Infineon Technologies AG

Earnings Release • Nov 16, 2006

News Details

Corporate | 16 November 2006 07:30

Infineon reports results for the fourth quarter and the 2006 financial year and provides outlook for the first quarter of the 2007 financial year

Corporate news transmitted by DGAP – a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. —————————————————————————— Infineon reports results for the fourth quarter and the 2006 financial year and provides outlook for the first quarter of the 2007 financial year FOURTH QUARTER 2006 RESULTS (July 1 to September 30, 2006) in Euro million Q4 FY06 Q3 FY06 +/- Revenues Infineon excluding 1,058 995 6% Qimonda Revenues Qimonda 1,232 977 26% Revenues Infineon Group 2,290 1,972 16% EBIT Infineon excluding Qimonda (174) (51) — EBIT Qimonda 204 100 +++ EBIT Infineon Group 30 49 -39% Net loss Infineon Group (36) (23) -56% Basic and diluted loss per share (0.05) (0.03) -56% (in Euro) Munich, Germany, November 16, 2006. Infineon reported revenues of Euro 2.29 billion, up from Euro 1.97 billion in the third quarter. The increase reflected higher sales in all operating segments. Revenues excluding Qimonda were Euro 1.06 billion, up 6 percent sequentially.The principal sales drivers in the Communication Solutions segment were seasonal effects and ramp-ups of products for new customers, while the Automotive, Industrial & Multimarket segment saw increased sales in the industrial and security & ASICs businesses. Group net loss in the fourth quarter was Euro 36 million compared to a net loss of Euro 23 million in the prior quarter. Loss per share was 0.05 Euro compared to a loss per share of 0.03 Euro in the prior quarter. Fourth quarter group EBIT was Euro 30 million, down from Euro 49 million in the prior quarter. For Infineon excluding Qimonda, the fourth quarter EBIT loss was Euro 174 million compared to an EBIT loss of Euro 51 million in the prior quarter. The fourth quarter 2006 EBIT loss excluding Qimonda included charges of Euro 164 million, mainly relating to the carve-out and Initial Public Offering (IPO) of Qimonda, and the impairments resulting from the insolvency of BenQ Mobile’s German subsidiary. The third quarter 2006 EBIT loss excluding Qimonda included charges of Euro 29 million, mainly relating to impairment and restructuring charges. Before these charges, the fourth quarter EBIT loss excluding Qimonda would have been Euro 11 million versus an EBIT loss of Euro 22 million in the prior quarter, driven by improved EBIT results in the Automotive, Industrial & Multimarket segment. 2006 FINANCIAL YEAR RESULTS in Euro million FY06 FY05 +/- Revenues Infineon excluding 4,114 3,934 5% Qimonda Revenues Qimonda 3,815 2,825 35% Revenues Infineon Group 7,929 6,759 17% EBIT Infineon excluding Qimonda (217) (294) 26% EBIT Qimonda 202 111 82% EBIT Infineon Group (15) (183) +++ Net loss Infineon Group (268) (312) 14% Basic and diluted loss per share (0.36) (0.42) 14% (in Euro) In the 2006 financial year, group revenues increased by 17 percent to Euro 7.93 billion, compared to the 2005 financial year, reflecting higher sales at Qimonda and in the Automotive, Industrial & Multimarket segment. Group net loss for the 2006 financial year narrowed to Euro 268 million, compared to a net loss of Euro 312 million in the prior year. Group EBIT loss was Euro 15 million in the 2006 financial year, compared to an EBIT loss of Euro 183 million in the 2005 financial year, reflecting improved results in all operating segments. Included in the 2006 financial year group EBIT loss were charges of Euro 196 million, mainly resulting from the IPO of Qimonda, the insolvency of BenQ Mobile’s German subsidiary, and impairment and restructuring charges. The EBIT loss in the 2005 financial year included net charges of Euro 104 million, primarily related to the planned phase-out of production at the company’s Munich-Perlach facility and net charges resulting from the reorganization measures in the Communication Solutions segment, partially offset by non-recurring license income. Before these charges, group EBIT in the 2006 financial year would have been Euro 181 million versus a group EBIT loss of Euro 79 million in the 2005 financial year. In the 2006 financial year, the EBIT margin in the Automotive, Industrial & Multimarket segment was 8.7 percent compared to 5.3 percent in the prior year, despite expenses of more than Euro 70 million from the ramp-up of the new production facility in Kulim, Malaysia, and the phase-out of production at the Munich-Perlach facility. ‘Infineon’s solid EBIT improvement in the 2006 financial year is the clear result of our continued effort to streamline the company’s operations. Qimonda almost doubled EBIT and we continued to make solid progress in our other businesses. We also almost doubled EBIT in our Automotive, Industrial & Multimarket segment and markedly improved the results in the Communication Solutions segment,’ said Dr. Wolfgang Ziebart, CEO and President of Infineon Technologies AG. ‘We achieved the turn-around in several businesses, such as discrete semiconductors, RF power and tuner systems. In the 2006 financial year, more than 70 percent of Infineon’s sales excluding Qimonda reached solid EBIT margins. We will continue to turn-around the wireless business, and are aiming to break even by the end of the 2007 calendar year. We continue to assess overall efficiency and are driving further improvements with a program called Infineon Complexity Reduction Program (ICoRe). Upon implementation, we expect to realize annualized savings of at least Euro 50 million from this program in the current financial year.’ OUTLOOK FOR THE FIRST QUARTER OF THE 2007 FINANCIAL YEAR In the first quarter of the 2007 financial year, Infineon expects revenues and EBIT for its businesses excluding Qimonda and prior to inclusion of charges, to decrease compared to the fourth quarter of the 2006 financial year. The decrease is expected to be driven mainly by the Communication Solutions segment due to the loss of business as a result of the insolvency of the German subsidiary of its customer BenQ Mobile. In addition, a number of temporary factors will negatively affect EBIT in the Automotive, Industrial & Multimarket segment. The company does not expect that this EBIT impact will be fully offset by an anticipated EBIT improvement before restructuring charges in the Corporate and Eliminations segment. Automotive, Industrial & Multimarket (AIM): In the first quarter of the 2007 financial year, Infineon expects revenues of its Automotive, Industrial & Multimarket segment to stay flat or decline slightly from last quarter’s high level. The company anticipates that the segment’s EBIT will decrease in the first quarter, driven predominantly by seasonality and certain other temporary effects outlined below. The company anticipates that revenues in its automotive business will decrease slightly compared to the fourth quarter of the 2006 financial year, as a result of typical seasonal weakness, as well as anticipated volume reductions at U.S. car manufacturers. The impact of this regional market weakness will be partly compensated by new product ramps. In its industrial businesses, Infineon continues to see strong demand, in particular for power products. Despite the fact that the new facility in Kulim, Malaysia, is ramping significantly ahead of plan, Infineon is still capacity-limited for power semiconductors, and anticipates the industrial businesses’ revenues to grow only slightly compared to the previous quarter. As Kulim has not reached sufficient economies of scale, a slightly negative effect on the EBIT is expected. In its security & ASICs business, the company expects a seasonally weaker first quarter compared to the previous quarter. Communication Solutions (COM): In the first quarter of the 2007 financial year, Infineon expects revenues of the Communication Solutions segment to decline significantly compared to the fourth quarter of the 2006 financial year. This is mainly due to an expected Euro 40 to 50 million decline in revenues with BenQ as BenQ Mobile’s German subsidiary has stopped all product purchases and orders from Infineon following its filing for insolvency at the end of September 2006. The EBIT loss before charges in the first quarter of the 2007 financial year is expected to increase significantly compared to the EBIT loss before charges in the fourth quarter of the financial year 2006, mainly driven by the revenue development. Qimonda: Qimonda expects its bit production to grow by approximately 10 to 15 percent in the first quarter of the 2007 financial year. The company expects this bit growth to be based on additional capacity, mainly from foundry partners, and improved productivity as a result of the continued conversion of capacities to 90nm technology. Qimonda also expects to maintain a share of bit-shipments to non PC applications significantly above 50 percent after the seasonally strong customer demand for consumer and gaming applications in the last quarter. Other Operating Segments and Corporate and Eliminations: In the first quarter of the 2007 financial year, Infineon expects revenues and EBIT in Other Operating Segments to remain broadly unchanged relative to the previous quarter. The company estimates that the planned restructuring of its wireless communications operations following the filing for insolvency of BenQ Mobile’s German subsidiary will result in charges of approximately Euro 30 million, which would be recorded in its Corporate and Eliminations segment in the first quarter of the 2007 financial year. Prior to inclusion of restructuring charges, EBIT in the Corporate and Eliminations segment is expected to improve relative to the prior quarter. The Corporate and Eliminations segment will continue to reflect intra-group elimination of sales between Infineon and Qimonda. INFINEON COMPLEXITY REDUCTION PROGRAM (ICoRe) Infineon is in the process of finalizing cost reduction measures under its Infineon Complexity Reduction Program (ICoRe). ICoRe is aimed at simplifying the entire process chain within the company as well as identifying and resolving overlap. Infineon expects to finalize the planned measures during the first quarter of the 2007 financial year, and expects to complete implementation of the measures in the current financial year. Upon implementation, ICoRe is expected to yield annualized cost savings of at least Euro 50 million. All figures in this quarterly information are preliminary and unaudited. Infineon began reporting its results of operations under its new organizational structure, which became effective on May 1, 2006, following the legal separation of its memory products segment into a separate legal entity called Qimonda AG. As a result of the reorganization, certain corporate overhead expenses are no longer apportioned to Qimonda and are instead allocated to Infineon’s remaining segments. The results of prior periods have been reclassified to conform to the current period presentation, as well as to facilitate analysis of current and future operating segment information. ANALYST TELEPHONE AND PRESS CONFERENCES Infineon Technologies AG will conduct a telephone conference (in English only) with analysts and investors on November 16, 2006, at 10:00 a.m. Central European Time (CET), 4:00 a.m. Eastern Standard Time (U.S. EST), to discuss operating performance during the fourth quarter and the 2006 financial year. In addition, the Infineon Management Board will host a press conference at 11:30 a.m. (CET), 5:30 a.m. (U.S. EST). It can be followed in German and English over the Internet. Both conference calls will be available live and for download on the Infineon web site at http://www.infineon.com. Segments’ 2006 fourth quarter performance and additional major business highlights can be found in the quarterly information at http://www.infineon.com. D I S C L A I M E R This discussion includes forward-looking statements about our future business. These forward-looking statements include statements relating to future developments in the world semiconductor market, including the market for memory products, Infineon’s future growth, the benefits of research and development alliances and activities, our planned levels of future investment in the expansion and modernization of our production capacity, the introduction of new technology at our facilities, the continuing transitioning of our production processes to smaller structure sizes, cost savings related to such transitioning and other initiatives, our successful development of technology based on industry standards, our ability to offer commercially viable products based on our technology, our ability to achieve our cost savings and growth targets, and the impact of our carve-out of Qimonda, our memory products business, its initial public offering, and any further sales of Qimonda shares or other corporate financing measures in that regard. These forward-looking statements are subject to a number of uncertainties, including trends in demand and prices for semiconductors generally and for our products in particular, the success of our development efforts, both alone and with our partners, the success of our efforts to introduce new production processes at our facilities and the actions of our competitors, the availability of funds for planned expansion efforts, the outcome of antitrust investigations and litigation matters, as well as the other factors mentioned herein. As a result, our actual results could differ materially from those contained in the forward-looking statements. Infineon, the stylized Infineon Technologies design are trademarks and service marks of Infineon Technologies AG. All other trademarks are the property of their respective owners. Contact: Investor Relations, Tel.: +49 89 234-26655, Fax: +49 89 234-9552987 (c)DGAP 16.11.2006 ————————————————————————— Language: English Issuer: Infineon Technologies AG Am Campeon 1-12 85579 Neubiberg/München Deutschland Phone: +49 (0)89 234-26655 Fax: +49 (0)89 234-955 2987 E-mail: investor.relations@infineon.com WWW: www.infineon.com ISIN: DE0006231004 WKN: 623100 Indices: DAX Listed: Amtlicher Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin-Bremen, Hannover, München, Hamburg, Düsseldorf, Stuttgart; Terminbörse EUREX; Foreign Exchange(s) NYSE End of News DGAP News-Service —————————————————————————