Siltronic Ag Ord

Hello everyone and welcome to the presentation of Siltronics Q1 2025 results. Please note that this call is being recorded and streamed on Siltronics' website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent to this. At this time, I would like to turn the conference over to Verena Stutste Head of Investor Relations and Communications at Siltronic AG.

Thank you, Elaine.

Welcome, everybody, to our Q125 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, We'll 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 2025 reporting are available on our website.

I now turn the call over to Michael for his remarks.

Thank you, Mirema, and a warm welcome also from my side.

Let's begin with the key messages of today's call. Despite the challenges, Q1 2025 is in line with expectations. The Weibo market continued its soft trend. Currently, we did not expect any significant direct business impact due to tariffs. While we still anticipate growth of our end markets, it remains, however, unclear how the tariffs or corresponding countermeasures might impact the 7% end market growth we projected back in March this year. Additionally, we are already observing a clear negative trend in the euro-US dollar exchange rate. Our sales guidance for 2025 remains unchanged. However, due to the tariffs, the uncertainties have clearly increased.

I will provide a more detailed update later on.

Let's start with a broad overview of our development in the financial year, and then Claudia will give you a detailed breakdown. Quarter over quarter, sales declined by 4%. This development was in line with expectations. and was due to slightly negative product mix and price effects. The EBITDA margin came in at 22.6% in Q1-25, after 25.8% in Q4-24. The CapEx spending of 97 million euros was mainly for the new FAB in Singapore. As anticipated, the net cash flow continued to be negative at 74 million euros. On a positive note, our market share was stable in Q125, reflecting our resilience in the current semiconductor environment, where all industry players are navigating similar challenges.

Now we move to the financials. Claudia, please.

Thank you, Michael.

A warm welcome also from my side. Let's get straight into the details of our Q125 results. As Michael highlighted, sales in Q1 developed largely as expected, reaching €346 million. Compared to Q4, a somewhat higher volume and a modest tailwind from FX were more than offset by slightly negative product mix and price effects. The price impact was more evident in 200 mm and smaller diameters and outside of long-term agreements. In addition to the sales decline, the EBITDA in Q1 was burdened by negative FX valuation impacts of 3 million euros. Furthermore, some expenses, such as vacation accruals or property costs, are particularly pronounced at the beginning of the year. Thus, our EBITDA has reached a value of 78 million euros, down 15 million euros quarter over quarter, resulting in an expected margin decline to 22.6%. Correspondingly, EBIT and Q1 declined to 50 million euros. Depreciation was almost unchanged, but is expected to increase by mid-25 due to the planned depreciation start for the new FAB in Singapore.

Looking at the financial results, we slightly benefited from lower variable interest rates for our debt financing. The group's tax rate in Q1 remained elevated at 43%.

Two main factors play a role here. Firstly, the lower profit before taxes increases the sensitivity of the tax rate. And secondly, one group entity in Singapore significantly contributed to this quarter's profit, and it was taxed at the local rate.

Taking all these factors into account, the Q1 net income came in at 4 million euros. Let's shift our focus to the key developments on our balance sheet.

By end of March, total assets reached 5 billion euros, slightly down from 5.1 billion euros at the end of 2024. CapEx clearly exceeded depreciation in Q1, but FX valuation effects of the Singapore entities had a counteracting impact. Trade payables, mainly those related to investments, have decreased as planned from €280 million at the end of last year to €234 million by the end of March. This, along with a lower operating cash flow, was also the main reason for the reduced cash position by €85 million. Our equity ratio stayed at a healthy level of 44%. Financial liabilities remained unchanged compared to December. In Q2, we will draw another smaller portion of our syndicated loan. The revolving credit line is still flexibly available to us. CapEx in Q1 totalled 97 million euros. To give you some context, for the full year 25, we expect an investment volume between 350 and 400 million euros, still focusing on renting our new FAP in Singapore and on our steady state capex.

Let's take a closer look at our debt situation.

As illustrated in the bridge, Siltronic had net financial debt of 734 million euros at the end of 24. In Q1, we generated an operating cash flow of 57 million euros, a clear reduction from the previous quarter. This decrease is mainly due to cash effects in working capital, in addition to the previously mentioned lower ABTA. As expected, CapEx payments in Q1 amounted to €139 million, significantly exceeding the invest level. Both operating cash flow and investment cash flow were negatively influenced by reporting day defects, which shouldn't be projected linearly over the years. In total, net financial debt increased to 819 million euros at the end of March.

With this, I hand back to Michael.

Thank you, Claudia.

Now let's turn our attention to the market outlook. We already presented this slide during our 2024 results presentation in March. Back then, we expected all end markets to be positive in 2025. resulting in a total end-market growth of 7%. This growth comprised 5% content growth and 2% unit growth. Given the new situation of U.S. tariffs and the respective countermeasures, it's challenging to predict how these developments will affect the overall GDP growth and, consequently, end-market-driven demand for waivers. In general, we assume that unique growth will show a higher impact compared to the more resilient and innovation-driven content growth. Looking at the end markets in detail, we especially see risks in the smartphone and PC area, while servers, given the AI trend, might stay strong. The industry and automotive segments could also be burdened by these rising uncertainties. Speaking of the innovation-driven silicon content, here you can see some examples for the growth of edge AI. Looking at the smartphone and notebook silicon content development, the increase is most pronounced in DRAM. On top, NAND and Logic are also growing, especially for advanced wafers. These trends highlight the strategic importance of our focus on leading edge and advanced memory applications. By staying ahead of the curve, we are well positioned to join the increasing demand for DRAM and other silicon-based components. Let's conclude today's presentation with our guidance for the financial year 2025. While we are confident that the demand for silicon wafers will significantly increase in the medium and long term, elevated inventory levels with our customers and related volume shifts we will still categorize 2025s. Overall, we continue to expect 2025 sales to be in the region of 2024 at comparable exchange rates. H1-25 is projected to be in the mid to high single digits below H2-24. This is likely better than our previous H1 guidance. The improvement is due to quarterly shifts and FX in Q1. From today's perspective, we will not again achieve the Q1 sales level neither in Q2 nor in Q3. In general, the risks compared to our March reporting have increased. As mentioned, currently it's difficult to assess the general impact of U.S. tariffs and corresponding countermeasures on end markets. On top, we see a clear negative FX trend. Currently, the euro is trading at 1.14 against the US dollar. As a reminder, on a full year basis, one US dollar cent change impacts our top line by around 11 million euros, and the EBITDA by roughly 8 million euros unhedged. Due to the more pronounced negative price effects outside of long-term agreements and adverse product mix developments, We have refined our EBITDA margin guidance to be between 21% and 25%. Our expectations for CapEx, depreciation, EBIT, and net cash flow remain unchanged for 2025. The qualifications for our new FED in Singapore are progressing well, and we can reaffirm the planned depreciation start for the new FED by mid of this year. With this, we conclude our Q1 25 results presentation, and Claudia and I are happy to take your questions. Thank you very much for your attention. Elaine, please open the Q&A session.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. Please state your name and organization before asking a question. The first question will come from Gustav Froberg from Barenburg. Please go ahead.

Good morning, everyone.

Thank you for taking my questions. Just one for me to start. Could you give us some color on the moving parts that you expect for your cash flows over the coming quarters? So a little bit about just the phasing of CapEx and some of the working capital items that are influencing your operating cash and free cash flow, please.

Hi, Gustav. This is Claudia.

Good morning. Yeah, you know that we don't disclose our Q1 net cash flow development, but what I can reaffirm is that we had some cut-off date effects in Q1 regarding trade payables and also receivables. And I recommend not to take those effects times four for the full year, but we cannot give more light on the quarterly development here.

Okay, that's fine. I'll jump back into the queue for now. Thank you.

Thank you.

We will take our next question. Please go ahead. Your line is open.

Good morning.

Here is Daniel Shafai from Citi. Thank you for taking my question. So my first one would be on the guidance. You're still maintaining your view on the strong second half revamp, on the push out in orders from the second half of 24. And kind of as usually, you're trying to guide as you see it. And how I understand from your guide, there was no change in the customer order timing yet. However, could you tell us how often are you in discussions with customers on this topic and was there some potential softening in their tone? And to follow up on this, also if we look a year back, you first guided also for flat sales for 24 and then kind of due to this push out, the guide became more like minus 10% year over year. Would it be correct to assume that if we would see a push out in the second half again, that this would be somewhere the magnitude of impact?

Thank you, Daniel.

This is Michael. I will answer your question. So first of all, what's the substance or basis for the H1 and H2 related points of the guidance? So what we clearly can say is there were more shifts this year in H1 compared to last year. But in contrast to last year, where things have been pushed also more and more longer term, we see clearly shifts this year from H1 to H2. And of course, there is a continuous risk of further postponements. So we are in very regular and very intense contact with customers. It starts, of course, with our sales teams. They have almost... weekly interaction with customers, and then the higher we go in the organization, the less frequent, of course, these interactions get, but be assured we are very close with them and get those updates very continuously and very regularly. If I had to single out a single point for further development this year, it's really FX, and we hinted that there is a substantial risk in there. So that might be the part I would recommend to take into account as a quantifiable risk.

Thank you. Okay, perfect.

And maybe if I could just squeeze in a question on inventories, given that usually you have this informative deck on inventories in your presentation, was just wondering if you could give us an update what dynamic you see in memory, logic, and power.

Yeah, pretty much. And unfortunately, it's very similar to what we said in the last quarter. Given, let's say, the further damped assumption on in-market demand, there is not a whole load of new dynamics coming into this. We still and unchangeably see logic, let's say, the most advanced segment being close to normal inventory levels. We see memory coming down continuously, but not very speedy. So it's still on the elevated level. And the coming down is driven by AI and certain applications for sure. And on the power side, it's a high level that did creep up in the last couple of quarters, which we don't see trending backwards yet. But I don't think we have up-to-date new data because it always takes a couple of weeks after the quarter closing until we collect all those information from publications from our customers. So it's pretty unchanged to what we said in the last call.

Perfect. Thank you very much.

We will now move to our next question from Florian Trice. Please go ahead.

Yes, good morning. Well, thanks for taking my question. I have one question on your comment around pricing trends. You mentioned in your initial remarks that the non-LTA portion of 300 millimeter is seeing higher pressure than, for sure, the LTA covered part. But can you maybe give us a bit of some quantification and what does it really mean? I mean, if we are now getting closer and closer to LTA prolongation, I just would love to get the feeling, are we talking about 5% pricing, Edwin, 20%? To really get the feeling how much kind of buffer you have to maneuver this kind of pricing pressure in coming quarters.

Thank you. Yeah, thank you, Florian.

Just to avoid any misunderstanding, we didn't want to highlight 300 millimeter outside LTE. but it's rather a general statement that LTA pricing is holding up as contracted. There's no change in that statement and in that kind of customer behavior. And be reminded that around two-thirds of our business is in LTA. And, of course, the majority here is 300 millimeter, but there are also smaller LTAs in 200 millimeters. We don't see... change in the LTA space, but we see, let's say, a slightly increasing price discussion in non-LTA. So that's around one-third of our business. And if you combine those two statements, of course, this price discussion are mostly pronounced the smaller diameter is considered. So it's, I would say, pretty seriously in the small diameter space. This is definitely reassuring and confirming our decision to strategically exit that business, and that will happen by end of July this year. 200 millimeter, I would say, it's slightly increasing in terms of price effect, but also I think our older statement, 200 millimeter is a mixed bag there, is holding. There are certain segments in 200 millimeter that are still doing well, and others are more on the price discussions. So I hope this gives you some more background and understanding of the overall pricing situation.

Yes, thank you very much.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad now. We will now take our next question. Please go ahead. Your line is open.

Yeah, hi. Good morning. I hope you can hear me. The first question is really a follow-up on the LTAs from the previous question. Just can you comment when any bigger LTAs are expiring in the near term and if you would expect any negative pricing effects here? That's the first question. The second question is just on CapEx. How much can you really cut down annual CapEx levels when things go really south? So what is your minimum CapEx level and could you technically also go below that 150 million that you have? historically seen to preserve some cash.

Thank you.

Thank you, Martin, and thanks for the question. I can also confirm no major LTAs expiring this year, and we are also concluding LTAs at the same time, so there will not be a situation anytime soon where we run into an LTA cliff or something like that. And let me reiterate also for the new FAP in Singapore, we have those long-term LTAs that run until 2028 or even 2030. So we feel pretty well set in terms of LTA. The two-thirds of the business being an LTA is not a hard line. It's not written in stone. But we would see it as a rough indicator and going forward wanted to maintain such a level, roughly speaking. On the CapEx side, yes, of course, this year is still governed by some necessary CapEx activities for the new FAP in Singapore. Once that is done, and of course, if the market is stable, trending week on the longer term or continuously, we could further cut capex and we will do so. In the running year, our guidance is pretty much what we can confirm. And of course, then the lower end of that guidance would be most likely what we could realize this year. We will and are in the process of collecting and managing the CapEx very carefully, also looking at a lot of small items to control. But this year, there's not a lot of headroom to further trim it down. In older years, it would look then definitely differently.

It's helpful. Thank you very much.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad now. We will take our next question. Please go ahead. Your line is open.

Hi, Ken Gustav from Barenburg.

Just a follow-up from me on syndicated loans and RCFs. Could you confirm to us the amount of loan volume you have left to draw and available to you and also remind us on the size of your available RCFs, please?

Thank you. Hi, Gustav.

Yeah, as I already mentioned during the speech, we will draw the last portion of the term loan part of our fund loan in Q2. And then we still have the revolving credit facility for our variable, let's say, liquidity reserve. I think we haven't disclosed any details on the amount of this RCF and I think we continue to keep it that way. We don't disclose that.

Okay, all good. Any comment on the volume of the term loan then and how much left you can draw on the term loan side? It's a smaller amount.

Yeah. let's say, double-digit million-euro amount.

Okay, that's great. Thank you, Claudia.

At this time, I would like to turn the conference over to Verena Stutze, Head of Investor Relations and Communications at Tiltronic AG.

Thank you, Elaine. This concludes our Q&A session today.

Thank you for joining us. We will release our H125 figures on the 29th of July. On this slide, you can also see our next IR events. Thank you, and let's talk again soon.

This concludes today's call. Thank you for your participation. You may now disconnect.