MUNICH (dpa-AFX) – Weak demand from the semiconductor industry will continue to weigh on wafer manufacturer Siltronic in 2024. Added to this are the costs of ramping up production at the new factory of Singapore, which weigh on the operating profit margin. But in the long term, the MDax group expects a lot from this investment of several billions. In order to reduce debt, which has also increased for this reason, and due to the prevailing gloom, the dividend is however significantly reduced to 1.20 euros per share – compared to 3.00 euros the previous year. The stock price fell sharply on Tuesday.
“Due to weak demand, due to the increase in customer stocks and the resulting persistent delays in delivered quantities”, the 2024 turnover should be at the level of the previous year, had announced the company Monday evening, to everyone’s surprise. It is especially the first six months that will be affected, which is why revenues for this period are only expected to be at the level of the second half of 2023. Over the whole of 2023, profits fell from 16% to 1. 5 billion euros, according to provisional figures presented at the beginning of February.
Nevertheless, the company continues to expect stable average sales prices for its semiconductor wafers. These are round silicon wafers from which customers make memory, logic and other electronic chips.
However, the start-up costs of the Singapore factory will weigh on the profit margin before interest, taxes, depreciation and amortization (Ebitda margin). According to the company, it should be three percentage points lower than the 29% forecast for 2023. The group had already announced charges due to start-up costs at the end of November.
If start-up costs are excluded, however, the operating margin is expected to remain roughly stable in 2024. Siltronic referred to an easing of energy and material costs, still high in 2023, which should however be offset by higher personnel costs and a lower result from foreign exchange risk hedging operations. The operating result (Ebit) is also expected to fall significantly, as depreciation is expected to almost double following the high investments of recent years.
Analyst Constantin Hesse of the investment company Jefferies now expects market expectations to fall sharply; for earnings before interest, taxes, depreciation and amortization alone, these could fall by up to 20 percent. This should weigh on the stock price.
Shortly after the market opened, shares fell to 82.65 euros, their lowest level since December. They then recovered somewhat: in last position on the MDax, they were still down by 6.8 percent to 86.00 euros. However, the upward trend which began last May after an intermediate low of 58.40 euros is faltering. Its lower limit is around 86 euros.
The expert from Jefferies Hesse sees an opportunity in a sharp decline. Indeed, the semiconductor sector is currently at a cyclical trough, given the continued decline in inventories and the still slow recovery of end markets. Additionally, Siltronic management is usually conservative in its outlook, so there was room for upside during the year.
Harry Blaiklock, analyst at Swiss bank UBS, is more cautious. Given the weakness of demand, it is difficult to predict business developments. This is why there are risks for the second half of the year, especially since continued weakness could ultimately also weigh on sales prices.
Despite the difficulties, the management of Siltronic around its leader Michael Heckmeier remains optimistic in the long term. Megatrends such as digitalization and electromobility are expected to provide a boost in the coming years. The objectives presented during a capital market day in November are maintained. Thus, the turnover is expected to increase to more than 2.2 billion euros by 2028. The participation of Wacker Chemie aims for a high Ebitda margin of 30 percent./mis/mne/jha
2024-02-13 15:42:55
#Siltronic #expects #turnover #stagnate #weak #action
