IPG announces continual operation of Russian facilities

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IPG Photonics, a manufacturer of fibre lasers founded in Russia in 1990 by the late Valentin Gapontsev, has announced that its Russian facilities are continuing to operate and manufacture optical components and finished products for its operations in the US, Germany and China.

IPG has major production and R&D facilities as well as close to 2,000 employees located in Russia. These facilities supply components that Germany and the US use in production, and provides finished products to China and the US.

In 2021, IPG’s Russian operations supplied approximately $100 million of finished product for the Chinese market. Historically, sales to Russian customers have been nominal, totaling $30 million in 2021.

The company says that sanctions will increase lead times and shipping costs for components and lasers to and from its Russian operations. As part of contingency planning, IPG already has built several months of critical inventory in Russia to support sales. Its Russian facility is currently able to ship optical and other components to IPG affiliates from Russia. In the event that sanctions or other developments resulting from the ongoing Russia-Ukraine war substantially limit IPG's ability to export optical or other components to or from Russia, the company’s sales may be materially impacted.

IPG is executing on contingency plans that include increasing manufacturing capacity and inventories of critical components in Germany and the US, and qualifying third-party suppliers to reduce reliance on Russian operations. Management believes that the company can start to reduce the reliance on components sourced from Russia within a few months and substantially reduce the risk related to sourcing these components from Russia in six to nine months. Management continues to assess the impact of the announced sanctions and will monitor any new sanctions.

The current cash balance in Russia is less than 1 per cent of IPG’s total current cash, and the Russian operations are self-funding. To preserve cash, the company has also suspended further capital investment in Russia other than for maintenance and non-material items. IPG has no operations in Ukraine.

Given the rapidly evolving situation, increased risk and uncertainty, IPG has also chosen to withdraw the annual earnings guidance provided for the first quarter of 2022, previously released on 15 February.

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