Germany deposition equipment maker Aixtron says that it has written down EUR 51.5m of inventory due to a significantly slower-than-expected recovery of demand for metal-organic vapor phase deposition (MOCVD) equipment.

The devaluation followed a comprehensive review of inventory held, which concluded that, despite the positive long-term outlook for the LED industry, the existing stock held was inappropriately high in comparison to the current subdued level of demand in the market.

These non-cash effects will lead to a negative operating result of about €78m in third-quarter 2012 (falling back from negative €16.5m in Q2) or €113m for the first nine months of 2012.

However, Aixtron expects sequentially stronger fourth-quarter revenue, albeit considerably less than previously expected. As a result of the unexpected slower demand recovery, the firm will not report a profit for full-year 2012 (whereas it had previously targeted profitability).

Aixtron now expects full-year revenue of about €220m (compared with the prior target of €275m, and down 64% on 2011’s €611m). Also, due mainly to the write-offs, the expected negative operating result will be about €125m.

Nevertheless, for 2013 the firm’s management expects an increase in demand for LED manufacturing equipment (driven by stronger projected demand in the LED lighting market) as well as a return to profitability during the year.