Siltronic Ag Ord

Hello everyone and welcome to the presentation of Siltronix Q1 results for the financial year 2024. Please note that this call is being recorded and streamed on Siltronix website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent with this. At this time, I would like to turn the conference over to Verena Stütze, Head of Investor Relations and Communication of Siltronix. Please go ahead.

Thank you, Sandra. Welcome, everybody, to our Q1 2024 results presentation. This call will also be webcast live on Siltronic.com. A replay of the call will be available on our website shortly after the end of the call. Our CEO, Michael Heckmeyer, and our CFO, Claudia Schmidt, will give you an overview of our financials, the current market developments, and our guidance. After the presentation, we will be happy to take your questions. Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q1 2024 reporting are available on our website. I now turn the call over to Michael for his remarks.

Thank you, Verena, and a warm welcome also from my side. As usual, let me start with the key messages of today's call. The first quarter of 2024 was without any major surprises and continued to be characterized by weak demand for wafers due to the high inventory levels at our customers. As you probably saw in our top announcement last week, this negative sentiment will remain with us for most of 2024. Accordingly, I would call it a year of transition. Our industry and the future growth will be driven by megatrends such as generative AI, digitalization, and electromobility. And therefore, we confirm our ambition to increase our group sales to more than 2.2 billion euro and our EBITDA margin to a figure in the high 30s by 2028. Let me give you a quick glance on our Q1 figures, which will be presented in detail by Claudia in a minute. As already indicated, the first three months did not bring major surprises. Sales were slightly below the previous quarter, but the EBITDA margin increased from 25.5% to what I consider a respectable 26.4%, thanks to a positive tailwind from the non-operating FX result. We achieved this with stable market shares and prices. Although we have passed the peak of our investments in 2023, the CapEx primarily required for the ramp of FedNext led, as expected, to a continued negative net cash flow. Claudia will now give you a deep dive into our financial performance before I report back with updates on the market development and the outlook. Claudia, please.

Thank you, Michael. A warm welcome also from my side. Let's jump directly into the analysis of our results. As Michael highlighted, the first quarter progressed largely as expected, with no big surprises, and we have been managing the week demand with resilience. Our sales totaled 344 million euros, a decrease of 3.7% quarter on quarter. The small decline is due to some shifts in product mix and a slight negative FX impact. It's important to note that product mix shifts are typical quarterly fluctuations. Both the wafer area sold and the prices remained largely stable sequentially. In the first quarter, our EBITDA was robust with 91 million euros, with an EBITDA margin of 26.4%, marking a slight increase quarter on quarter. The small decline in sales was counterbalanced by a favorable FX result of 5 million euros in Q1, which arose partly due to hedging and partly due to valuations in the light of a strengthening US dollar. Looking into the next quarters, please do not expect a similar positive hedging result. As we have already stated for this year compared to 23, while we do forecast a positive impact from reduced energy and material costs, we expect this to be offset by a lower hedging result and increasing labor tariffs. The EBIT came in at 36 million euros and was in line with Q4. Our financial results saw a modest decline to minus 3 million euros. The tax rate for Q1 stood at 16%, an increase from the 7% rate in Q4. The lower tax rate in Q4 was mainly related to deferred taxes. Taking all these factors into account, we concluded Q1 with a net income of 28 million euros. Now let's look at our balance sheet. Total assets summed up to roughly 4.6 billion euros by the end of March. The changes compared to Q4 are mainly driven by two factors. On the one hand, our investments increased the fixed assets by 153 million euros. Consequently, our cash and securities have decreased to less than 400 million euros by the end of March. On the other hand, You may recall that our working capital ratio at the end of 23 was at an all-time low. We've recorded very favorable DSO and the capex-related surge in trade payables. However, as already announced in the last call, we now saw a reversal of this. The DSO increased in general, and we've received customer payments just after the reporting date. Furthermore, the spillover from the trade tables from Q4 was significantly reduced in Q1. The equity ratio remains resilient and is at a very healthy level of 46%. Financial liabilities in Q1 increased quarter on quarter as we have drawn the first 50 million euros of our syndicated loans. Therefore, loans amounted to a total of roughly 850 million euros at the end of March. Customer prepayments were slightly above 600 million euros, with 27 million euros received and 6 million euros refunded. In Q1, our capex totalled 173 million euros, which is roughly 200 million euros below Q4. Reflecting our increased focus on capex management, we have revised our full year capex guidance downward from less than 600 million euros to slightly below 550 million euros as compared to our March publication. Most of this capex is allocated to our new FAB. Let's dive deeper into our debt situation as illustrated in the bridge. End of 23, Siltronic was carrying net financial debt of 356 million euros. Our operating cash flow in Q1 was impacted by an increase in trade receivables and therefore came in at 62 million euros. As previously mentioned, our DSO were in general higher and we've received payments from customers just after the reporting date. Consequently, our operating cash flow was noticeably lower than the high capex payments we saw in Q1, also due to the capex liabilities overhang from the previous year. In Q1, we've recorded an investment grant of 32 million euros, which had a positive effect on our cash flow. In total, our net financial debt amounted to 501 million euros. You already know this financing picture. Therefore, only a brief update from my side. The first portion of the SIN loan, 50 million euros, was drawn in Q1. As already announced, we will undertake refinancing this year and are currently evaluating our options. In this context, we currently have no plans for a capital increase. With this, I hand back to Michael.

Thank you, Claudia. Ladies and gentlemen, when looking at this slide, let's begin with the good news. The end markets are anticipated to grow. Our March projections for end market growth were slightly lowered from 7 to 8% to approximately 5% due to some new data points, especially for the industrial and automotive segment. Servers driven by AI, especially generative AI, will see the largest growth this year. From the end markets, the growth would perfectly fit to our 45% CAGR assumption. However, the still elevated inventories that our customers are being reduced slower than expected. As a result, we anticipate a higher negative inventory impact. This inventory situation overshadows the positive trend from the end markets and results in an overall negative way for demand in the mid to high single digit percentage range. Therefore, expect the inventories to last for several more quarters, further delaying the turnaround in our industry. Let's take a closer look at our market assessment for the three wafer segments and our most important market channels. Whilst memory inventory is decreasing slowly, we already see the first positive impacts from one of the big megatrends driving our industry, artificial intelligence. The strongest growth we see in servers used for AI applications is driven by high-end DRAM chips used for high bandwidth memory. The inventories for HBM appear improving compared to other DRAM and NAND, which are still pretty elevated and only decreasing slowly. When it comes to logic, the inventory levels show a mixed picture at different customers. Regrettably, we observe a similar trend when the inventory levels are only improving slowly. And unfortunately, power inventory is further increased based on the latest data points. Please be aware that this is a combination of our own models and market data based on several data points and that segment dynamics are influenced by individual customer patterns. The overall picture can deviate significantly due to different inventory types and also our customer mix. And looking at the more positive news flow from certain chip manufacturers, these announcements appear to be more price than volume driven. And you know, for us, volume is the decisive factor. As you may have noted from our ad hoc announcement last week, we observed further significant volume postponements from customers. particularly for the second half of 2024. Overall, the demand situation has not improved in the past few weeks. And as already mentioned, we anticipate 2024 to be a transition year. Looking beyond 2024, we expect a dynamic upward trend for over wafer demand, in particular for 300 and 200 millimeter wafers. I'm sure you are familiar with this chart. As you know, for 300 millimeter, we anticipate a strong CAGR of 6%. For 200 millimeter, we expect a small growth. And for diameters up to 150 millimeters, a continued decline. Today will be the last time we report on the small diameters market. Since a few weeks ago, we announced that we will phase out the SD wafer production during 2025. As communicated for us, SD wafers are approaching the end of their lifecycle. The significant decline in volumes we saw in 2023 and early 2024 triggered our decision to discontinue the production of polished and epitaxial small diameter wafers. The process is set to be completed in the course of 2025 and will not have a substantial negative effect on our results this year. Going forward, we will further increase our focus on the gross driver's power and leading edge also fueled by 300 millimeter wafers. And this is supported by FedNext in Singapore. So we are very pleased with the development of FedNext. The transition of the project to the local team is completed and the capacity ramp is on schedule. Let's now turn to the guidance for the financial year 2024, which had to be adjusted due to the still challenging demand situation driven by high customer inventories. Due to the ongoing weakness in demand reaching into the second half of the year, we now expect 2024 sales to be roughly 10% below 2023. This is mostly volume-driven, but we also see both a small FX and price effect. We expect our APGA margin to be in the range of 21% to 25%. Depreciation is projected to be below 300 million euros, a significant increase from the previous year's However, this new guidance is considerably lower due to the later start of FEDNEX depreciation in Q4. As indicated, CapEx will be significantly reduced compared to the record high of more than 1.3 billion in 2023. We expect it to reach an amount of slightly below 550 million euros, which is roughly 50 million lower than our guidance in March. This reduction is driven by our high focus on CapEx management. Due to the steep decline in CapEx, we will see a pronounced improvement in net cash flow, although it will still remain significantly negative. I would like to conclude this presentation confirming our midterm ambitions for 2028. We expect a substantial sales growth to more than 2.2 billion euros and an improvement of the EBITDA margin to the high 30s by 2028. Thank you very much for your attention. With this, we close our presentation, and Claudia and I will be happy to take your questions. Sandra, please open the Q&A.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. Our first question comes from Daniel Shafrai from Citi. Please go ahead.

Hi, good morning. Yes, so I have a couple of questions. The first one being, so now that given we have seen the push-outs in the second half, can we still expect that the first half in terms of sales will be still the low point, especially 2Q, or might it be even 3Q and 4Q now? And also, now that you've seen those pushouts and adjusted the guidance accordingly, is this guidance now already conservative enough, or is there potential for more pushouts to come? Thank you.

Thank you, Daniel. I will take these two questions with regards to more details about quarterly phasing, we would refrain now to give a great amount of more of this. As you know, we gave full year guidance. You know our Q1 results. And then you can do some math. And we don't expect any significant pickup during the year. So I think that's maybe enough for your further quarterly modeling. With regards to your Second question, do we expect more push-outs? Currently, we build all what we know into the guidance. We have some downside potential and margin there in the guidance. But I also have to say the environment is a very dynamic one. But we know what we know is included, and we don't have a clear view on more to come, but what we know by today is embedded in this guidance.

Okay, thank you. I understand. And just maybe a follow-up, a quick one on pricing. What price reductions do you guys see for 200 millimetres and 300 millimetres, respectively, currently in the spots and LTA markets?

Yeah, we said clearly for the time being, pricing is stable. That was the Q1 numbers. Going forward, we will see and we do see some price effects. And as we indicated earlier, it's a kind of mixed bag. Let me start with the lowest one, the small diameters experiencing significant price pressure, which at the end was one of the reasons for us to discontinue that business, right? In the second corner 200 millimeters, we would say it's a mixed bag. So some more high tech areas are pretty stable and unchanged. And some others are also experienced pricing pressure. 300 millimeter is mainly covered by LTAs. Of course, no change in that statement. And we see a good adherence to LTA contracts But also on the spot side there, we do see increasing price discussions. Overall, it's not significant, but that's maybe the overall situation we can explain. Perfect. Thank you.

The next question comes from Harry from UBS. Please go ahead.

Good morning. Thanks for taking my question. I've got kind of a follow-up to that pricing question. I just wondered, What gives you confidence that pricing will stay at that slightly negative effect that you're guiding for and you won't see any further pressure beyond that?

Yeah, so I think the good news is the LTA coverage and its holding. But we early on already said the longer this, let's say, demand weakness is hanging on, the more we will also see pricing effects kicking in there. So for the time being, we're quite comfortable. As I said, Q1, we can confidently report a stable price situation. We see this discussion is increasing, but we also don't have any hint for total gear change in this space of discussions.

Got it. And then, I mean, based on your comments around LTAs, I guess you haven't had any customers coming to you kind of asking for flexibility on on pricing?

Sorry, I didn't get this acoustically. In the LTAs, we had what?

Have you had any customers coming to you and asking for any flexibility around pricing?

The LTAs are including some price margins, as we discussed. This goes to single-digit ups and downs, and there are discussions in this framework currently.

Very useful. And then I think in the past you said that for this year you don't have any major LTAs expiring. Is that the same going into 2025 as well?

So no major LTAs expiring, and particularly the, let's say, important ones covering our FedNext, as we said, run times until 28 or 2030. So nothing major changing there.

Great. Thank you, Michael.

The next question comes from Konstantin Hesse from Jefferies. Please go ahead.

Good morning. Thank you very much for taking my questions as well. The first one is, Michael, I know that you guys typically don't comment on competition, but given the dynamics, I'm very surprised about the different outlook that you guys are giving relative to Shinetsu. Shinetsu clearly stated last week that they saw the bottom in Q1 and that every quarter from now on they're seeing a recovery. So I'm trying to understand Because typically, you know, you, Shunetsu, Sumco, there might be some timing differences, but typically you do move in tandem. So is there something fundamentally happening here? Are you losing market share for some reason? Or is it simply a timing situation as to maybe you were supplying more wafers compared to Shunetsu, and as a result, they're basically catching up a bit. What's the dynamic here? Why are they saying something completely different to you in that sense? That's my first question.

Thank you, Konstantin. I mean, you know, we don't comment resize on individual competitor statements, but what I can say is the following, and I repeat what I said already. Q1 data very clearly indicate no change in market share. So that means for the time being, and particularly through all those shifts happening last week. And of course, there's some phasing effects, etc. But we don't have any indication that our market share changes for the time being. Now, going forward, I mean, we need to check quarter by quarter as we do anyway. And there could well be that, you know, different wafer suppliers have different customer mix, different product mix. And then it depends, of course, for example, in the memory space, some of the customers did pull the brake earlier, others later. And then some waiver suppliers have different exposure to different customers and depend on individual pickup times of the business. This could lead to such mixed effects. We don't have any indication for a structural or fundamental change happening at all. So what we see is a stable situation and then some phasing and potential mix effects here and there, but that's what I can comment on. And when we read the very details of different announcements, it's not so different when you study them word by word than what we are seeing.

Yeah, I was just a bit surprised that they're seeing an improvement following Q1, and you are. Just some food for thought. Then on the price, I understand that, you know, the change of the guidance, I assume that's now primarily driven by continued weakness in spot. And you just said something interesting there. My understanding was that there was no compromise on price in the LTAs, zero compromise across you, across Sumco, across Shinetsu. Now you're saying that the LTAs actually do have price ranges, which can be negotiated in the single digits. And you're basically having these discussions now. So concerning the LTAs, do you compromise on price here? So are there discussions ongoing to potentially see price declines in LTAs?

Thank you, Konstantin. What I said about LTA pricing and the margins in the contracts is nothing new. We said that already last year, and it's part of the contract. And those discussions are happening, let's say, on six months and on a yearly basis. I don't see, just to be clear, I don't see a significant change there. There's nothing new. The more price discussions start in the spot part of it, but the LTA pricing is happening as committed in the contracts and there's no change.

Okay. Okay. So no compromise on price on the LTA side.

So as contracted, as I said, some contracts have margins. Those are discussion, but no change compared to contracted pricing.

Okay, understood. And then lastly is on the production exit of the smaller diameter size in 25. You mentioned that there will not be a big impact in 24. Could I please understand what the impact is in 25? What is the current exposure you still have? I believe In previous conversations, I think it was something around 10% to 15% of volumes market level anyways, and you always said that you were relatively similar to the market. So what kind of could we actually see up to a 10% volume impact next year driven by the fact that you're exiting the SD market?

Yeah, thank you, Konstantin. So the reason why we don't see any or foresee no major impact for this year is that customer reactions were fairly relaxed. So we never got customers that were cutting orders immediately. On the other side, we didn't also see an indication to harvest some very early upside because, of course, we were hoping some customers start a kind of last order race. So both did not happen, and that's the basis for the statement that 24 will not widely be impacted, yeah. In twenty five, we will continuously ramp down the revenue. It's a single digit mid single digit in our overall sales pattern. And from a margin side, we also said it will be slightly supportive in a margin. The SD margin, of course, was and is below average of our group margin. So these are the two effects. Revenue slightly down a single digit on the overall portfolio and margins slightly up.

Oh, okay. So the revenue for SD is only mid-single digit? Yeah. Oh, okay. Interesting. Okay. Thank you.

The next question comes from Gustav Froberg from Berenberg. Please go ahead.

Good morning, everyone. Thank you for taking my question as well. I just have one just on balance sheet and funding. Could you run me through how you look at your balance sheet as of today, given the recent cut to guidance? Do you see any need to top up with equity or are you happy to fund with debt? And what are some of the Assumptions and thoughts that underlie the thinking around your funding and your balance sheet, please. Thank you.

Good morning, Gustav. I will take your question regarding balance sheet. As we mentioned, the equity share of 46% is pretty comfortable with this, and we expect it to stay roughly in that range going further. Of course, we have drawn now the first part of our SIN loan, and as such, our loan amount will go up during the year until end of this year. And those are the major changes that we see in our balance sheet for this year.

Okay. Do you have any comments on covenants or anything of the like with the debt that you have and maybe the debt that you will take on? whether or not you see any need for equity at all in the business.

As we stated, we do not plan a capital increase this year. So you see that we still feel very comfortable regarding our financial governance.

And final question on the same topic. Is the scope for you to take out more debt beyond what you have already talked about in terms of the syndicated loan, etc.? ?

We announced that we will start a refinancing round this year, and this will take, during this year, we are evaluating our options, and depending on the instrument that we choose and the general conditions, we will decide on how much we will take there, how much additional refinancing.

Thanks, Claudia. Very clear.

The next question comes from Florian Traisch from Kepler-Chevreux. Please go ahead.

Yeah, thank you very much. Two questions. One is around the inventory correction you're now facing. So the first question is a bit in Q1, was the impact still rising relative to Q4? Or do you expect it to really come down now quarter by quarter? And more in general on inventory correction, what is really your visibility? I think we have two major shifts in more pronounced inventory advance in the last five months. So clearly, is it just hoping to have a right number, or do you really get decent information from your key clients? And the second part is around your reiteration of the ambition for 28. As you have now heard, SD will go out, which will be an impact. The whole recovery is delayed by access inventory. So is it implicitly meaning you're more confident than ever, or is it just offering enough room for error to still get to this ambition? Thank you.

Thank you, Florian. With regards to inventories, I mean, you're right. There is a more general discussion picture and data point when we talk about memory, logic, and power. And the trend here, we kind of analyze with the same or similar data than you do. This is pretty much from MI side and institutes what is published. And then, of course, in addition, we have the insight into our customers. So here, We can say, if we take memory as an example, yes, inventories are going down, but much slower than we anticipated. So this is, let's say, a very persistent topic. And some of our customers are still very elevated. That's a fact and has to do with their business situation. Some of them start reporting, let's say, growth and then, let's say, very positive dynamics. But then when you look into more details, it's more on the high value HBM and other side, which for them is more price than volume driven. So means they can drive their P&L, but it's not by volume happening, but it's more on the price side. So that's not helping us a lot, but it's still good for our customers for the overall price. industry dynamics. So we have a very clear picture of some of those inventories still elevated, going down, but it's, you know, hanging on for a longer time than everybody did foresee. Coming to your second question around our 2028 ambition. I mean, we have no doubt that the drivers of this industry are unchanged. And even I would say with Chen AI, there's even more midterm potential here for the industry in a total. So a bad year or two bad years do not change our overall belief and let's say ambition. And of course, we do the math and we are still confident that we can do the 28 numbers.

Great. Thank you very much.

The next question comes from Martin Jungfly from BNP Paribas. Please go ahead.

Hi, good morning. I have two questions, please, on TAP Next. First of all, on the ramp speed, I understood initially it was like 100,000 wafers per month final annualized output by year-end. Has this changed? And also, what do you here see from competitors that are also expanding? Do you see somewhat still rational behavior, or So do these also adjust output speeds according to market demand, or is there any signs of them trying to gain market share? And the second question is really on the ramp costs. In your previous release, you were expecting a 300 basis point margin hit from ramp costs. Now with the FAB ramp delayed, what would be the impact this year, and also would this mean that the majority of this 300 basis points impact would be now pushed to next year? Thank you.

Good. So let me start maybe with a more outside perspective on FedNext. Then Claudia will give you some details about ramp cost and depreciation. And then I come back with your second question about competitors' behavior. So FedNext overall, our ramp plan is in place and there's no change. And this is, I think, very good news. The project has been handed over from the internal project organization to the local organization, which is always a very important milestone for such a, let's say, massive construction project. And things are happening on plan and on schedule there. With regards to customer qualifications, we see some of them sliding into Q4. And that is also, of course, related to the overall market environment. but not, you know, a change for overall ramp situation and ramp capacity. Now that's more the high level statement and maybe Claudia can then discuss with more the ramp cost situation and this depreciation impact.

Yeah. I will take over for this part. To be very clear, the ramp costs are still there cash wise. So there are ramp costs, but until we start to, the depreciation of FabNext, they are capitalized. So they show up in the assets. And starting Q4, they will show up in the P&L. So they are still there, but in our result only from Q4.

The next question comes from Robert Sander from Deutsche Bank. Please go ahead.

There was one from Martin around competitors, whether there's a change in competitors ramping their capacity. And Martin, I would also stay to my old statements. We see some of them also delaying, ramping slower. For some of them, which are, let's say, more in the shell phase, still we don't have very detailed insights. But overall, this high level statement of rational behavior when it comes to capacity add and extensions is unchangeably true.

Good to hear. Thank you.

Mr. Saunders, your line is now open. Please go ahead.

Yeah. Hi. Good morning. I guess given that you're delaying FAB next, the ramp of it, I was just wondering when you now thought that line would reach kind of cost parity with the existing Singapore line. Second question would just be around the SD impact. Did you say it's mid-single digit percentage of sales in 2024? Is that right? As opposed to mid-single digit millions, just to double check. And then the last question, can you comment around the impact of currency? Because obviously the yen has been very weak, which could potentially give your Japanese competitors an advantage and perhaps a desire to be more aggressive on price? Thank you.

So let me take the first one. Next, when it's loaded and renting, to a certain extent, we have no doubt that it will be very attractive and will contribute with EBITDA margins above 50%. So now your question is, of course, when will that happen? And our honest answer is we don't know that because it really will completely depend on market pickup and further ramp opportunities with our customers. So it's now would be really misleading to give you any date in the current situation. Once market is picking up and we see volume developments coming in, then we would be again in the position to be more precise on that what you call cost parity or a creative margin contributions from Fed Next. And to be honest, I didn't get the second one, but I think it was around SD. Is it mid single digit of overall sales? And I can reconfirm the answer, yes. It's mid single digit. Mid single digit percentage.

Correct.

Yes.

Yeah, that's what I thought. It was a one million wafer per month line in Berghausen, right? But I assume you've scaled that down already. I was just actually interested, when is that going to be zero? Basically, when are you going to be completely shut down? Is it the end of 25?

It will depend on final customer dependence and let's say all our patterns coming in. But in the course of 25, we will be discontinued that business.

I actually just have one other last question just on the debt side. So how much of your 900 odd million of debt is actually being refinanced this year and what is your cost of debt now that your leverage is heading above two times? Is it above 6% or below? Thanks.

As already mentioned just a second ago, we have not fixed the amount that we will refine this year. We will see. It will heavily depend on the instrument that we will choose in the end. But we will let you know as soon as we know. Got it. Thanks a lot. And our question regarding FX, I think it's still open, regarding the Japanese yen. Yes, of course, our Japanese customers may have benefits of the development, but of course, we won't comment on that. Our Japanese gen share in sales is pretty low, so it's not nice to see that development, but it's okay for us.

Thanks a lot.

The next question comes from Jürgen Wagner from Stiefel. Please go ahead.

Yeah, good morning. Looking at page 11 of your handout, which market segments would you regard yourself as being significantly overexposed? And then you talked about rational behavior on a high level. What would be your view on longer term pricing once this inventory correction is over and all the new wafer fabs have to ramp up in volumes in, let's say, 26 or so. Thank you.

Thank you. In terms of our market exposure, there is basically no change. I mean, we are almost equally represented in the three segments, memory, logic and power. And of course, we have a slight overexposure in memory. But the recent developments or shifts did not change our market situation and exposure to those segments. What is the pricing once inventories are meltdown? The honest answer, we don't know. We eagerly wait for that time to happen. We would still be then in a position where around two-thirds of our 300-millimeter business is in LTAs with the margins and price corridors I described there. And then we would assume, of course, if demand is picking up very quickly, that there will be upside spot opportunities again. But it's a bit... speculative when you're still, let's say, in the middle of this valley and wait for the uptick. That would be my more high-level statement to your question.

And your long-term targets, they are basically based on the assumption that you will have two-thirds in LTAs, right?

The long-term target is, of course, unchanged, and the assumption is, of course, a kicking in of the FabNext benefits here with the fully automated, let's say, very low-cost base, which then would provide this above-average and eventually above 50% EBITDA margin contribution to the group. That's the main value driver together with our strategy focusing on high-value leading edge and power.

Okay. Thank you.

As a reminder, if you wish to register for a question, please press star followed by one. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Michael Heckmeyer for closing remarks.

Thank you very much, but I am only back to Verena.

Thank you, Michael. This concludes our Q&A session. Thank you for joining us today. Our next Investor Relations highlight will be the AGM on May 13, and the speeches of this AGM will also be streamed on our IR webpage. For our two figures, this will be released on July 25. Stay healthy, and let's talk again soon. Bye.

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