Filtronic’s loss-making plant given spark of hope

Electronics group Filtronic could be just weeks away from signing two desperately needed contracts for its troubled Newton Aycliffe semiconductor plant.

Chairman David Rhodes told Filtronic’s annual general meeting that it is on scheduleto finalise agreements with BAE Systems Avionics and M/A Com ‘within the next several weeks’.

The County Durham plant would supply BAE Systems with compound semiconductors and related products to be used in various defence projects, thought to include Eurofighter.

M/A Com – part of US giant Tyco International – would take ‘large volumes’ of semiconductors for use in mobile phones and other wireless technology.

Rhodes said the deals would transform the prospects for Newton Aycliffe, lifting it from its current loss-making position into profitability during the year to May 2003. Newton Aycliffe has cost Filtronic £1m per month to run since it bought the vast semiconductor facility for £10m from Fujitsu in 1999. In January the company confirmed that it was looking for a ‘white knight’ to help share the running costs, raising new fears about its future.

The plant – located in the heart of Tony Blair’s Sedgefield constituency – has symbolised the roller-coaster fortunes of the north east’s fledgling high-tech sector. Fujitsu’s decision to pull out despite investing £400m in Newton Aycliffe was a bitter blow to the region.

When the prime minister officially reopened the site under Filtronic’s ownership last June the company was bullish about its potential.

It hoped to quickly begin high-volume production of gallium arsenide-based semiconductor products. but the plant has consistently operated at well below its full capacity and became a drain on the rest of the group.

Earlier this year Rhodes said that stemming the flow of cash out of Newton Aycliffe had become Filtronic’s number-one priority.

The company’s shares rallied briefly by 4% to 171.5p following Rhodes’ confirmation that the new deals were on track, before losing ground again earlier this week.