Siltronic AG — Investor Presentation 2017

Mar 15, 2017

Siltronic – a leading producer of silicon wafers

Roadshow Presentation

March/April, 2017

© Siltronic AG 2017

Increasing demand for electronic devices and new applications drive semiconductor growth, which in turn fuels silicon demand.

Electronics value chain 2016

Source: Electronics (IC Insights), Semiconductors (WSTS, only silicon-based), Silicon wafers (SEMI SMG), electronic applications (WACKER estimate)

Siltronic is a strong wafer supplier with leading-edge technology

Top 5 wafer producers serve more than 90% of market across all diameters

Sources: Companies' revenue reports 2016, converted to USD mn

International manufacturing network supports market leadership and business focus

Customer base well diversified across all major semiconductor silicon wafer consumers

Siltronic is a supplier to all top 20 silicon wafer consumers

Note: Top 20 consumers defined according to their fab capacities in the Fab Data Base from Gartner Source: Company Information; Gartner Fab Data Base; Companies' web pages

Continuous improvement of key ingot and wafer properties to meet customers' requirements

Silicon area demand continues to grow

Silicon wafer demand, in bn in²

Source: SEMI (Silicon Area until 2016), IHS Markit Technology (Semiconductor Silicon Demand Forecast Tool, Q1'17 Update, Estimate 2017)

IHS Markit expects Silicon demand to grow +4.9% in 2017, driven by SSDs, industrial applications, and network infrastructure.

Source: IHS Markit Technology (Semiconductor Silicon Demand Forecast Tool, Q1'17 Update)

300mm demand is expected above industry capacity, after almost a decade of over-supply

300mm effective capacity vs. demand, kpcs per month

Comments

• Extension not considered at current price levels
• ~30% to 35% overall empty shell capacity estimated to be available
• Would allow for costefficient brownfield extension according to demand growth without need of creating overcapacity
• Takes around 12-18 months to bring brownfield capacity online

Sources: SEMI, IHS, Siltronic

Siltronic is Focused on Growing 300 mm and Attractive 200 mm Business

Development of Total Wafer Demand per Diameter, in mn 300 mm equivalents per month

Source: SEMI up to Jan 2017, Siltronic estimates

Siltronic Outlook 2017 (as per March 14, 2017)

EBITDA margin	at least 20%
ROCE	substantially higher than in 2016, approximately at WACC
Free Cash Flow	clearly positive; by far above 2016
Sales	at least EUR 1bn
R&D	unchanged at approx. 7% of sales
Cost Position	potential savings of around EUR 20mn to EUR 25mn
Hedging Expenses	substantially lower around EUR 10mn (at EUR/USD = 1.05; EUR/JPY = 120)
Depreciation	on the level of 2016
Tax	between 20% and 25%
Financial Result	roughly EUR 10mn interest expense
Earnings per Share	significantly higher than in 2016
CapEx	around EUR 100mn, partly financed by USD 20mn customer prepayments

Based on technology leadership Siltronic is well positioned to improve returns

Appendix

Financials improved strongly over the last years

Adjusted1 financial figures (EUR mn)	2012	2013	2014	2015	2016
Sales	1030.0	875.5	853.4	931.3	933.4
EBIT	(75.5)	(87.3)	(31.6)	2.7	27.0
EBIT margin in %	(7.3)	(10.0)	(3.7)	0.3	2.9
EBITDA	122.5	112.6	117.7	124.0	146.0
EBITDA margin in %	11.9	12.9	13.8	13.3	15.6
CapEx	144.3	39.7	40.7	75.0	88.8
Free cash flow	(134.4)	64.7	86.3	37.4	19.0

¹figures 2012-2014 adjusted for consolidation effects resulting from acquisition of SSW and restructuring

Financial Year 2016: Highlights

Sales	Sales of EUR 933.4mn (2015: EUR 931.3mn)
EBITDA	EUR 146.0mn (2015: EUR 124.0mn), Without negative FX effects* EBITDA would have been EUR 166.9mn
Margin	EBITDA margin 15.6% (2015: 13.3%) Without negative FX effects* EBITDA margin would have been 17.9%
EBIT	positive at EUR 27.0mn (2015: EUR 2.7mn)
Cost Savings	around EUR 30mn
Investments**	EUR 88.8mn (2015: EUR 75.0mn), mainly in enhanced capabilities
Free Cash Flow	EUR 19.0mn (2015: EUR 37.4mn), despite EUR 11.1mn one-time payment to pension fund and EUR 20.5mn repayment of customer prepayments
Net Cash	EUR 175.0mn (2015: EUR 155.9mn)

*other operating income and expenses influenced by FX effects, mainly due to hedging . In 2016, FX effects added up to expenses of EUR 20.9mn. ** without investment in financial assets

Q4 sales development driven by positive mix, increased spot prices and tailwind from JPY

Positive development of EBITDA and EBITDA margin due to cost reductions and decreasing hedging expenses

EBITDA margin and EBITDA in EUR mn

Comments

Positive

• Higher ASP in Q4 q-o-q due to mix and increased spot prices
• Cost reduction on track
• Hedging losses* for FY 2016 decreased to EUR 20.9mn y-o-y
• Positive effects of strong JPY on sales and gross profit outweigh negative effects on other operating income and expense

*Other operating income and expenses influenced by FX effects, mainly due to hedging

Positive development of net result

Result and income tax, in EUR mn

Comments

• Net profit of EUR 8.7mn in 2016
• Successful continuation of cost reduction program contributed to positive development
• EUR 7.2mn effective taxes
• Potential future tax advantages based on tax losses carried forward not capitalized (accounting policies)
• Expect tax rate to come down to 20% to 25%

Equity ratio of 40.2% Net financial assets of EUR 175mn

Balance sheet, in EUR mn

Assets	Dec 31, 2016	Dec 31, 2015	Comments Dec 31, 2016	Equity and liabilities	Dec 31, 2016	Dec 31, 2015	Comments Dec 31, 2016
Non-current	554.1	579.1		Equity	425.3	497.3
PP&E	519.8	542.9		Siltronic	431.9	500.5
Other fixed	34.3	36.2	25 intangibles (related to SSW)	Other shareholders	-6.6	-3.2	Samsung's 22% in SSW
Current	502.7	461.7		Liabilities	631.5	543.5
Inventories	140.9	142.7		Pension provision	395.1	299.4	Germany and US
Trade receivables	118.2	100.4		Other provisions	51.1	41.7	40 personnel related (e.g. early retirement)
Other current	28.2	24.1	3 hedging	Financial debt	40.4	38.6	Samsung
				Trade liabilities	81.6	72.1
Cash and fixed term deposits	215.4	194.5		Other	63.3	91.7	26 prepayments 21 employee related 10 hedging
Total	1,056.8	1,040.8		Total	1,056.8	1,040.8

Pension provision increased y-o-y due to lower interest rates; however down q-o-q

Comments

• Changes in interest rates influence evaluation of pension provision
• Change in interest rates directly reflected in equity (OCI)
• One-time payment into pension fund of EUR 11.1mn in Q4 2016 had an impact on cash flow, not on financial result

CapEx: spending mostly for capability and cost reductions

Adjusted¹ CapEx and D&A, in EUR mn CapEx 2015 and 2016

• New crystal pulling hall in Freiberg
• Exhange of old crystal pullers vs. state-of-the-art equipment
• Automation projects in Germany

2017 focus on

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

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.

Payments for CapEx above average in 2016

Cash flow, in EUR mn

	2015	2016
Cash flow from operating activities	96.1	115.6
thereof repayment of prepayments	23.3	20.5
thereof one-time payment to pension fund	0	11.1
Proceeds/payments for CapEx	-58.7	-96.6
Free cash flow	37.4	19.0

Comments

• CapEx for investments in state-of-the-art crystal pullers and further automation of production sites
• Free cash flow still burdened by repayment of prepayments. These will be settled by mid-2018
• In 2016 one-time payment to pension fund of EUR 11.1mn

Successful cost reduction programs continue

Cost savings, in EUR mn¹

Additional savings levers:

• Investing in automation in Germany
• Investing in new pullers to improve yields and capabilities
• Poly cost optimization ongoing
• Further productivity increases through various initiatives

¹ Based on 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).

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 email: petra.mueller@siltronic.com Tel. +49 89 8564-3133		Listing:	Frankfurt Stock Exchange Prime Standard
Financial Calendar
Q1 2017 Results	April 27, 2017
Annual General Meeting	May 9, 2017
Q2 2017 Results	July 28, 2017
Q3 2017 Results	October 26, 2017

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.