MARKET REPORT: Renishaw profits soar as it cashes in on chip shortage

Engineer Renishaw saw profits soar as it cashed in on surging demand for semi-conductors.

The FTSE 250 group makes encoders, precise measuring devices that are used by factory robots to manufacture these highly sought after computer chips, and dental and bone implants for the medical industry.

In a trading update for the three months to the end of September, it said revenues jumped by 35 per cent to £157.8million while profits more than doubled to £41.7million from £18.3million.

Engineering firm Renishaw makes encoders, precise measuring devices that are used by factory robots to manufacture these highly sought after computer chips

Renishaw said the spike in growth was driven by ‘strong’ demand from the semiconductor and electronics markets, a trend it expected to continue. It added that it was seeing record levels of orders and that alongside semiconductors it expected a recovery in demand for machine tools and measuring equipment.

Semi-conductors are used in everything from mobile phones to car brake sensors and power steering. However, a global shortage this year has caused many production lines to grind to a halt.

Afflicted firms include Apple, which may slash production targets for its iPhone 13 due to the shortage, while French car maker Renault is expected to make 300,000 fewer vehicles this year.

Stock Watch – Argo Blockchain 

Bitcoin miner Argo Blockchain climbed after prices of the crypto-currency hit an all-time high.

The company, which uses thousands of computer processors based in the US and Canada to extract the digital currency, was lifted 1.5 per cent, or 2p, to 134p after bitcoin’s value surged to a record $66,974 on Wednesday, giving it a market cap of over $1.2 trillion.

The crypto-currency was boosted by a strong debut of the US market’s first bitcoin exchange-traded fund (ETF) earlier this week, which many experts think will draw more investor cash into the crypto market.  

The trading update was accompanied by a blockbuster set of results for the full year to the end of June in which it said annual profits rocketed 146 per cent to £119.7million as companies stepped up investments in electronics manufacturing.

Analysts at Peel Hunt said the company’s outlook was ‘promising’ following the results, adding that speculation of a potential takeover of the firm ‘will persist’ despite the company scrapping a sale process in July due to a lack of satisfactory offers. 

Renishaw’s shares climbed 11.1 per cent, or 515p, to 5155p following the strong figures, valuing the stake of its 81-year-old co-founder, executive chairman and largest shareholder David McMurtry at £1.36billion. 

Meanwhile, fellow co-founder and deputy chairman John Deer, 83, is sitting on a stake worth £622.7million.

The FTSE 100 dropped 0.45 per cent, or 32.8 points, to 7190.3 while the FTSE 250 dipped 0.22 per cent, or 49.62 points, to 22917.05.

The re-emergence of the Evergrande debt crisis in China soured market sentiment as investors fretted over the potential effects on the Chinese economy should the developer collapse under the weight of its £221billion debt pile.

UK stocks in the firing line included miners amid fears a slowdown in Chinese output will hit the country’s demand for raw materials such as coal and iron ore. 

BHP Group dropped 3.7 per cent, or 74.6p, to 1928.4p while Rio Tinto lost 4.8 per cent, or 236.5p, to 4649p and Glencore sank 2.5 per cent, or 9.4p, to 368.55p.

Anglo American was also down 2.7 per cent, to 75.5p, to 2762.5p after a mediocre production report in which it said copper production had fallen 6 per cent in the three months to October due to maintenance work at its Collahuasi mine in Chile. 

However, the firm also flagged a 28 per cent increase in diamond production as demand for sparkling stones rebounded in its key US and Chinese markets.

Greeting card and gifts firm Moonpig was brought back down to earth, slipping 3.2 per cent, or 11p, to 337.6p, after a number of its IPO investors sold around 30m shares in the group for £98million overnight. 

The shares were sold for 328p each, a nearly 6 per cent discount to the Wednesday closing price.

Blue-chip analytics group Relx rose 1.6 per cent, or 35p, to 2250p as it highlighted revenue growth in its exhibitions business as lockdown restrictions eased.

Elsewhere, asset manager Legal & General climbed 1.9 per cent, or 5.1p, to 279.9p after analysts at Jefferies upgraded the stock to ‘buy’ from ‘hold’, saying the company was ‘in a league of its own’ and had several ‘competitive advantages’ through its alternative investment arm. 

The target price was also hiked to 340p from 290p.

This post first appeared on Dailymail.co.uk