MEMC Electronics (WFR) Lowers Guidance Following Plant Failure, Announces 2 Plant Closures

MEMC Electronics (WFR) is trading down about 5% with heavy volume after it lowered guidance due to a recent failure at its Pasadena, Texas plant.  The company has disclosed that on Aug 7th, a portion of the plant had to be shut down due to a major equipment failure and that rebuilding has been more difficult than expected.  While the company expects to be back to normal operations by the end of September, lost production and associated costs are expected to eat into revenues and margins for the 3rd quarter.

They now anticipate Q3 2009 revenues to be in the range of $285 – $315 and gross margins in the single digits.  Previous guidance called for revenue in the $300 – $350 range and gross margin at 12%.

The company has also announced the planned closing of its Sherman, Texas and St Peters, Missouri plants in order to streamline and cut costs.  Both are expected to be phased out within the next year or so.

WFR CEO Ahmad Chatila said, “We must continue to aggressively drive all unnecessary costs out of the business during these extraordinary times. We will be shifting this high-volume production closer to a number of our customers, who are located in lower cost regions. This will allow us to reduce manufacturing costs and to serve our customers effectively, with the right cost-competitive capacity – in the right places – to meet their needs.”

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