Infineon “On Course” with Q3 Results at Upper End of Forecast Range
Infineon Technologies AG today reported results for the third quarter of its 2018 fiscal year (period ended 30 June 2018), including: Revenue €1,941 million; Segment Result €356 million; Segment Result Margin 18.3 percent; earnings per share €0.24 (basic and diluted); adjusted earnings per share €0.24 (diluted); gross margin 38.2 percent; adjusted gross margin 39.2 percent
“Infineon continues to be on course for success. The dollar has regained some strength and is providing us with additional tailwind," stated Dr. Reinhard Ploss, CEO of Infineon. “The automotive business does well. Electro-mobility in particular is currently driving growth.
"Demand is also strong for drives used in industrial machines as well as for our solutions for home and DIY appliances, which are increasingly battery-powered. We expect demand for our products as well as for increasingly high-value integrated solutions to keep growing.
"As a reliable partner to our customers, we are preparing for this by investing in particular in a new 300-millimeter thin-wafer manufacturing facility for power semiconductors at the Villach site," Dr. Ploss concluded.
Outlook for Q4 FY 2018: Based on an assumed exchange rate of US$ 1.20 to the euro, quarter-on-quarter revenue growth of 3 percent (plus or minus 2 percentage points) and Segment Result Margin of 19 percent at mid-point of revenue guidance. For the 2018 fiscal year as a whole, this would translate arithmetically into year-on-year revenue growth of 6.4 to 7.4 percent and a Segment Result Margin of 17.5 percent at the mid-point of revenue guidance for FY 2018.
Detailed performance in third quarter of 2018 fiscal year
In the third quarter of the 2018 fiscal year, revenue grew by 6 percent from €1,836 million to €1,941 million quarter-on-quarter. Rising demand and a stronger US dollar caused revenue to grow in all four segments, i.e. Automotive (ATV), Industrial Power Control (IPC), Power Management & Multimarket (PMM) and Chip Card & Security (CCS).
The gross margin in the third quarter improved to 38.2 percent, compared to 37.1 percent in the second quarter. These figures include acquisition-related depreciation and amortization and other expenses totaling €18 million, mainly relating to the acquisition of International Rectifier. The adjusted gross margin amounted to 39.2 percent, up from the 38.0 percent recorded for the previous quarter.
The Segment Result rose from €314 million to €356 million quarter-on-quarter. The third-quarter Segment Result Margin climbed to 18.3 percent from 17.1 percent in the second quarter.
The non-segment result for the three-month period under report was a net loss of €37 million, compared with the previous quarter's net profit of €218 million. The net profit reported for the second quarter included a pre-tax gain of €268 million arising on the sale of the major part of Infineon's RF power business to Cree Inc., USA, which, along with related impairment losses of €11 million, were included in other operating income. The third-quarter non-segment result comprises €18 million of cost of goods sold, €17 million of selling, general and administrative expenses and €2 million of research and development expenses.
The non-segment result includes €32 million of depreciation and amortization arising in conjunction with the purchase price allocation as well as other expenses for post-merger integration measures relating to International Rectifier.
Third-quarter operating income amounted to €319 million, compared to the preceding quarter's €532 million, which had included the above-mentioned gain on the sale of the major part of the RF power business. Income from continuing operations for the third quarter decreased accordingly to €254 million, down from the €457 million reported for the second quarter. Income from discontinued operations improved quarter-on-quarter from a break-even amount of €0 million to €17 million in the third quarter. Net income for the three-month period totaled €271 million, compared with €457 million in the previous quarter. The third-quarter income tax expense amounted to €49 million. The corresponding figure for the second quarter was €62 million, influenced in part by the gain arising on the sale of the major part of the RF power business.
Earnings per share (basic and diluted) for the third quarter of the 2018 fiscal year amounted to €0.24, down from the previous quarter's €0.40, which had been impacted by the above-mentioned exceptional item. Adjusted earnings per share (diluted) amounted to €0.24, compared to €0.26 in the second quarter. For the purpose of calculating adjusted earnings per share (diluted), a number of items were eliminated, most notably acquisition-related depreciation/amortization and other expenses (net of tax) as well as reversals of valuation allowances on deferred tax assets.
Investments - which Infineon defines as the sum of purchases of property, plant and equipment, purchases of intangible assets and capitalized development costs - amounted to €280 million in the third quarter of the 2018 fiscal year, compared with €263 million in the preceding three-month period. Depreciation and amortization increased from €211 million to €219 million quarter-on-quarter.
Free cash flow from continuing operations amounted to €192 million. In the second quarter of the 2018 fiscal year, free cash flow totaled €334 million, including in particular the impact of the sale of the major part of the RF power business. Net cash provided by operating activities from continuing operations increased from €310 million to €462 million quarter-on-quarter.
The gross cash position rose from €2,438 million to 2,621 million over the course of the third quarter. The net cash position improved from €649 million to €792 million during the same period.
