A high-flying Newport company which expected to make a profit this year has plunged into the red .

Shares in Surface Technology Systems, pictured, makers of the machines that etch silicon wafers for microchips, have slumped.

But the news has not come as a dramatic surprise to the company. Chairman Nigel Randall predicted in April that sales would be lower in 2002.

The company's share value slipped following news that orders have decline with renewed pressure on pricing.

With a £12.6 million write-down on surplus stocks of components, this means first half losses will be wider than expected.

It also means that STS, which employs around 290 at Imperial Park and was looking forward to a profit for the full year of around £1 million, will now make a loss for the year.

Chief executive Ian Smith told financial specialists Citywire that markets were 'absolutely dire' at present and he didn't think there would be much improvement until 2004.

This was despite the fact that revenues for the year ended December 31 were up 58 per cent to £56.7 million and operating profit up 70 per cent to $6.1 million.

But STS has proved capable of riding the volatile semiconductor market with adaptable skills and machinery.