Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Siltronic AG (SSLLF, Financial) managed to slightly increase sales quarter on quarter, reaching EUR351 million, marking a 2.3% increase.
- The company maintained a solid EBITDA margin of 25.8%, despite challenging market conditions.
- Prices remained almost stable quarter on quarter, indicating some resilience in pricing power.
- The company has implemented effective cost and liquidity management measures, including reducing CapEx and labor costs.
- Siltronic AG (SSLLF) slightly upgraded its full-year guidance, expecting sales to be in the high single-digit percentage range below 2023 levels and an EBITDA margin in the range of 23% to 25%.
Negative Points
- The demand environment for wafers remains challenging due to elevated inventory levels in the chip industry, impacting order intake.
- The company experienced a negative FX result of minus EUR1 million in Q2, contributing to a sequential decline of EUR6 million.
- CapEx primarily required for the ramp of the new fab in Singapore led to continued negative cash flow.
- Financial liabilities increased as the company drew EUR150 million of its syndicated loan in H1, bringing total loans to EUR960 million.
- Despite the positive end market growth forecasts, the elevated inventories overshadow the positive trend, resulting in overall negative wafer demand in the mid-single-digit percentage range.
Q & A Highlights
Q: Can you provide more color on what drove you to lift the full-year guidance for both top line and margin?
A: We now have better visibility seven months into the year. Initially, we set conservative ranges for margins and sales. With improved precision, we upgraded the sales guidance to a high single-digit decline and the EBITDA margin to the upper range communicated in April. β Michael Heckmeier, CEO
Q: When do you expect the elevated inventories to clear and orders to start coming through?
A: It's difficult to predict exactly when the end market growth will translate into our order books due to the elevated inventories. We are not in a position to provide a clear timeline for recovery. β Michael Heckmeier, CEO
Q: What drove the volume increase quarter over quarter, and can you comment on pricing dynamics?
A: There were no specific quarterly volume dynamics to highlight. On pricing, LTAs are coming in as contracted, with minor price dynamics in the non-LTA space, particularly in smaller diameters. Overall, the price effect is small. β Michael Heckmeier, CEO
Q: Do you expect further volume shifts given the rising power inventories?
A: Volume shifts are part of the current situation, and we cannot declare an end to this. We may face further discussions in the power segment, similar to the industry. β Michael Heckmeier, CEO
Q: Are there any major LTAs expiring this year or next year?
A: No major LTAs are expiring this year or next year. β Michael Heckmeier, CEO
Q: How should we model cash flow in the second half of the year?
A: EBITDA profitability will decline in the second half, putting pressure on cash flow. However, our investment level will also decline, and we will further reduce CapEx-related trade payables. β Claudia Schmitt, CFO
Q: Why not delay the FabNext project given the current financial environment?
A: Delaying the FabNext project wouldn't make sense as we need to qualify products with customers to be ready when demand picks up. We can adjust CapEx spending based on market conditions. β Michael Heckmeier, CEO
Q: How do you see market share evolving given the positive tone from peers?
A: We don't see significant changes in market share for this year. The overall industry sentiment is not much more positive than ours. β Michael Heckmeier, CEO
Q: Any comments on competition from alternative products like SiC or GaN?
A: We don't see unusual dynamics from China or significant threats from SiC or GaN. SiC is not a topic for us, and GaN is still being evaluated. Both are not a threat to the silicon space. β Michael Heckmeier, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
