Morgan Advanced Materials, a UK-based semiconductor component provider, anticipates a downturn in organic revenue for the current year. This forecast is largely due to demand uncertainties influenced by potential tariff increases from the US. The company, with manufacturing sites in the US and regions like China, Mexico, and Canada, which are areas potentially impacted by tariffs, is exploring options to relocate operations to lessen these effects.
“Demand in a number of our end-markets is uncertain. Our current outlook for revenue in 2025 is for a mid single-digit organic decline and assumes no recovery in H2,” stated the company. In response to weaker demand, Morgan Advanced is expediting its programme aimed at simplifying operations, targeting a 12.5% margin in 2025. The company plans to maintain a similar distribution of adjusted operating profit between the year’s two halves.
Revised investment strategy in response to BEV market slowdown
According to Morgan Advanced, slower growth in battery electric vehicles (BEVs) has affected semiconductor capacity demand, leading to high inventory levels among customers in the short term. Consequently, the company has adjusted its investment strategy, now planning to invest around £60m in semiconductor capacity instead of the previously projected £100m. This revised investment is expected to generate additional revenues of £40m and an adjusted operating profit of £12m in 2027, compared to earlier estimates of £80m in revenue and £25m in profit. Despite current market conditions, the company stated that it remains confident in the long-term potential of semiconductors and intends to resume investments as market conditions improve.
Morgan Advanced’s medium-term guidance for capital expenditure is now set at approximately £90m for 2025, decreasing to £65m in 2026, and £60m in the following year. The effective tax rate, excluding specific adjusting items, is projected to be between 26-28%.
The demand for Morgan Advanced’s silicon carbide (SiC) power semiconductor products has slowed, primarily due to reduced demand for electric vehicles. In its largest market, the US, the electric vehicle industry faces competition from less expensive gas-powered vehicles and potential policy changes under the Trump administration that could eliminate tax credits for buyers, as per a report in Reuters.
President Trump’s proposed tariff hikes on various US imports, including semiconductors from multiple countries, have led global companies to devise strategies for potential impacts on their operations and clients.
Morgan Advanced reported a 1.3% decrease in revenue to £1.1bn for 2024 and expects organic revenue to decline by a mid-single-digit percentage this year. The company’s shares dropped by 8% during early trading, reaching their lowest level since November 2023 at 236p.
Despite the revenue decline, there was an increase of 6.7% in Morgan Advanced’s adjusted operating profit in 2024 due to efforts to streamline reporting segments and consolidate manufacturing facilities.
“We have delivered robust organic constant currency revenue growth against a backdrop of increasingly challenging end-markets, with good progress made in our business simplification and efficiency initiatives, continuing our track record of self-help,” said Morgan Advanced CEO Pete Raby. “We remain focused on delivering against our strategic initiatives and expect a return to a 12.5% adjusted operating profit* margin during 2025.”
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