NXP: ‘the impact of COVID-19 was greater than anticipated’

NXP says that this pre-announcement is currently the company’s best estimate but may change following the completion of its first quarter financial closing procedures. These estimates reflect a worse than anticipated impact from the COVID-19 pandemic versus what the company had anticipated earlier in March. “Consistently during this challenging period, we have taken stringent actions to ensure the health and safety of all of our NXP team members and are extremely proud of their continued dedication,” said Richard Clemmer, NXP Chief Executive Officer, in the update. “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.” Richard Clemmer continues to explain that 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. “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,” Clemmer continues. According to the update, NXP chose not to ship roughly USD 150 million of orders to its distribution partners in order to maintain its own normal channel inventory. “While the demand environment is challenging, NXP continues to have a strong balance sheet and excellent liquidity. We expect our cash balance to be USD 1.1 billion as of the end of March, and in addition we have an untapped revolving credit facility of USD 1.5 billion, should we need it,” adds Peter Kelly, NXP Chief Financial Officer. According to the new update, NXP is expecting a 3.5% YoY drop in first-quarter sales due to COVID-19. The midpoint of the company's March 2 forecast had NXP anticipating USD 2.23 billion in revenues, which would have been a 6.3% YoY growth. Now, the company is expecting first quarter revenues of USD 2.02 billion, a decrease of 3.5% YoY, as stated earlier.