Siltronic AG — Earnings Release 2015

Mar 16, 2016

Siltronic – a leading producer of silicon wafers

Full Year Results 2015

© Siltronic AG 2016

Highlights 2015: Financials

Sales	EUR (2014: adjusted1 Sales of 931.3 mn 853.4 mn EUR) Growth of 9.1%
EBITDA	EUR (2014: adjusted1 124.0 mn 117.7 mn EUR), Without negative FX effects2 EBITDA would have been 169.7 mn EUR
Margin	EBITDA margin of 13.3% (2014: adjusted1 13.8%) Without negative FX effects2 EBITDA margin would have been 18.2%
EBIT	EUR (2014: adjusted1 positive at 2.7 mn -31.6 mn EUR)
Cost Savings	around 45 mn EUR realised
CapEx	EUR (2014: adjusted1 75.0 mn 40.7 mn EUR), mainly in enhanced capabilities
Free Cash Flow	EUR (2014 adjusted1 37.4 mn : 86.3 mn EUR)
Net Cash	155.9 mn EUR (2014: net debt of 24.5 mn EUR)
* 1 adjusted for consolidation 2 other operating income and	effects resulting from acquisition of Siltronic Silicon Wafer Pte.Ltd., Singapur expenses influenced by FX effects, mainly due to hedging In 2015, These effects added up to expenses of 45.7 mn EUR.

Agenda

Market Overview

Financials

Outlook

Appendix

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What happened in 2015? - GDP growth slowed, electronics revenue went down, and semiconductor revenue stayed flat.

Worldwide GDP

grew 3.1% in 2015 (0.3% pts. less than in 2014), according to IMF

Electronic revenue

• Electronics revenue was USD 1,423 bn in 2015 (2.1% down from 2014), according to IC Insights
• Overall key electronic categories weakened throughout 2015 as purchasing power declined (in some regions) due to strong dollar

Worldwide semiconductor market

• Semiconductor market equals around 25% of the electronics industry
• Semiconductor unit sales grew 2.7% YoY in 2015, while revenue was flat (-0.2% YoY), according to WSTS

Silicon area demand continues to grow

Silicon wafer demand, in bn in2

Source: SEMI SMG Silicon Area until 2015, IHS Semiconductor Silicon Demand Forecast Tool Q1 2016 (growth rates from 2016 onwards)

Agenda

• Market Overview
• Financials
• Outlook
• Appendix

(

Financials improved strongly

Adjusted1 financial figures (EUR mn)	2015	2014	2013	2012
Sales	931.3	853.4	875.5	1030.0
EBIT	2.7	(31.6)	(87.3)	(75.5)
EBIT margin in %	0.3	(3.7)	(10.0)	(7.3)
EBITDA	124.0	117.7	112.6	122.5
EBITDA margin in %	13.3	13.8	12.9	11.9
CapEx	(75.0)	(40.7)	(39.7)	(144.3)
Free cash flow	37.4	86.3	64.7	(134.4)

¹figures 2014 adjusted for consolidation effects resulting from acquisition of SSW and restructuring

Sales development driven by higher wafer volumes and strong USD

• Volumes FY 2015 up y-o-y
• Volumes Q4 decreased yo-y as well as compared to previous quarters
• Prices decreased q-o-q in contract currency
• ASP y-o-y up in EUR due to stronger USD

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

¹ adjustments are based on the assumption that SSW would have been consolidated prior to January 1, 2014. Initial consolidation of SSW was made as of January 24, 2014. The adjustments are not in compliance with IFRS

EBITDA 2015 increased by 5%

¹ adjustments are based on the assumption that SSW would have been consolidated prior to January 1, 2014. Initial consolidation of SSW was made as of January 24, 2014. The adjustments are not in compliance with IFRS

² other operating income and expenses influenced by FX effects, mainly due to hedging . In FY 2015, these effects added up to expenses of 45.7 mn EUR.

EBITDA excluding FX and hedging improved by >50%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

EBITDA w/o FX & hedging EBITDA margin ¹ adjustments are based on the assumption that SSW would have been consolidated prior to January 1, 2014. Initial consolidation of SSW was made as of January 24, 2014. The adjustments are not in compliance with IFRS

² other operating income and expenses influenced by FX effects, mainly due to hedging . In FY 2015, these effects added up to expenses of 45.7 mn EUR.

.

USD sales significantly higher than USD/SGD costs

Equity ratio of 48% and strong net cash position of EUR 156 mn

Balance sheet, in EUR mn

Assets	Dec 31, 2015	Comments	Equity and liabilities	Dec 31, 2015	Comments
Non-current	579.1		Equity	497.3
PP&E	542.9		Siltronic	500.5
Other fixed	36.2	30 intangible (related to SSW)	Other shareholders	-3.2	Samsung's 22% in SSW
Current	461.7		Liabilities	543.5
Inventories	142.7		Pension provision	299.4	Germany and US
Trade receivables	100.4		Other provisions	36.4	33 personnel related (e.g. early retirement)
Other current	24.2		Financial debt	38.6	Samsung
			Trade liabilities	72.1
Cash and fixed term deposit	194.4		Other	97.0	46 prepayments 19 hedging 19 employee related
Total	1,040.8		Total	1,040.8

Capital discipline supports positive free cash flow

2015 2014¹ Cash flow from operating activities 96.1 123.7 Payments for CapEx (58.7) (37.4) Free cash flow 37.4 86.3

Comments

2014

• Prepayments of EUR 56 mn received

2015

• Repayment of around EUR 21 mn of prepayments
• closed some FX forwards prematurely with cash impact in 2015; P&L impact in 2016

¹ adjustments are based on the assumption that SSW would have been consolidated prior to January 1, 2014. Initial consolidation of SSW was made as of January 24, 2014. The adjustments are not in compliance with IFRS

Cash flow, in EUR mn

Pension provision decreased considerably

Pension provision, in EUR mn

Comments

• decrease in Q2/2015 due to changes in interest rates
• stable since that time
• changes shown in equity

CapEx: spending mostly for capability and cost reductions

CapEx focus on

• Capability improvement
• New design rules
• New generation crystal pullers
• Cost reduction (e.g. automation)
• Debottlenecking

No extensions planned

• Empty shell capacity would allow for fast and cost efficient extension
• Extensions not considered at current price levels

¹ adjustments are based on the assumption that SSW would have been consolidated prior to January 1, 2014. Initial consolidation of SSW was made as of January 24, 2014. The adjustments are not in compliance with IFRS

Siltronic continued successful track record of cost reduction

Cost reduction, in EUR mn¹

Additional Savings Levers:

• Cost reduction roadmap defined for 2016 and beyond
• Investing in automation in Germany
• up to 500 employees to be transferred to WACKER between 2014 and 2019 (~200 already transferred)
• Investing in new pullers to improve yields and capabilities
• Poly cost optimization ongoing
• Further productivity increases through various initiatives

¹ Based on the prior year cost basis to current year volumes and adjustments to certain current year costs to reflect prior year contractual and economic parameters (e.g. prior year unit labor cost).

² excluding SSW

Agenda

• Market Overview
• Financials
• Outlook
• Appendix

(

2016 is expected to bring slightly better GDP growth, driving moderate growth outlook for electronics and semiconductors.

Worldwide GDP

• IMF is projecting 3.4% growth in 2016 (0.3% pts higher than in 2015)
• The importance of the Chinese economy will grow for consumer markets like personal computers, digital TVs, smartphones and automobiles. China's economy is forecasted to grow 6.3% in 2016, compared to 6.9% in 2015

Electronics revenue

IC Insights predicts 2.4% revenue growth, to USD 1.457 bn in 2016

Worldwide semiconductor market

Most analysts predict moderate growth for semiconductor revenue in 2016, but the individual forecasts cover a wider range (from -1% to +6%)

Silicon Area

• IHS Technology is forecasting 3.3% with SSDs, the industrial sector and automotive as the biggest silicon market drivers
• SEMI (+1.4%) predicts small, but positive growth for silicon

Source: IMF, IC Insights, IHS Technology, WSTS, SEMI SMG

IHS expects silicon area demand to grow 3.3% in 2016. Main drivers are SSDs, industrial sector and automotive

Source: IHS Technology, Semiconductor Silicon Demand Forecast Tool (Q1'16 Update)

Wafer demand for key applications 2015, in bn in²

Silicon demand for Automotive is outgrowing the semiconductor market, with the highest growth for 300 mm wafers.

• Silicon area consumption in the automotive sector is outgrowing the market.
• 300 mm demand for automotive is growing strongest. Key drivers are advanced driver assistance systems and infotainment applications.

Source: IHS Q1 2016

Industrial and automotive with higher growth rates in next years compared to computing and mobile

Silicon industry will experience challenges and opportunities in 2016

• Inventory adjustments which occurred in 2nd half of 2015 in the value chain seem to be done
• Usual post-Chinese New Year increase in market activities has not happened yet
• Some economic uncertainties due to recent market rumors on significant slow-down in Apple's demand
• Sequentially slightly higher volumes expected in Q1 2016 vs. Q4 2015 due to moderate demand growth
• Currently demand curve for 2016 expected to follow the usual pattern with sequentially higher demands in Q2 vs Q1
• Ongoing price pressure in contract currency expected for H1 2016 for some products with lower market utilization rates

Siltronic will continue to focus on topics under its control

• Stay ahead of the markets in technology development
• Ongoing strengthening of cost position
• Further improve manufacturing and logistics excellence
• Further strengthening customer service and support

Siltronic Outlook 2016

EBITDA margin	slight improvement
ROCE	in the mid single-digit percentage range
Free Cash Flow	clearly positive, but below the 2015 figure
Sales	slight year-on-year decrease
R&D	unchanged at approx. 7% of sales
Cost Position	potential savings of around EUR 30-35 mn
Hedging Losses	substantially lower at around EUR 10-15 mn
Depreciation	slight reduction
Tax	roughly EUR 10 mn
Financial Result	roughly EUR 10 mn
Earnings per Share	presumably slightly positive
CapEx	around EUR 80 mn

Appendix

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Strong #3 Wafer Supplier

Market Share by Wafer Revenues (Top 5 Suppliers only), USD basis

Sources: Companies' revenue reports until Q3 2015, converted to USD using annual foreign exchange rates;

Shareholder structure

Freefloat by regions¹

Major shareholdings included in freefloat²

Baupost Securities Group	8.7%
MainFirst Sicav	5.1%
Wellington Management Co.	2.8%
Morgan Stanley	1.8%

Siltronic Strategy: Improving returns and stay ahead in technology

Investment Highlights – Siltronic Strengths

Strong track record in efficiency improvement and cost reduction

Strategic supply of high-quality polysilicon at competitive cost

Experienced management team and highly skilled workforce

Contact and Additional Information

Issuer and Contact		Additional Information
Siltronic AG Hanns-Seidel-Platz 4 D-81737 München	ISIN: WKN: Deutsche Börse:	DE000WAF3001 WAF300 WAF
Investor Relations: Petra Mueller Tel. +49 89 8564-3133		Listing:		Frankfurt Stock Exchange Prime Standard
Financial Calendar
Full Year 2015 Results:	March 16, 2016
Q1 2016 Results:	April 28, 2016
Annual Shareholder Meeting: May 12, 2016
Q2 2016 Results:	July 28, 2016
Q3 2016 Results	October 27, 2016

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 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, as well as the words "may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue", "potential, future, or further", and similar expressions identify forward-looking 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 and the prospects for growth anticipated by Siltronic AG's 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 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 undue reliance on forward-looking statements, which speak only as of the date of this presentation.