Siltronic reports slightly better sales than expected in the second quarter of 2016

  • At EUR 229.6 million, sales 4 percent higher than in prior quarter (EUR 220.6 million), but below very strong Q2 2015 (EUR 246.7 million)

  • At EUR 35.1 million, EBITDA significantly higher than Q1 2016 (EUR 23.6 million)

  • Negative exchange rate effects from currency hedges down significantly in H1 2016

  • Outlook for fiscal year 2016 fundamentally confirmed

Siltronic AG, the third-largest manufacturer of hyperpure silicon wafers in the world, is overall satisfied with the business development in Q2 2016.

“In a persistently challenging market environment within the semiconductor industry, our sales developed slightly better than expected. Our product mix improved slightly during both the first and second quarters of 2016, although average selling prices were still substantially lower than the level seen in the previous year. We were still faced with significant price pressure in Q1 2016, which then lessened during Q2, causing average prices to remain virtually unchanged. For Q3, we expect prices to stabilize. However, average selling prices are overall still significantly lower than in the previous year.” said Dr. Christoph von Plotho, CEO of Siltronic AG.

At EUR 229.6 million, sales in Q2 2016 were 4.1 percent higher than in Q1 (EUR 220.6 million). Compared to the very strong Q2 2015 (EUR 246.7 million), however, sales fell by 6.9 percent. In H1 2016 sales added up to EUR 450.1 million, 7.3 percent below H1 2015 (EUR 485.4 million). In comparison to sales in H2 2015 (EUR 445.9 million), sales in H1 2016 increased by 0.9 percent.

Cost of sales in the period January to June 2016 were EUR 190.5 million, equating to a decrease in production costs per wafer area year-on-year, despite the reduction in wafer area sold.

The decrease in average selling prices compared to H1 2015 is reflected in the gross profit, which was EUR 73.0 million in H1 2016 (H1 2015: EUR 86.3 million). In Q2 2016, Siltronic realized gross profit of EUR 39.3 million, an increase of 16.6 percent over Q1 (EUR 33.7 million). Compared to the prior-year quarter (Q2 2015: EUR 46.7 million) the figure decreased by 15.8 percent. The gross margin in Q2 2015 was 18.9 percent. Compared to Q1 2016, the gross margin increased significantly from 15.3 percent to 17.1 percent in Q2.

Other operating income and expenses continue to be affected by exchange rate effects in 2016, particularly as a result of currency hedging. Nevertheless, expenses have decreased significantly as expected this year. The negative balance came down from EUR 19.7 million in H1 2015 to EUR 12.4 million in H1 2016.

“Approximately one quarter of our sales is based on Japanese yen. The appreciation of the yen thus has a positive effect on our sales and gross profit. A portion of this positive effect is offset by the contrasting effects of hedging, which are recognized under Other operating income and expenses. Overall, however, the positive effects outweigh the negative ones,” von Plotho explains.

At EUR 35.1 million, and with an EBITDA margin of 15.3 percent, EBITDA was significantly higher than in the previous quarter (Q1 2016: EUR 23.6 million; 10.7 percent), and also above Q2 2015 (EUR 31.4 million; 12.7 percent). Year-on-year, Siltronic realized EBITDA of EUR 58.7 million in H1 2016 compared to EUR 71.5 million in H1 2015. The EBITDA margin was 13.0 percent in H1 2016 (H1 2015: 14.7 percent).

Excluding the effects of currency hedging, EBITDA in H1 2016 would have been EUR 71.1 million (H1 2015: EUR 91.2 million), with an EBITDA margin of 15.8 percent (H1 2015: 18.8 percent).

At EUR 6.0 million, EBIT was positive in Q2 2016, and thus significantly better than in Q2 2015 (EUR 0.2 million). In Q1 2016, EBIT was still negative, at EUR -5.6 million. In H1 2016, EBIT reached EUR 0.3 million (H1 2015: EUR 8.5 million).

The decrease in EBIT resulted in a lower ROCE (return on capital employed), which was positive in H1 2016, at 0.1 percent. The decline compared to the prior-year figure is basically due to the decrease in EBIT. Compared to Q1 2016 (-3.3 percent), ROCE improved significantly to +2.9 percent in Q2.

The financial result, negative at EUR 6.2 million, was predominantly affected by the discounting of pension provisions in H1 2016 (H1 2015: negative EUR 5.3 million). Due to interest rate effects relating to currency hedging, the financial result was better in Q2 (negative EUR 2.4 million) than in Q1 (negative EUR 3.8 million).

Income taxes were EUR 4.8 million in H1 2016, and thus significantly below the prior-year figure of EUR 8.3 million.

The net result for the period improved considerably in Q2 2016, equating to a profit of EUR 0.9 million, up from a loss of EUR 11.5 million in Q1 2016, and a loss of EUR 7.0 million in Q2 2015. The loss for H1 2016 as a whole was EUR 10.7 million, compared to a loss of EUR 5.1 million in H1 2015.

At EUR 0.07, the earnings per share were positive in Q2 2016, up from EUR -0.34 in Q1.

Due to interest rate cuts in Germany and the US, pension provisions increased significantly. This had a negative effect on equity, which amounted to EUR 323.6 million as of June 30, 2016, corresponding to an equity ratio of about 31 percent, compared to 48 percent as of December 31, 2015.

As a result of the current low-interest phase, Siltronic expects that higher payments will be required in the future to cover the corporate pension scheme. Contributions, that will be necessary either in 2016 or in 2017, will likely be in the range of EUR 10 million to EUR 15 million. The contributions will only affect cash flow, however, and not the Company’s financial result.

In H1 2016, Siltronic invested nearly EUR 43 million in property, plant and equipment and intangible assets. These capital expenditure allow Siltronic to meet the increasingly more sophisticated specifications of customers and to increase production efficiency. The further automation of production, the construction of a new crystal pulling hall, and the replacement of older with new, state-of-the-art crystal pullers are all fully on target.

Non-current liabilities increased to EUR 567.9 million in H1 2016 (December 31, 2015: EUR 396.0 million). The main reason for this increase was the discount-related increase in pension provisions, as discount rates decreased in both Germany and the US.

Free cash flow, at EUR -6.6 million, was affected by the net loss for the period and by capital expenditure in H1 2016. Of that amount, EUR -6.7 million already related to Q1 2016. Free cash flow in 2016 is lower due to EUR 52.2 million payments related to capital expenditure on property, plant and equipment, which is significantly higher than the EUR 16 million invested in H1 2015.

As a result of the negative free cash flow, net financial assets decreased from EUR 155.9 million as of December 31, 2015, to EUR 150.9 million as of June 30, 2016.

Outlook for fiscal year 2016 fundamentally confirmed, with a slight adjustment concerning ROCE and the effects of currency hedging

Siltronic continues to anticipate wafer area on the level of the previous year. Following better than expected sales in H1 2016, the Company does not expect a further upturn in H2 2016. Average selling prices will stabilize in Q3.

Siltronic maintains its forecast that sales will decline year-on-year in the low to mid single-digit percentage range, and that the EBITDA margin for 2016 as a whole will increase slightly compared to 2015.

Siltronic expects ROCE to be in the low to mid single-digit percentage range (April 2016 forecast: mid single-digit percentage range).

In April, the cost of currency hedging, which is shown under Other operating income and expenses, was estimated to be around EUR 10 million to EUR 15 million. If the post-Brexit EUR/JPY exchange rate of about 115 will prevail, however, the cost of hedging is likely to increase to approximately EUR 20 million to EUR 25 million. The hedging losses will still be considerably lower than in the previous year, when hedging costs amounted to about EUR 43 million predominantly as a result of the appreciation of the US dollar.

All other forecasts concerning KPIs remain unchanged compared to April 2016.


SILTRONIC AG – KPI OVERVIEW

EUR million Q2 2016 Q1 2016 Q2 2015 H1 2016 H1 2015
Sales 229.6 220.6 246.7 450.1 485.4
EBITDA 35.1 23.6 31.4 58.7 71.5
EBITDA margin 15.3% 10.7% 12.7% 13.0% 14.7%
EBIT 6.0 -5.6 0.2 0.3 8.5
EBIT margin 2.6% -2.5% 0.1% 0.1% 1.8%
Financial result -2.4 -3.8 -3.2 -6.2 -5.3
Net result for the period 0.9 -11.5 -7.0 -10.7 -5.1
Earnings per share (EUR) 0.07 -0.34 -0.17 -0.27 -0.07
Capital expenditure in property, plant and equipment and intangible assets -22.4 -20.4 -9.1 -42.8 -13.4
Free cash flow 0.1 -6.7 7.1 -6.6 46.8
  June 30, 2016 December 31, 2015
Equity 323.6 497.3
Equity ratio 31% 48%
Net financial assets 150.9 155.9
Total assets 1,037.0 1,040.8
Employees 3,817 3,894

 

Conference call for analysts and investors

On July 28, 2016 at 3 p.m. (CEST), the Executive Board of Siltronic AG will hold a conference call with analysts and investors (only in English).The call will be broadcast live via the internet as an audio webcast, which will also subsequently be available on-demand on the website of Siltronic .

Our current investor presentation (in English only), quarterly report, press release, and an excel file with the most important KPIs are all also published on Siltronic’s website.

Key dates
October 27, 2016 Interim statement, Q3 2016


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