Chip manufacturer Camtek stock drops in Tel Aviv following earnings report

Chip testing equipment manufacturer Camtek continues to lose ground in trading today (Friday) in Tel Aviv, following yesterday's earnings report, with shares down 3%. The company's market capitalization stands at 1.8 billion shekels. Since its peak last March, the stock has lost 55%, wiping out over 2.2 billion shekels in value. Alongside the report, Camtek announced a dividend of 3 million dollars (61 cents per share) and the approval of a share buyback program estimated at approximately 35.7 million shekels.

Camtek recorded revenues of 17.9 million dollars in the second quarter, a 27% increase compared to the same quarter last year. Operating profit fell by 2.6% to 6.6 million dollars due to a rise in operating expenses, with R&D, general, and administrative costs each jumping by 87%.

However, net financial income of 5.4 million dollars resulted in a net profit of 10.8 million dollars, a 67% increase year-over-year. The company noted that the rise in interest income stems from higher cash balances following a private placement and increased interest rates on deposits.

The private placement was conducted in March, raising 225 million shekels from institutional and qualified investors at a price of approximately 610 shekels per share, nearly double the current market price. According to a preliminary estimate by Discount Bank, Camtek is expected to exit the TA-125 index at the next update.

Analyst and investment manager Lior Wieder noted that the company presented an erosion in operating profit, a surge in expenses, and a total reliance on one-time financial income for its bottom line.

Developments in China

During an investor call following the report, CEO Yaakov (Kobi) Herschman stated that global demand for semiconductors continues to grow and is expected to exceed 1.6 trillion dollars this year. He noted that the company's performance reflects resilience in various advanced applications. The order backlog totaled 47.5 million dollars, compared to 49.3 million dollars in the same period last year, and has since risen to 54 million dollars.

Herschman highlighted that China remained the company's leading source of income in the first half of the year, accounting for about 41% of total revenue. He noted the Chinese government's aggressive efforts to expand its chip industry, which, according to the company, often involves copying technologies from Western firms, including Camtek. The company is monitoring the situation to protect its intellectual property.

"The ongoing trade war between China and the USA has led to the inclusion of some of our customers in China on the list of companies prohibited from trading with American firms," Herschman added, noting that restrictions on one client have been eased. "This prohibition is a source of real concern for us, as future escalation could harm business activity and allow non-American competitors to sell to Chinese companies on the prohibited list. However, the company has succeeded and continues to succeed in maintaining business volume with the Chinese market despite these effects."