A Cambridge-based manufacturer of digital inkjet printheads is cutting a fifth of its workforce after a downturn in Chinese construction hit demand for ceramic tiles printed with its products.
Xaar intends to slash about 160 jobs in the UK from its 800-strong workforce. About 700 of its staff are employed in and around Cambridge. About 120 jobs will be lost at its factory in Huntingdon.
In its third profit warning this year, Xaar said annual revenue would be 5-10% under the lowest estimate of £115m, and that it expected revenues to fall below £100m next year. Revenues had tripled in the previous four years as demand from tile manufacturers supplying China’s construction industry boomed.
The company warned in August that demand for its products had fallen because of the slowdown in Chinese construction. Xaar, which relies on ceramic tiles for two-thirds of revenues, said ceramic tile production, almost half of which is in China, had fallen further in the past month. Xaar’s shares, which hit a record £11.62 at the end of last year, fell by 35% to 240p.
Xaar’s woes represent a blow to UK efforts to increase manufacturing and boost exports to help rebalance the economy. In 2012, the chancellor, George Osborne, said the UK was “on the road to economic irrelevance” and called on business to double exports by 2020, targeting China and other emerging markets.
Ian Dinwoodie, Xaar’s chief executive, said: “One thing that has been clear in our history is that fast-growing markets move and change very rapidly. There is a much more dynamic environment in Asian markets which can be great on the upside but it can mean that progress doesn’t go in straight lines.”
Dinwoodie said Xaar had hired hundreds of specialised, highly trained employees over the past two years and that making job cuts was painful. “It’s a reasonably paid, skilled environment with good quality jobs so this is really frustrating,” he said.
Economists are worried that China’s once-booming construction market is about to burst amid a glut of urban residential property and falling sales of new commercial buildings. The sharp slowdown in the real estate market has increased concern about the wider Chinese economy.
Dinwoodie said Xaar was investing in research and development to find new sources of revenue so that it would not rely so heavily on China and ceramic tiles. The tile market had been the fastest to convert to digital printing and Xaar had responded to demand, he said.
“The only way we would have been less exposed to this is to turn down sales, which isn’t what you want to do as a growth company,” Dinwoodie said.
