AIXTRON 3Q14 Revenue Performance Driven Down by Lower LED Industry Demands

Key points:

  • Affected by decreasing LED industry demands and higher cost of sales, Aixtron 3Q14 gross profit of EUR 6.5 million (US $8.28 million) was lower than last year.

  • Company reported increasing interest in non-LED products including OLED.

  • Aixtron projected it will stay in the red till 2015, but expects financial situation to gradually improve.

 

AIXTRON, a leading provider of deposition equipment to the semiconductor industry, today announced financial results for the third quarter 2014 and first nine months of 2014.

Q3/2014 Revenues amounting to EUR 45.6m were broadly stable both against the previous year and sequentially (Q3/2013: EUR 46.2m; Q2/2014: EUR 46.2m).

Q3/2014 Gross Profit amounted to EUR 6.5m and was down year-on-year and sequentially, due to lower revenues and below mentioned higher cost of sales (Q3/2013: EUR 10.6m; Q2/2014: EUR 12.6m).

Q3/2014 EBIT at EUR -17.9m was down compared to both Q3/2013 and Q2/2014, reflecting the business development in the quarter (Q3/2013: EUR 2.9m incl. unusual items; Q2/2014: EUR -10.6m).

At the end of September, AIXTRON received its largest ever multiple tool order from Chinese manufacturer San’an Optoelectronics Co., Ltd. for 50 next generation Showerhead MOCVD tools. The order is being processed and the equipment will be delivered starting in Q4/2014 and will have an impact on the Company's order intake, revenue and earnings development in future quarters. Due to the application of internal criteria before reporting an order as order intake, AIXTRON's Q3/2014 Order Intake was not yet affected and at EUR 37.6m was 5% up year-on-year and stable sequentially (Q3/2013: EUR 35.7m; Q2/2014: EUR 38.2m).

AIXTRON continues to work on increasing the Company’s operating efficiencies as part of the 5-Point-Program, focusing on Supply Chain, Service, R&D and Production processes. A specific focus to improve gross margin is on the recently expanded and accelerated Design-to-Cost programs in order to reduce the cost of materials and components on a continuous basis.

 

 Financial Highlights

 

2014

2013

+/-

2014

2014

+/-

(in EUR million)

9M

9M

 

Q3

Q2

 

Revenues

135.8

131.8

3%

45.6

46.2

-1%

Gross profit

29.9

-24.8

221%

6.5

12.6

-48%

Gross margin

22%

-19%

41pp

14%

27%

-13pp

Operating result (EBIT)

-39.4

-83.1

53%

-17.9

-10.6

-69%

EBIT-margin

-29%

-63%

34pp

-39%

-23%

-16pp

Net result

-43.4

-86.2

50%

-19.9

-11.6

-72%

Net result margin

-32%

-65%

33pp

-44%

-25%

-19pp

Net result per share - basic (EUR)

-0.39

-0.85

54%

-0.18

-0.10

-80%

Net result per share - diluted (EUR)

-0.39

-0.85

54%

-0.18

-0.10

-80%

Equipment order intake

113.5

96.1

18%

37.6

38.2

-2%

Equipment order backlog (end of period)

70.7

72.8

-3%

70.7

66.4

6%

 

Business Development 

Utilization rates of most tier one LED chip manufacturers have recently come down. However, the imminent availability of more efficient, new MOCVD tool generations by the major equipment manufacturers could have a positive impact on the low levels of equipment demand in the market. As previously described, AIXTRON received its largest ever multiple tool order from China which will have a positive impact on order intake and revenues in future quarters.

Revenues amounting to EUR 45.6m in Q3/2014 were broadly stable both against the previous year and sequentially (Q3/2013: EUR 46.2m; Q2/2014: EUR 46.2m).

Due to a less favorable sales mix, increased customer specific support activities and a write-down of legacy components triggered by the launch of the next generation Showerhead MOCVD tool, the Company recorded higher cost of sales in Q3/2014 year-on-year and sequentially (Q3/2014: EUR 39.1m; Q3/2013: EUR 35.7m; Q2/2014: EUR 33.6m).

Consequently, this resulted in a lower Q3/2014 gross profit of EUR 6.5m year-on-year. Sequentially, gross profit was down due to lower revenues and above mentioned higher cost of sales (Q3/2013: EUR 10.6m; Q2/2014: EUR 12.6m).

The operating expenses at EUR 24.4m increased both year-on-year and sequentially, reflecting an increase in research and development expenses which was mainly due to pre-launch development costs in the area of next generation MOCVD tools as well as progress we have made in the OLED area. (Q3/2013: EUR 22.7m excluding an accrued insurance compensation; Q2/2014: EUR 23.2m).

As a result of the above mentioned development the Q3/2014 EBIT at EUR -17.9m was down compared to both Q3/2013 and Q2/2014, reflecting the business environment in the quarter (Q3/2013: EUR 2.9m; Q2/2014: EUR -10.6m).

Mainly due to a country specific tax expenses, the net result for Q3/2014 amounted to EUR -19.9m (Q3/2013: 1.6m; Q2/2014: EUR -11.6m).

AIXTRON‘s equipment order intake in the third quarter 2014 has not yet been affected by the aforementioned large MOCVD order and so at EUR 37.6m was up 5% year-on-year and stable sequentially (Q3/2013: EUR 35.7m; Q2/2014: EUR 38.2m).

The total equipment order backlog of EUR 70.7m as at September 30, 2014 was 3% down from the EUR 72.8m at the same point in time in 2013 and 21% higher than the 2014 opening backlog of EUR 58.1m.

The free cash flow in Q3/2014 was EUR -21.7m (Q3/2013: EUR -6.5m; Q2/2014: EUR -17.5m). This development was in line with Management expectations and was mainly due to the losses and to the scheduled increase of inventories for the next generation MOCVD tool in advance of respective customer deposits.

Cash and cash equivalents (including bank deposits with a maturity of more than three months) as of September 30, 2014 amounted to EUR 260.5m (December 31, 2013: EUR 306.3m).

Management Review

Martin Goetzeler, President & Chief Executive Officer of AIXTRON SE, comments on the execution of the largest order the Company has ever received and the development in the third quarter: "We have received this important order for our newly developed MOCVD tool from one of the world’s leading LED manufacturers and the ramp-up of our production is in full swing. In the OLED area, we have recently received the crucial hardware for our Gen8 demonstration tool for the cost efficient production of large area OLEDs. Additionally, we are experiencing a pick-up in customer interest for our non-LED technologies and applications. These developments are positive examples of the progress we are making in the markets we choose to address. On the other hand, we need to acknowledge that our customers are facing very competitive industry dynamics which could lead to further consolidation and also to continued requirements for lower total cost of ownership of MOCVD equipment. Therefore it is extremely important for us to execute our 5-Point-Program to further reduce COGS and OPEX in order to secure healthy margins and to support our dedication to return to profitability in the foreseeable future”.

Guidance

Management reiterates its original guidance for fiscal year 2014 made at the end of February, for revenues to be in line with those of last year. Concurrently, the Company is not expected to be profitable on an EBIT basis over the course of this year. Nevertheless, Management continues to expect a year-on-year improvement in earnings due to progress made in cost savings and restructuring.

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