deteriorate,” noted NXP CEO Richard Clemmer.
While markets and manufacturing in China has started to come back to normalcy, there are many countries which are still on the lockdown. India, one of the biggest markets for mobile devices, is on a lockdown till the first half or April 2020.
“Throughout March, the demand headwinds accelerated in the automotive market where many global auto OEMs outside of China have shut production lines, and within the industrial and mobile markets where customer demand trends have resulted in the push-out of orders,” added Clemmer.
Current customer demand environment remains fluid
NXP also mentioned about the current demand for products and solutions in the global markets. The company informed that orders worth $150 million were not shipped on purpose to maintain normal channel inventory.
Clemmer said, “We continue to be vigilant in the management of our distribution channel, aligning channel inventory to the sales out of the channel, and expect channel inventory to be consistent with prior periods, in the 2.4 months of supply range.”
“Furthermore, we chose not to ship roughly $150 million of orders to our distribution partners in order to maintain our normal channel inventory. The current customer demand environment remains quite fluid and we will provide our best perspective for the second quarter during our earnings call on April 28,” he added.
