Industry weakness impacts Siltronic's earnings in Q1 2023
Munich, Germany, May 11, 2023 – Siltronic AG (MDAX/TecDAX: WAF) reported a decline in sales of around 14 percent in Q1 2023 compared to Q4 2022. The reduction resulted from the lower wafer area sold and the stronger euro compared to the US dollar.
"After the record year 2022, demand for wafers was weaker in Q1 2023, as expected. Reasons for this development are the general economic slowdown, geopolitical uncertainties, and the consequences of inventory corrections at chip manufacturers and their customers," said Rainer Irle, CFO of Siltronic AG. "Nevertheless, we are convinced of the medium- and long-term growth of the industry. To accompany this, our focus is on the construction of the new 300 mm fab in Singapore, which is progressing with great strides and on schedule."
Business Development in Q1 2023
Siltronic generated sales of EUR 404.4 million in Q1 2023, a decrease of 14.3 percent versus Q4 2022. The decrease was primarily driven by the wafer area sold and secondarily by the strengthening of the euro against the US dollar. The euro to US dollar exchange rate averaged 1.07 in Q1 2023, a strengthening of 5.2 percent sequentially q-o-q (Q4 2022: 1.02).
The driver for the EUR 13.4 million lower cost of sales compared to the previous quarter was the lower wafer area sold. The associated cost savings were dampened by a disproportionately low decline in labor costs and by price increases for raw materials, supplies and energy.
The developments described above reduced the gross profit for Q1 2023 by EUR 54.3 million and EBITDA by EUR 42.9 million q-o-q. Foreign exchange hedging is the main reason why EBITDA developed better than the gross margin by EUR 11.4 million.
EBITDA in Q1 2023 was EUR 125.2 million, compared to EUR 168.1 million in Q4 2022. The EBITDA margin decreased from 35.6 percent to 31.0 percent.
When comparing EBIT in the reporting quarter with the previous quarter, it should be noted that Q4 2022 was positively influenced by the reversal of an impairment of a building in the amount of EUR 5.7 million. The writeup is recorded in other operating income. Additionally, it should be noted that Q1 2022 included a termination fee of EUR 50.0 million due to the failed tender offer by GlobalWafers. The termination fee was the reason for the higher tax rate in the same period of the previous year.
Rising market values of securities and interest effects had a positive impact on the financial result compared to the previous quarter and Q1 2022.
Although the semiconductor industry is currently in a weaker market phase, a remarkable profit for the period of EUR 72.5 million was achieved, compared to EUR 118.6 million in the previous quarter. Of this amount, EUR 66.1 million is attributable to Siltronic AG shareholders with earnings per share of EUR 2.20.
Development of equity, net cash flow and net financial assets
With equity of EUR 2,118.4 million on March 31, 2023, Siltronic AG's equity ratio was 51.1 percent compared to 51.0 percent on December 31, 2022. The increase in equity is based on the net income for the quarter of EUR 72.5 million. There were offsetting effects mainly from the currency translation of the foreign subsidiaries.
Lower interest rates have led to a slight increase in pension provisions of EUR 2.5 million. The interest rate in Germany fell from 3.72 percent at the end of 2022 to 3.66 percent at the end of Q1 2023. In the US, the interest rate also decreased from 4.90 percent to 4.68 percent during this period.
The decline in EBITDA of EUR 42.9 million is reflected in the cash flow from operating activities. Due to the continued very high cash outflows for capital expenditure including intangible assets, both the free cash flow at EUR -83.8 million and the net cash flow at EUR -105.6 million were negative in Q1 2023. In Q1 2023, customer prepayments of EUR 32.4 million were received.
On March 31, 2023 the company had net financial assets of EUR 284.1 million after EUR 373.6 million on December 31, 2022.
The start into 2023 was rather muted for Siltronic. Due to inventory corrections at chip manufacturers and their customers, Siltronic continues to expect temporary market weakness in the coming quarters. Customer postponements in delivery volumes will affect the entire year 2023.
In Q2 2023, we expect sales to be at the level of Q1 2023. The EBITDA margin is forecast to be between 27 and 31 percent (plan rate EUR/US dollar 1.10). We do not expect any recovery in the second half of the year.
Conference call for analysts and investors:
The Executive Board of Siltronic AG will hold a conference call with analysts and investors (in English only) on May 11, 2023, at 10:00 am (CEST). This call will be streamed via the Internet. The audio webcast will be available live as well as on demand on Siltronic’s website.
The quarterly statement and the latest investor presentation are also published on the Siltronic website.
July 27, 2023 Interim Report 2023
October 26, 2023 Q3 2023 quarterly statement
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Siltronic is one of the world’s largest manufacturers of hyperpure silicon wafers and partner to many leading semiconductor companies. The company operates production sites in Asia, Europe and the USA. Siltronic develops and manufactures silicon wafers in diameters of up to 300 mm. Silicon wafers form the basis for modern microelectronics and nanoelectronics and are a key component in semiconductor chips driving computers, smart phones, navigation systems and many other applications. Siltronic AG employs around 4,500 people worldwide and has been a stock-listed company in Germany (Prime Standard) since 2015. The Siltronic AG stock is listed on both the MDAX and TecDAX.
This press release contains forward-looking statements based on assumptions and estimates made by the Executive Board of Siltronic AG. These statements can be identified by wording such as "expect", "want","anticipate", "intend", "plan", "believe", "strive", "estimate", and "will" or similar terms. Although we assume that the expectations contained in these forward-looking statements are realistic, we cannot guarantee that they will prove to be correct. These assumptions may contain risks and uncertainties that could cause the actual figures to differ considerably from the forward-looking statements. Factors that can cause such discrepancies include changes in the macroeconomic and business environment, changes in exchange rates and interest rates, the introduction of products that compete with our own products, a lack of acceptance of new products or services, and changes in corporate strategy. Siltronic does not intend to update these forward-looking statements, nor does it assume any responsibility to do so.
This press release includes supplementary financial indicators that either are or may be so-called alternative performance indicators that are not clearly defined in the relevant financial reporting framework. In assessing the financial position and performance of Siltronic, these supplementary financial indicators should not be used in isolation or as an alternative to those presented in the consolidated financial statements and determined in accordance with the relevant financial reporting framework. Other companies that present or report alternative performance indicators with similar names may calculate them differently. Explanations of the key financial figures used are available in the Annual Report of Siltronic AG.
Due to rounding, some of the figures presented in this press release as well as in other reports may not add up exactly to the stated totals and percentages presented may not accurately reflect the absolute values to which they relate.
This press release is a quarterly Group statement in accordance with Section 53 of the Exchange Rules for the Frankfurt Stock Exchange.