Siltronic Q3 2024 Earnings Overview

In the third quarter of 2024, Siltronic, a global leader in the semiconductor wafer industry, reported earnings that aligned with expectations amidst a challenging demand environment. CEO Michael Heckmeier highlighted the company's modest sales growth and robust EBITDA margin, despite headwinds such as high inventory levels within the industry.

The company's financial stability was bolstered by a successful €370 million promissory note loan placement, and its outlook remains cautiously optimistic, focusing on mid- to long-term growth potential, especially in the AI sector.

Key Takeaways

• Q3 sales rose by 1.7% quarter-on-quarter to €357 million but fell by 9% year-over-year.
• EBITDA margin stood strong at 25%, with a slight decrease from the previous quarter.
• A €370 million promissory note loan was placed to enhance liquidity.
• Adjusted EBITDA margin guidance is now 24%-26%.
• Sales guidance for 2024 anticipates a high single-digit percentage drop from 2023.
• Depreciation guidance was revised to €230 million to €250 million.
• Management remains optimistic about the semiconductor industry's long-term prospects, particularly in AI.

Company Outlook

• Siltronic expects sales for 2024 to be lower than 2023 due to volume declines and slight negative impacts from foreign exchange and pricing.
• The company plans to adjust the ramp-up of its new Singapore fab based on market demand and inventory normalization.
• Overall silicon demand is projected to slightly decline by 2% in the industrial sector, while automotive demand remains stable.
• Competitive pressures from Chinese manufacturers are being navigated, with plans to exit operations in the 150mm and below wafer segments by 2025.

Bearish Highlights

• The semiconductor industry faces high inventory levels, which may affect demand into 2025.
• Discussions on production utilization are ongoing, with no detailed guidance on potential reductions.
• Competitive pressures in the wafer market, particularly from Chinese manufacturers, prompt strategic exits from certain segments.

Bullish Highlights

• The new fab in Singapore is progressing well, with reduced equipment lead times offering flexibility for future investments.
• The company maintains steady-state CapEx around €200 million, adjustable based on market conditions.
• Management believes in the industry's mid- to long-term growth drivers, particularly AI.

Misses

• There was a 9% decline in year-over-year sales.
• The company experienced negative foreign exchange impacts.
• Delays in product qualifications have led to adjusted EBITDA margin guidance.

Q&A Highlights

• The company has not observed specific deterioration in Q4 compared to Q3, attributing changes to normal quarterly phasing.
• There's uncertainty regarding the duration of the inventory correction phase, which could impact 2025.
• Cash outflows for debt repayments are expected to begin in 2025, with outflows projected to be higher than inflows.

Siltronic’s earnings call provided investors with insights into its financial performance and strategic positioning amid uncertainty in the semiconductor industry. The company’s robust EBITDA margin and liquidity through a promissory note loan highlight its financial resilience. However, industry challenges necessitate strategic adjustments, including exiting specific wafer segments. Management focuses on efficiency and potential growth in AI, with further insights expected in early 2025 during the preliminary full-year figures release.

Closing Remarks

Verena Stutze, Head of Investor Relations and Communications, concluded the session by noting that preliminary full-year 2024 figures would be released on February 4, 2025, followed by the annual report in March. The next conference is scheduled for March 6, 2025.