Siltronic reports strong second quarter 2020

Business at Siltronic AG (MDAX/TecDAX: WAF) developed better than expected in Q2 2020. On a half-year basis, however, sales and earnings were below the prior-year period as forecast. The corona pandemic led to partly strong demand for wafer area, especially in Q2 2020. This was mainly driven by a digitization push triggered by the pandemic and a probable build-up of inventories in the entire semiconductor value chain. The measures taken by Siltronic in Q1 2020 to ensure the health of its employees and the smooth running of production continued to be successful in Q2.

"Home offices and home schooling show how important increased investment in digitization is. The surge in digitization was reflected in solid order intake in H1 2020," said Dr. Christoph von Plotho, CEO of Siltronic AG.

In Q2 2020, Siltronic achieved sales of EUR 323.1 million, a 7.7 percent increase compared to Q1. This positive development was driven by an increase in wafer area sold.

In H1 2020, the company generated sales of EUR 623.3 million, which was below the prior-year figure as expected. This is mainly due to lower ASP per wafer area, as H1 2019 was very much characterized by Q1 with high ASPs.

Cost of sales increased to EUR 224.0 million in Q2 2020 due to the increased wafer area and higher scheduled depreciation. For H1 2020 they amounted to EUR 434.8 million. However, cost of sales per wafer area decreased due to productivity improvements.

The company achieved a gross profit of EUR 99.1 million in Q2. This was 11.0 percent above Q1. Gross margin rose from 29.8 percent to 30.7 percent.

EBITDA increased by 19.2 percent to EUR 100.4 million in Q2 2020. The EBITDA margin increased by 3 percentage points from  28.1 percent to 31.1 percent. On a half-yearly comparison, EBITDA was 18.7 percent below the same period of last year. The decline in ASP on the back of a strong Q1 2019 is the main reason for this development.

EBIT for Q2 improved by EUR 13.6 million to EUR 66.9 million compared to Q1. This represents an increase of 25.5 percent. After the first six months of 2020, EBIT amounted to EUR 120.2 million (H1 2019: EUR 178.0 million).

Although the coronavirus did not have any significant impact on Siltronic's EBIT and EBITDA, it was reflected in the financial result. Q1 2020 was dominated by the downturn in the financial markets, whereas Q2 saw earnings of EUR 2.2 million.

In Q2 2020, Siltronic generated a profit for the period of EUR 60.8 million. This represents an increase of  32.2 percent compared to Q1. The profit after six months was EUR 106.8 million. EUR 54.0 million of this amount is attributable to Siltronic AG shareholders. Earnings per share for the first six months of 2020 were EUR 3.12, compared with EUR 4.66 in the first half of 2019.

Development of equity, net cash flow and net finanicial assets

With equity of EUR 866.5 million at June 30, 2020, Siltronic AG's equity ratio was 45.4 percent compared with  47.8 percent at December 31, 2019. The EUR 63.7 million decrease in equity is attributable to the half-year profit of EUR 106.8 million less the dividend payment of EUR 90 million and the increase in pension obligations of EUR 47.7 million.

In H1 2020, Siltronic invested EUR 94.3 million in property, plant and equipment and intangible assets. They mainly relate to investments in capabilities and automation as well as the continuation of projects to expand capacity. Due to travel restrictions caused by the corona pandemic, the company was unable to implement all measures as planned, but is confident that it will be able to largely complete them by the end of 2020.

In Q2 2020, net cash flow was EUR 26.7 million compared to EUR 40.9 million in Q1 2020. Net cash flow for H1 was EUR 67.7 million (H1 2019: EUR 81.2 million). This includes refund of customer prepayments of EUR 38.5 million.

"Continued investment in automation and capabilities ensures our position as one of the technology and quality leaders. The ability to always be qualified by customers for the latest design rules strengthens the earning power of our company," von Plotho emphasized.

Despite the dividend payment of EUR 90 million, net financial assets decreased by only EUR 79.5 million to EUR 509.4 million due to the positive cash flow.

Business development expected to be slightly weaker in the second half of the year due to the effects of the corona crisis

In H1 2020, Siltronic benefited from the demand for wafer area triggered by the digitization push, but the demand was presumably also supported by inventory build-up along the entire value chain. This tailwind is also countered by the negative impact of the corona pandemic. The massive slump in global economic output was reflected in many countries in a rise in unemployment figures and consequently a collapse in consumer confidence. The effects of the negative development in the automotive sector and in industrial applications, as well as possibly more restrained consumer spending on electronic goods in the second half of 2020, are expected to have a negative impact on demand for wafer area. As Siltronic has a relatively high supply share to the automotive industry, the outlook is gradually worsening, especially for wafer diameters of 200 mm and smaller.

Siltronic expects orders in H2 2020 to be slightly lower than in H1 and states its forecast for 2020 more precisely.

The company expects sales in 2020 to decline by a mid-single-digit percentage range, with a slight sequential decline in the second half of the year. In case of a continuing weakness of the US dollar, the decline could be somewhat higher. The EBITDA margin should be around mid-single-digit percentage points and net cash flow slightly below 2019. The tax rate in 2020 should be below 10 percent. As already forecast in March, EBIT and earnings per share will be significantly below the prior-year figures. Siltronic still plans to invest around EUR 200 million.

"The further effects of the corona pandemic are not foreseeable, especially if the number of infected people in countries such as the USA continues to rise and the risk of a second wave generally increases," says Dr. Christoph von Plotho.

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 June 30, 2020 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 Q2 interim report and the latest investor presentation are also published on the Siltronic website.

Other dates:

October 29, 2020          Q3 2020 quarterly statement