DGAP-News: Infineon Technologies AG
/ Key word(s): Quarterly / Interim Statement/Forecast
- Q3 FY 2020: REVENUE OF €2,174 MILLION; SEGMENT RESULT €220 MILLION; SEGMENT RESULT MARGIN 10.1 PERCENT
- CYPRESS CONSOLIDATED SINCE CLOSING OF ACQUISITION ON 16 APRIL 2020. PRELIMINARY PURCHASE PRICE ALLOCATION GIVES RISE TO GOODWILL OF ABOUT €5.5 BILLION
- OUTLOOK FOR Q4 FY 2020: BASED ON AN ASSUMED EXCHANGE RATE OF US$ 1.15 TO THE EURO, REVENUE OF BETWEEN €2.3 BILLION AND €2.6 BILLION IS EXPECTED. AT THE MIDPOINT OF THE GUIDED REVENUE RANGE, A SEGMENT RESULT MARGIN OF ABOUT 14 PERCENT IS PREDICTED.
- OUTLOOK FOR FY 2020: ASSUMING REVENUE IN Q4 FINISHES AT THE MIDPOINT OF THE GUIDED RANGE, REVENUE FOR THE FULL FISCAL YEAR 2020 WILL BE AROUND €8.5 BILLION. AT THIS LEVEL, THE SEGMENT RESULT MARGIN IS EXPECTED TO COME IN AT ABOUT 13 PERCENT.
"Infineon has so far coped well with the challenging situation caused by the coronavirus pandemic. As a company, we reacted quickly to the new situation and established a framework that has enabled us to stabilize our business. Our diversified business model - which is further strengthened with the integration of Cypress - has proven to be robust, especially in terms of profitability," said Dr. Reinhard Ploss, CEO of Infineon. "The pandemic continues to have a significant impact on our target markets, resulting in weaker demand in many product areas. Thankfully, we are seeing concrete signs of recovery within the automotive sector, which has been particularly hard hit. Infineon is also benefitting from increased digitization through the growing volume of data traffic, the Internet of Things and mobile communication. Our outlook for the final quarter of the fiscal year is cautiously optimistic. That said, our business performance is highly dependent on how the coronavirus pandemic continues to unfold worldwide, on the impact of the economic stimulus packages that have been implemented, and on a variety of geopolitical factors."
1 The calculation for earnings per share and for adjusted earnings per share is based on unrounded figures.
2 The reconciliation of net income to adjusted net income and adjusted earnings per share as well as of cost of goods sold to adjusted cost of goods sold and adjusted gross margin can be found in the quarterly information at www.infineon.com.
With effect from the beginning of the 2020 fiscal year, Infineon began is applying IFRS 16 (Leases) using the modified retrospective approach. In addition, Cypress Semiconductor Corporation has been fully consolidated since 16 April 2020. For theise reasons, comparability with prior-year periods is restricted. Please see the section "Basis of Presentation" in the press release at www.infineon.com.
GROUP PERFORMANCE IN THIRD QUARTER OF 2020 FISCAL YEAR
The gross margin for the third quarter came in at 27.0 percent, compared to 34.5 percent in the previous quarter, whereas the adjusted gross margin improved from 35.6 percent to 35.9 percent. The Segment Result declined to €220 million, compared to €274 million for the preceding three-month period. The Segment Result Margin fell from 13.8 percent to 10.1 percent.
The non-segment result for the three-month period was a net loss of €313 million, compared to a net loss of €48 million in the previous quarter. The significant increase was attributable to amounts recorded in conjunction with the acquisition and first-time consolidation of Cypress mainly related to the purchase price allocation. The non-segment result for the third quarter included €193 million of cost of goods sold, €79 million of selling, general and administrative expenses and €8 million of research and development expenses. In addition, net operating expenses amounting to €33 million were recorded.
In the third quarter, Infineon recorded an operating loss of €93 million, compared to an operating income of €226 million in the preceding quarter.
The financial result for the three-month period deteriorated from negative €27 million to negative €79 million quarter-on-quarter. The noticeable change was attributable partly to expenses connected with the financing of the Cypress acquisition and partly with the first-time consolidation of financial debt previously existing at Cypress. In addition the financial result includes an expense of €15 million arising on interest rate hedges entered into in conjunction with the refinancing of the Cypress acquisition.
The purchase price allocation undertaken in connection with the first-time consolidation of Cypress and the related release of deferred tax liabilities, gave rise to tax income of €44 million in the third quarter of the current fiscal year. In the second quarter the tax expense amounted to €21 million.
Income/loss from continuing operations deteriorated from an income of €178 million in the second quarter to a loss of €128 million in the third quarter. As in the preceding three-month period, income from discontinued operations was zero. The third quarter of the current fiscal year therefore finished with a net loss of €128 million, compared to net income of €178 million one quarter earlier.
For the third quarter of the current fiscal year, Infineon reports negative earnings per share from continuing operations of €0.11 (basic and diluted), compared to positive earnings per share of €0.13 in the previous quarter. Third-quarter adjusted earnings per share4 (diluted) amounted to positive €0.13, unchanged from the previous quarter.
Investments - which Infineon defines as the sum of purchases of property, plant and equipment, purchases of intangible assets and capitalized development costs - totaled €266 million in the third quarter of the current fiscal year, compared with €247 million in the preceding three-month period. Depreciation and amortization went up from €249 million to €381 million quarter-on-quarter. The increase was mainly attributable to the first-time inclusion of depreciation and amortization relating to Cypress, comprising €52 million on newly recognized assets measured at their fair value or on assets remeasured at their fair value in conjunction with the purchase price allocation and €78 million of ongoing depreciation and amortization.
Free cash flow from continuing operations decreased to a negative amount of €7,137 million related to the purchase price payment for Cypress. Excluding cash outflows arising in connection with the Cypress acquisition and adjusted for cash acquired from Cypress, organic free cash flow would have been a positive amount of €439 million. In the preceding quarter, positive free cash flow amounted to €108 million, or €116 million excluding cash outflows arising in connection with the Cypress acquisition. Net cash provided by operating activities from continuing operations in the third quarter totaled €533 million, up from €354 million in the second quarter.
The gross cash position at the end of the third quarter of the 2020 fiscal year amounted to €3,450 million, compared to €4,588 million at 31 March 2020. Thenet cash position decreased from a positive amount of €3,051 million at the end of the previous quarter to a negative amount of €4,296 million at 30 June 2020, reflecting the impact of the Cypress acquisition and the related increase in gross debt to an amount of €7,746 million from €1,537 million in the previous quarter.
CYPRESS ACQUISITION - REFINANCING
For refinancing the purchase price, the Company's share capital was increased by 55 million shares on 26 May 2020, thereby generating net proceeds of about €1.0 billion, which were used to repay part of the acquisition financing raised from banks for the takeover of Cypress. The share placement completed the equity portion of the refinancing of the Cypress acquisition.
Likewise for the purpose of refinancing the purchase price, fixed-interest notes totaling €2.9 billion were placed on 17 June 2020. The issuance comprises four tranches with various maturities and interest rates:
- €750 million with a term of 3 years and an annual coupon of 0.75 percent
- €750 million with a term of 6 years and an annual coupon of 1.125 percent
- €750 million with a term of 9 years and an annual coupon of 1.625 percent
- €650 million with a term of 12 years and an annual coupon of 2.00 percent
The proceeds from the share capital increase and from the issuance of notes were utilized to already fully repay the original bridge financing taken out to pay the purchase price for Cypress. Of the initial acquisition financing, three term loans remain in place totaling USD 3.3 billion.
OUTLOOK FOR FOURTH QUARTER OF 2020 FISCAL YEAR
At the midpoint of the guided revenue range, the Segment Result Margin is forecast to come in at about 14 percent.
OUTLOOK FOR THE 2020 FISCAL YEAR
Investments in property, plant and equipment, intangible assets and capitalized development costs in the region of €1.2 billion are planned for the 2020 fiscal year. Depreciation and amortization will amount to approximately €1.3 billion, including the effects of the preliminary purchase price allocation for Cypress.
In the current fiscal year to date, free cash flow has already been significantly impacted by the acquisition of Cypress as well as the economic consequences of the coronavirus pandemic and is expected to be significantly negative for the fiscal year as a whole. However, excluding cash used in connection with the acquisition of Cypress, organic free cash flow is expected to reach a positive value of more than €600 million.
3 With effect from 1 August 2020, the "Digital Security Solutions" segment changed its name to "Connected Secure Systems". The name change reflects the integration of Cypress' "IoT, Compute & Wireless" line of business and the related expansion of the segment's product portfolio and scope of business.
4 Adjusted net income and adjusted earnings per share (diluted) should not be seen as a replacement or superior performance indicator, but rather as additional information to the net income and earnings per share (diluted) determined in accordance with IFRS.
Infineon's segments' performance in the third quarter of the 2020 fiscal year can be found in the quarterly information at www.infineon.com.
All figures in this quarterly information are preliminary and unaudited.
ANALYST TELEPHONE CONFERENCE AND TELEPHONE PRESS CONFERENCE
The Q3 Investor Presentation is available (in English only) at:
INFINEON FINANCIAL CALENDAR (* preliminary)
- 19 Aug 2020 Lampe Bank German Conference, Baden-Baden (virtual)
- 1 - 2 Sep 2020 Jefferies Annual Semiconductor, IT Hardware & Communications Infrastructure Summit, Chicago (virtual)
- 2 Sep 2020 UBS Japan in Focus Conference, Japan (virtual)
- 3 Sep 2020 dbAccess European TMT Conference, London (virtual)
- 8 - 9 Sep 2020 Citi 2020 Global Technology Virtual Conference, New York (virtual)
- 14 Sep 2020 DB Global Technology Conference, San Francisco (virtual)
- 21 Sep 2020 Berenberg Goldman Sachs German Corporate Conference, Unterschleißheim (nearby Munich, virtual)
- 22 Sep 2020 Baader Investment Conference, Munich
- 5 - 6 Oct 2020 ATV Roadshow and Call, London (virtual)
- 9 Nov 2020* Earnings Release for the Fourth Quarter and the 2020
- 18 Nov 2020 Morgan Stanley TMT Conference, Barcelona (virtual)
- 23 Nov 2020 DZ Bank 11th Equity Conference, Frankfurt
Infineon is listed on the Frankfurt Stock Exchange (ticker symbol: IFX) and in the USA on the over-the-counter market OTCQX International Premier (ticker symbol: IFNNY). Further information is available at www.infineon.com
D I S C L A I M E R
These statements are based on assumptions and projections resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks. Actual business development may therefore differ materially from what has been expected.
Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.
Due to rounding, numbers presented throughout this press release and other reports may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Bernd Hops, Media Relations, phone: +49 89 234 23888
04.08.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
|Company:||Infineon Technologies AG|
|Am Campeon 1-15|
|Phone:||+49 (0)89 234-26655|
|Fax:||+49 (0)89 234-955 2987|
|Listed:||Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange|
|EQS News ID:||1108451|
|End of News||DGAP News Service|