Siltronic AG — Call Transcript 2019

Oct 24, 2019

Siltronic AG Q3 2019 Conference Call Presentation

October 24, 2019

© Siltronic AG

Sales	 EUR 299.8m (Q2 2019: EUR 311.8m)
EBITDA	 EUR 91.5m (Q2 2019: EUR 100.0m)  EBITDA margin: 30.5% (Q2 2019: 32.1%)
EBIT	 EUR 63.6m (Q2 2019: EUR 74.6m)  EBIT margin: 21.2% (Q2 2019: 23.9%)
Capex	 EUR 88.6m (Q2 2019: EUR 105.1m)
Net cash flow	 EUR -8.8m (Q2 2019: EUR 0.4m)
Net financial assets	 EUR 578.8m (June 30, 2019: EUR 592.1m)

MARKET UPDATE

Market development

Economic sentiment softens across major economies

• GDP grew at a slower pace QoQ while PMI is in negative territory for all major regions
• Unemployment remains low in most regions
• Consumer confidence varies from region to region

Silicon wafer volumes down

• Q3 SEMI market was ~6.3 bn cm²/month, -1.7% below Q2 19 average and -9.9% YoY
• Siltronic expects market weakness to carry well into 2020

Wafer demand impacted by high inventories

• Demand for 150 mm further down in Q3 and Q4, price pressure on quarterly contracts
• Standard products in 200 mm down while special products still high, some price pressure on less loaded products
• Demand for 300 mm slightly down as customer inventories remain high and customers shifted volumes under LTAs; pricing under existing LTAs firm, non-LTA prices may decline slightly in 2020

Sources SEMI up to Sep. 2019 /Siltronic

End markets expectations for early 2020 rather flattish: visibility for 2020 extremely low

Smartphones PCs/Laptops

• Volumes expected to be flat

• Silicon content growth depend on mix effect

• Volumes expected to be rather flattish

• But increasing NAND content

Servers

• Data center growth expected to be
• "slower" But with "upside risk", compounded by machine learning applications which drive memory and logic content

Automotive

• Car volumes have been softening
• Content should be driven by further ADAS implementation and electrification
• The latter could be impacted shortterm by consumer acceptance in Europe

Industrial

• Silicon demand partly impacted by reduced capex
• Content growth expected to continue

Pictures: zapp2photo/stock.adope.com, Denis Rozhnovsky/stock.adobe.com, phonlamaiphoto/stock.adobe.com, ekkasit919/stock.adobe.com, denisismagilov/stock.adobe.com Source: Siltronic Oct. 2019

Silicon outlook: Demand muted due to high inventories

Silicon demand drivers

Units in 2020 Smartphones PCs Server Industry Cars Content computing Die / density Semi device inventories end of 2019 Impact

. Siltronic Marketing Oct. 2019

Siltronic AG – Q3 2019 Conference Call Presentation October 24, 2019 6 of 21

FINANCIALS Q3 2019

Sales development negatively impacted by lower wafer area demand

Sales, in EUR million	Ø FX rates Q3/18		Q4	Q1/19	Q2	Q3
	EUR / USD	1.16	1.14	1.14	1.12	1.11
	EUR / JPY	130	129	125	124	124

Comment

• Sales in Q3 down as expected due to lower wafer area sold and minimal price reductions especially in SD and some in 200 mm
• ASP in EUR Q1-Q3 2019 up compared to 2018

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Higher energy costs and depreciation burden cost of sales

Other currency effects (mostly hedging), in EUR million

Cost of Sales, in EUR million Gross profit, in EUR million / Gross margin, in %

Comment

• COGS y-o-y declined only slightly as lower costs for materials and supplies were largely offset by higher energy costs and depreciation
• COGS q-o-q declined by 1.7%. Lower personnel and supplies' costs partly offset by higher depreciation
• Negative effects from currency hedging increased q-o-q

High US-Dollar and Japanese Yen exposure

FX exposure, in %

Sensitivity

1 USD-cent change

• ~ EUR 8.0 million sales
• ~ EUR 6.5 million EBITDA unhedged
• ~ EUR 4.5 million EBITDA after hedging

1 JPY change

• ~ EUR 2.5 million sales
• ~ EUR 2.0 million EBITDA unhedged
• ~ EUR 1.0 million EBITDA after hedging

Profitability affected by lower loading, higher energy costs and slightly increased depreciation

Net profit of EUR 216 million in Q1-Q3 2019

Working Capital up q-o-q but down y-o-y

Strong equity ratio and solid net financial assets

¹⁴ of 21 Siltronic AG – Q2 2019 Conference Call Presentation October 24, 2019

Pension reserves impacted by low IFRS interest rates

• DBO of EUR 1,228 million assets of EUR 662 million = EUR 566 million
• Pension reserves @3% = DBO of EUR 850 million – assets EURO 662 million = EUR 188 million
• IFRS interest uses bond yields only, assets include bonds, equity, real estate + derivatives
• Wacker pension fund
• fully funded under German pension fund regulations using 3.54% interest rate
• asset liability study: probability of return in next 20 years:

≥3.75% 56%

Strong net cash flow despite high payments for capex

¹⁶ of 21 Siltronic AG – Q2 2019 Conference Call Presentation October 24, 2019

Siltronic Outlook 2019 (as of October 24, 2019)

EBITDA margin	 between 30% and 35%
EBIT	 significantly below 2018
Net cash flow	 clearly positive, approx. EUR 180m below 2018
Sales	 depending on timing of market recovery and on FX effects around 10% to 15% below 2018
Cost position	 negative effect due to tariff increases and EUR 20m higher electricity costs in Germany
FX effects	 negligible vs. 2018 assuming EUR/USD rate of 1.15 and EUR/JPY rate of 130
Depreciation	 around EUR 110m
Tax rate	 between 10% and 15%
Capex	 about EUR 350m in capacity, automation and capabilities, significantly lower in 2020
Earnings per share	 significantly below 2018

APPENDIX

H

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Contact and Additional Information

Issuer and Contact

Siltronic AG Hanns-Seidel-Platz 4 D-81737 München	ISIN: WKN: Deutsche Börse:	DE000WAF3001 WAF300 WAF Frankfurt Stock Exchange Prime Standard
Investor Relations: Petra Mueller Email: petra.mueller@siltronic.com Tel. +49 89 8564-3133	Listing:
Financial Calendar Preliminary figures FY 2019 January 29, 2020

Additional Information

Disclaimer

The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this presentation may be statements of future expectations, future financial performance and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities and risk adequate pricing, words such as "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "continue", "projects" or "seeks", "potential", "future", or "further" and similar expressions may identify forwardlooking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These include, among other factors, changing business or other market conditions, currency and interest fluctuations, introduction of competitive products, poor acceptance of new products and services, change of the corporate strategy and the prospects for growth anticipated by the management. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Siltronic AG does not undertake and does not intent to undertake any obligation to update or revise any statements contained in this presentation, whether as a result of new information, future events or otherwise. In particular, you should not place any reliance on forwardlooking statements which speak only as of the date of this presentation.

SILTRONIC AG | Hanns-Seidel-Platz 4

81737 Munich Germany