Siltronic AG — Call Transcript 2020

Jun 30, 2020

Siltronic AG Q2 2020 Conference Call Presentation

July 30, 2020

© Siltronic AG

Corona Update

• Employee safety highest priority
• No additional Covid-19 cases
• Production running smoothly at all sites
• No production shutdowns
• Delays in some invest projects due to travel ban
• Time loss on start of operation of some equipment in Q1 and Q2
• Confident to finish most planned projects by year-end
• Increased freight costs, especially in Q1 and Q2, will impact cost base
• Freight costs started to normalize in Q3

What did silicon demand look like in Q2?

Logic	Industry / Auto
 Foundry business: strong  Servers: strong (Home Office, streaming)  Inventories: ok	 Auto: weak, higher negative impact to follow in H2  Traditional applications: high inventories  Hybrid and electrical cars: flattish
Memory  DRAM: inventories flattish q-o-q on an elevated level	300 epi strong (unchanged q-o-q) 200 pol + FZ strong (unchanged q-o-q) 200 epi good (unchanged q-o-q)
 NAND: finished goods inventories on normalised levels (servers: strong; smarphones: weak	300 pol stable q-o-q SD improved q-o-q
 overall uncertainty about upstream inventories in semi value chain	 Price trend flattish q-o-q

Highlights Q2 2020: Financials

Sales	 EUR 323.1m (Q1 2020: EUR 300.1m)
EBITDA	 EUR 100.4m (Q1 2020: EUR 84.2m)  EBITDA margin: 31.1% (Q1 2020: 28.1%)
EBIT	 EUR 66.9m (Q1 2020: EUR 53.3m)  EBIT margin: 20.7% (Q1 2020: 17.8%)
Capex	 EUR 48.3m (Q1 2020: EUR 46.0m)
Net cash flow	 EUR 26.7m (Q1 2020: EUR 40.9m)
Net financial assets	 EUR 509.4m (March 31, 2020: EUR 588.1m)

FINANCIALS Q2 2020

Q2 sales improved q-o-q

Sales, in EUR m	Ø FX rates	Q2/19	Q3	Q4	Q1/20	Q2/20
	EUR / USD	1.12	1.11	1.11	1.10	1.10
	EUR / JPY	124	119	120	120	118

Comments

• Q2 sales up q-o-q:
• higher wafer area sold
• flattish price trend
• Tailwind from USD y-o-y; no change q-o-q

Productivity improvements lead to lower costs per wafer area

High US-Dollar and Japanese Yen exposure

Higher production volumes positive for earnings

Net profit of EUR 61 million

1.80

Working capital slightly up

Equity decreased due to dividend payment and higher interestrelated pension obligations

12 of 22 Siltronic AG – Q2 2020 Conference Call Presentation July 30, 2020

Pension reserves up due to lower IFRS interest rates in Germany

• DBO of EUR 1,195 million ./. assets of EUR 643 million = EUR 552 million
• Pension reserves @3% = DBO of EUR ~875 million ./. assets EUR 643 million = EUR ~232 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%

≥3.0% 80%

≥2.5% 91%

Capex 2020 significantly down vs. 2019

54 123 257 363 200 Investment, in EUR m ~

Comment

• Capex 2020
• Significantly down to around EUR 200m
• Capacity expansion projects completed in Q1
• Crystal pulling hall in Singapore to be finished in Q2
• Epi expansion in H2 to accommodate demand and market growth
• Some delays in invest projects due to Corona (no travel of engineers to start operation of equipment)

Net cash flow in Q2 influenced by dividend payment

Negative corona effects on silicon demand in H2 2020

Development of wafer volume in Q3

• 300 epi strong good logic and foundry business
• 300 pol stable still elevated raw wafer inventories
• 200 mm decline high exposure to automotive industry
• SD decline after strong Q2 back to Q1 level

What to expect in H2

• After strong Q2 with inventories at customers most likely up, H2 wafer area slightly below H1
• Negative impact on wafer demand of automotive industry in H2
• Tightened US sanctions against Huawei/HiSilicon add further uncertainty
• Uncertainty about smartphone recovery in H2
• Siltronic expects H2 to be weaker compared to H1 2020

Siltronic Outlook 2020 (as of July 21, 2020)

Sales	 mid-single digit %-range below 2019 with a slight sequential decrease in H2 vs. H1; in case of continuing USD weakness, decline could be somewhat higher
EBITDA margin	 mid-single digit percentage points below 2019
Depreciation	 around EUR 140m
EBIT	 significantly below 2019 due to higher depreciation
Tax rate	 below 10%
Capex	 around EUR 200m, mainly in capabilities and automation
Net cash flow	 significantly below 2019; around EUR 40 million burden from carry-over of unpaid 2019 investments
Earnings per share	 significantly below 2019
Siltronic AG – July 30, 2020	Q2 2020 Conference Call Presentation 18 of 22

APPENDIX

Contact and Additional Information

Issuer and Contact

Siltronic AG Hanns-Seidel-Platz 4 D-81737 München	ISIN: WKN: Deutsche Börse:	DE000WAF3001 WAF300 WAF
Investor Relations: Petra Mueller email: petra.mueller@siltronic.com Tel. +49 89 8564-3133	Listing:	Frankfurt Stock Exchange Prime Standard
Financial Calendar 2020
Q3 Quarterly Statement October 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