Nordson's FQ109 Forecast: Asia Headwinds, Solar Breezes

From Nordson Corp.’s FQ408 conference call: (NDSN)

Currency headwinds: How will Nordson’s bottom line be affected going forward as currencies continue to fluctuate?

The sudden strengthening of the US dollar against most major currencies which began in August and accelerated with the September financial turmoil impacted our results as currency became a headwind in the quarter.

The dollar has been very volatile over the last several months. We started the first quarter of fiscal 2009 with the Euro at $1.27. The dollar is now 13% weaker, just over $1.46. Likewise with the Yen we started the quarter at 98 Yen to the dollar and the dollar is now 10% weaker at 88 Yen to the dollar.

The numbers in our outlook are based upon the final six weeks of the quarter averaging about $1.41 at the Euro.

What's doing well? Disposables, Netbooks and Solar:

Those businesses that are associated with large portions of spare parts or selling consumable components that are used once and disposed, our packaging business, other businesses that are related to consumer non-durables like non-woven’s, those are all if you will, large businesses that are doing well... Life sciences [are] continuing on without impact.

In a number of our businesses we have a number of projects surrounding solar that despite energy prices where they are today, those seem to be going forward without any deceleration. Also in technology markets we’re seeing some areas like LEDs and low cost computers and a variety of spots where either there is something about the economics in our customers’ world or alternatively where we’ve been able to gain share.

We continue to be able to win with some of our technology driven activities... smart phones for example.

The investment in the technology to make those phones or the investments to move to the next generation of architectures for things like memory continue to make progress

Using the Chinese New Year to slow things down. What will happen after?

The non-smart cell phone activities, those customers, the contract manufactures in Asia are taking very extended shutdowns over the New Year holidays and up to Chinese New Year. Those shutdowns and the lack in some of the traditional cell phones as an example are causing the need to make capacity or capability investments slower then we’ve seen in prior periods.

We believe that year-end holidays and January are going to be an especially weak period of time due to customer extended shutdowns and customer conservatism until after the New Year or the Chinese New Year with a wait and see attitude.

More on Asia: On Nordson’s FQ308 conference call execs said:

We continue to have double digit growth rates in Asia. We have strong high single digit growth rates in Europe most recently. It’s interesting, the only place we have a little softness in Adhesive order rates is in Japan and frankly that’s lumpy, it’s a smaller territory it can bounce around week to week.

Foreign markets previously offset the slumping U.S. markets. No more. From this quarter's call (FQ408):

Even China, a significant driver of growth over the last several years, is experiencing a deceleration of growth not seen in many years.

We are seeing a pause in spending [on capital goods] by our customers at a rate indicative of a singular focus on cash preservation.

We are seeing softness again within the larger dollar systems businesses and this is related to the global economic weakness rather then market share. This weakness is most pronounced in Europe and Asia Pacific where many of our customers are putting orders on hold as they assess the severity of this downturn.