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Q3 FY 2016: Revenue €1,632 million; Segment Result €254 million; Segment Result Margin 15.6 percent
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Outlook for Q4 FY 2016: quarter-on-quarter revenue increase of 3 percent (plus or minus 2 percentage points), Segment Result Margin 17 percent at mid-point of revenue guidance
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Gross margin 36.6 percent, adjusted gross margin 38.1 percent
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Earnings per share €0.16 (basic and diluted), adjusted earnings per share (diluted) €0.19
Neubiberg, Germany, August 2, 2016 – Infineon Technologies AG today reported results for the third quarter of its 2016 fiscal year (period ended June 30, 2016).
“Revenue, earnings and margin all increased in line with expectations in the third quarter. Demand was particularly strong for our automotive electronics, renewables and power supply solutions. Despite the current contraction of the semiconductor market and contrary to many of our competitors, Infineon has grown once again compared to the prior year’s corresponding quarter, reflecting its focus on sub-markets with structural growth. We therefore continue to forecast a long-term compound annual growth rate of 8 percent,” stated Dr. Reinhard Ploss, CEO of Infineon. “We are enabling cleaner and safer cars, greener energy and even faster mobile communication. The planned acquisition of Wolfspeed will secure us a decisive technological advantage in the long term and help us grow our system understanding. We are thereby focusing on promising growth areas such as electromobility and the Internet of Things.”
Review of Group financials for the third quarter of the 2016 fiscal year
Revenue of the Infineon Group increased from €1,611 to €1,632 million quarter-on-quarter. Contributions to this 1 percent revenue growth were made by the Automotive (ATV), Industrial Power Control (IPC) and Power Management & Multimarket (PMM) segments. As expected, revenue reported by the Chip Card & Security (CCS) segment decreased slightly.
The gross margin improved quarter-on-quarter from 35.1 percent to 36.6 percent. The third-quarter figure includes acquisition-related depreciation and amortization and other expenses attributable to the International Rectifier acquisition totaling €24 million. The adjusted gross margin amounted thus to 38.1 percent after 36.6 percent in the prior quarter.
Segment Result increased by 11 percent from €228 million to €254 million quarter-on-quarter. The Segment Result Margin for the third quarter improved to 15.6 percent, compared with 14.2 percent in the preceding quarter.
The non-segment result for the three-month period was a net loss of €61 million, compared with a net loss of €54 million in the previous quarter. Of this result, €24 million related to the cost of goods sold, €2 million to research and development expenses and €27 million to selling, general and administrative expenses. Other operating income and other operating expenses amounted to a net expense of €8 million. The non-segment result includes €48 million of depreciation and amortization arising in conjunction with the purchase price allocation and other expenses for post-merger integration measures relating to the acquisition of International Rectifier.
Operating income increased from €174 million in the second quarter to €193 million in the third quarter of the current fiscal year. Income from continuing operations totaled €184 million, compared with €177 million in the second quarter. Income from discontinued operations amounted to €2 million, compared with €3 million in the preceding quarter. Net income increased from €180 million to €186 million quarter-on-quarter. The figure for the second quarter included €21 million of tax income, compared with €3 million recorded in the third quarter. Tax income primarily results from the reduction of deferred tax liabilities relating to the acquisition of International Rectifier and from the revaluation of deferred tax assets relating to German and foreign entities.
Earnings per share (basic and diluted) remained unchanged at €0.16 in the third quarter.
Adjusted earnings per share[1] (diluted) improved from €0.18 in the second quarter of the current fiscal year to €0.19 in the third. For the purpose of calculating adjusted earnings per share (diluted), a number of items were eliminated, most notably acquisition-related depreciation/amortization and other expenses (net of tax) as well as valuation allowances on deferred tax assets.
Investments – which Infineon defines as the sum of purchases of property, plant and equipment, purchases of intangible assets and capitalized development assets – increased from €163 million in the second quarter to €220 million in the third quarter of the current fiscal year. Third-quarter depreciation and amortization decreased slightly to €206 million, compared with €213 million in the preceding quarter.
Free cash flow[2] from continuing operations improved sharply, rising quarter-on-quarter from €45 million to €277 million. Net cash provided by operating activities from continuing operations increased from €195 million to €496 million.
The gross cash position increased to €2,083 million at the end of the third quarter, compared to €1,803 million at March 31, 2016. The net cash position rose accordingly from €27 million to €299 million over the three-month period.
Outlook for the fourth quarter of the 2016 fiscal year
In the fourth quarter of the 2016 fiscal year, Infineon expects quarter-on-quarter revenue growth of 3 percent (plus or minus 2 percentage points). This forecast is based on an assumed exchange rate of US$1.10 to the euro. At the mid-point of the forecast revenue range, the Segment Result Margin is expected to come in at 17 percent.
Outlook for the 2016 fiscal year
Based on the outlook for the fourth quarter, revenue growth and Segment Result Margin for the full 2016 fiscal year are expected to end up within the range forecast in the preceding quarters.
Investments in property, plant and equipment, intangible assets and capitalized development costs are planned in the region of an unchanged €850 million for the 2016 fiscal year. Based on expected full-year revenue, the ratio for investments as a percentage of forecast revenue is expected to be approximately 13 percent. Depreciation and amortization are forecast to be in the region of €850 million.
[1] Adjusted net income and adjusted earnings per share (diluted) should not be seen as a replacement or superior performance indicator, but rather as additional information to the net income and earnings per share (diluted) determined in accordance with IFRS. The detailed calculation of adjusted earnings per share is presented on page 9.
[2] For definitions and the calculation of free cash flow and of the gross and net cash position, please see page 13.
Revenue for the ATV segment in the third quarter of the 2016 fiscal year totaled €676 million, compared with €670 million in the second quarter. Radar-based solutions for driver assistance systems were particularly sought after. Demand remained high for solutions for hybrid and electric vehicles. Globally, premium vehicles remained in high demand. Segment Result improved from €94 million in the second quarter to €104 million in the third quarter of the current fiscal year, with the Segment Result Margin rising from 14.0 percent to 15.4 percent.
IPC segment revenue increased by 6 percent from €265 million in the second quarter to €280 million in the third quarter of the 2016 fiscal year. Demand was particularly strong for renewables-related products. Revenue from products for electric drives and home appliances remained flat and declined slightly for traction. Segment Result improved from €26 million in the second quarter to €42 million in the third quarter, with the Segment Result Margin rising from 9.8 percent to 15.0 percent.
PMM segment revenue grew by 3 percent to €509 million in the third quarter of the 2016 fiscal year, compared with €496 million in the second quarter. Business with products for AC-DC and DC-DC conversion grew due to seasonal factors. Contrary to the normal seasonal trend, revenue generated with components for mobile communications remained flat. The Segment Result improved quarter-on-quarter from €74 million to €79 million. The Segment Result Margin was 15.5 percent, compared with 14.9 percent one quarter earlier.
CCS segment revenue decreased by 4 percent from €180 million in the second quarter to €172 million in the third. Demand declined for payment cards reflecting softer market conditions. On the other hand, demand increased for chips required for authentication solutions in line with seasonality. Segment Result fell by €4 million from €36 million in the second quarter to €32 million in the third quarter of the current fiscal year, while the Segment Result Margin came in at 18.6 percent, compared with 20.0 percent in the preceding quarter.
Analyst and press telephone conference
Infineon will host a telephone conference call for analysts and investors (in English only) on August 2, 2016 at 9:30 am (CEST), 3:30 am (EDT). During the call, the Infineon Management Board will present the Company’s results for the third quarter of the 2016 fiscal year. In addition, the Management Board will host a live telephone conference with the media at 11:00 am (CEST), 5:00 am (EDT). It can be followed over the Internet in both English and German. Both conferences will also be available live and for download on Infineon’s website at www.infineon.com/investor.
The Q3 Investor Presentation is available (in English only) at: http://www.infineon.com/cms/en/corporate/investor/reporting/index.html
Infineon Financial Calendar (* preliminary)
- Sep 1, 2016 Commerzbank Sector Week, Frankfurt
- Sept 6 – 7, 2016 Citi Global Technology Conference, New York
- Sept 8 – 9, 2016 Deutsche Bank European TMT Conference, London
- Sept 19, 2016 Berenberg Bank and Goldman Sachs German Corporate Conference, Munich
- Sep 21, 2016 Baader Investment Conference, Munich
- Nov 16 – 17, 2016 Morgan Stanley TMT Conference, Barcelona
- Nov 23, 2016* Earnings Release for the Fourth Quarter and 2016 Fiscal Year
- Nov 29 – 30, 2016 Credit Suisse TMT Conference Scottsdale (AZ)
- Feb 2, 2017* Earnings Release for the First Quarter of the 2017 Fiscal Year
- Feb 16, 2017 Annual General Meeting 2017, Munich
- May 4, 2017* Earnings Release for the Second Quarter of the 2017 Fiscal Year
- Aug 1, 2017* Earnings Release for the Third Quarter of the 2017 Fiscal Year
- Nov 30, 2017* Earnings Release for the Forth Quarter of the 2017 Fiscal Year