Infineon Concludes A Significantly Better-Than-Expected Quarter & Again Raises Its Outlook For The Current Fiscal Year

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Infineon Technologies AG is reporting results for the second quarter of its 2023 fiscal year (period ended 31 March 2023). “Infineon is performing very well. We are seeing strong growth in our businesses relating to electromobility, renewable energy generation and energy infrastructure. These are precisely the key applications we are serving in terms of the decarbonization,” says Jochen Hanebeck, CEO of Infineon. “Although an improvement in consumer goods markets such as smartphones, PCs and home appliances is not yet visible, we are nevertheless very confident overall about Infineon’s future business performance. We are therefore revising our expectations for revenue and profitability in the current fiscal year upwards, as already announced at the end of March.”

Group performance in the second quarter of the 2023 fiscal year

In the second quarter of the 2023 fiscal year, Group revenue was €4,119 million. Compared with revenue in the prior quarter of €3,951 million, this was an increase of 4 percent. Revenue in the Automotive (ATV) and Green Industrial Power (GIP)1 segments improved significantly. The Connected Secure Systems (CSS) segment saw a slight increase in revenue, whereas the Power & Sensor Systems (PSS) segment experienced a significant decline as expected. The weaker US dollar compared with the prior quarter had a negative impact on revenue in all segments.

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The gross margin in the second quarter of the current fiscal year was 46.6 percent, compared with 47.2 percent in the prior quarter. The adjusted gross margin was 48.6 percent, compared with 49.2 percent in the prior quarter.

The Segment Result increased in the second quarter of the 2023 fiscal year to €1,180 million, from €1,107 million in the prior quarter. The Segment Result Margin was 28.6 percent, compared with 28.0 percent in the first quarter of the current fiscal year.

The second-quarter non-segment result was a net loss of €107 million, compared with a net loss of €141 million in the prior quarter. The non-segment result for the second quarter of 2023 included €81 million relating to cost of goods sold, €54 million relating to selling, general and administrative expenses and €8 million relating to research and development expenses. In the second quarter, the non- segment result included a net figure for other operating income of €36 million. This includes a gain from the sale of the HiRel DC-DC converter business to Micross Components, Inc. in February 2023.

Operating profit improved in the second quarter of the 2023 fiscal year to €1,073 million, up from €966 million in the previous three-month period.

The financial result in the second quarter of the current fiscal year was a net loss of €17 million, compared with a net loss of €24 million in the first quarter of the 2023 fiscal year.

The tax expense in the second quarter of the 2023 fiscal year increased to €237 million, compared with €216 million in the prior quarter.

Profit from continuing operations in the second quarter of the 2023 fiscal year rose to €827 million from €729 million in the preceding quarter. As in the first quarter of the current fiscal year, the result from discontinued operations was a loss of €1 million. The profit for the period improved in the second quarter of the 2023 fiscal year to €826 million, up from €728 million in the prior quarter.

Earnings per share from continuing operations in the second quarter of the 2023 fiscal year increased to €0.63, from €0.55 in the preceding quarter (basic and diluted in each case). Adjusted earnings per share2 (diluted) rose in the second quarter of the current fiscal year to €0.69, from €0.64 in the first quarter of the 2023 fiscal year.

Investments – which Infineon defines as the sum of investments in property, plant and equipment, investments in other intangible assets and capitalized development costs – totaled €565 million in the second quarter of the current fiscal year, compared with €605 million in the prior quarter. Depreciation and amortization in the second quarter of the 2023 fiscal year amounted to €434 million, compared with €429 million in the first quarter of the 2023 fiscal year.

Free Cash Flow in the second quarter of the current fiscal year increased to €193 million, compared with €25 million in the preceding quarter. Cash flow from operating activities from continuing operations improved slightly to €647 million, compared with €631 million in the first quarter of the 2023 fiscal year.

The gross cash position at the end of the second quarter of the 2023 fiscal year decreased to €3,446 million, compared with €3,708 million at 31 December 2022. This was mainly due to the dividend payout in February of €417 million, which more than offset the positive Free Cash Flow. Financial debt decreased slightly from €5,467 million at the end of the first quarter of the current fiscal year to €5,428 million at 31 March 2023 as a result of exchange rate movements. The net cash position was net financial debt of €1,982 million, compared with net financial debt at the end of the prior quarter of €1,759 million.

Outlook for the third quarter of the 2023 fiscal year

Based on an assumed exchange rate of US$1.10 to the euro, Infineon expects to generate revenue of around €4 billion in the third quarter of the 2023 fiscal year. Revenue growth in the ATV segment is expected to increase slightly compared with the previous quarter. Revenue in the GIP segment should stay at about the level reached in the preceding quarter. In the PSS and CSS segment a revenue decline is forecast compared with the second quarter of the current fiscal year. Based on the revenue forecast for the group, the Segment Result Margin should be around 26 percent.

Outlook for the 2023 fiscal year

Notwithstanding the less favorable exchange rate now assumed of US$1.10 to the euro (previously US$1.05), the revenue forecast for the 2023 fiscal year has been revised up from €15.5 billion (plus or minus €500 million) to €16.2 billion (plus or minus €300 million). This is equivalent to a growth rate of 14 percent compared with the 2022 fiscal year. Revenue growth for both the ATV and GIP segments is expected to be above the average rate for the Group. In the CSS segment, revenue is likely to grow at around the average rate for the Group. Revenue in the PSS segment is expected to be lower than in the prior year. At the mid-point of the guided revenue range, the adjusted gross margin is now expected to be around 47 percent (previously around 45 percent) and the Segment Result Margin around 27 percent (previously around 25 percent).

Investments – which Infineon defines as the sum of investments in property, plant and equipment, investments in other intangible assets and capitalized development costs – are planned at around €3.0 billion for the 2023 fiscal year. The focus here will be on the construction of the third manufacturing module on the Kulim site (Malaysia) designed to produce compound semiconductors, the planned start of construction work on the fourth manufacturing module in Dresden (Germany) designed to produce analog/mixed-signal components and power semiconductors, and the continuing expansion of frontend manufacturing capacity especially in Dresden (Germany) and Villach (Austria).

Depreciation and amortization are now anticipated to be about €1.8 billion in the 2023 fiscal year (previously about €1.9 billion), of which approximately €450 million is attributable to purchase price allocations arising mainly from the acquisition of Cypress. Taking the planned investment in frontend buildings into account, Free Cash Flow is now forecast to be around €1.1 billion (previously €0.8 billion). Adjusted Free Cash Flow is now expected to reach around €1.8 billion (previously €1.5 billion), or about 11 percent of the forecast revenue for the year of €16.2 billion.

The outlook for Infineon for the 2023 fiscal year is presented without taking into account the planned acquisition of GaN Systems (in particular, not taking into account the purchase price payment), as the transaction is still subject to customary closing conditions, including regulatory approvals.

Segment earnings for the second quarter of the 2023 fiscal year

ATV segment revenue increased in the second quarter of the 2023 fiscal year to €2,080 million, compared with €1,872 million in the first quarter of the current fiscal year. The revenue growth of 11 percent was mainly the result of continuing very high demand in the areas ADAS and electric vehicles. The Segment Result improved in the second quarter of the current fiscal year to €647 million, from €532 million in the prior quarter. The Segment Result Margin rose again, now reaching 31.1 percent compared with 28.4 percent in the preceding quarter. GIP segment revenue in the second quarter of the 2023 fiscal year rose to €558 million, from €500 million in the prior quarter. The 12 percent increase in revenue was the result of increasing demand in all application areas. Particularly dynamic revenue growth was to be seen in the areas of renewable energy, energy infrastructure, automation and industrial drives, as well as transport. The Segment Result improved in the second quarter of the 2023 fiscal year to €181 million, from €144 million in the preceding quarter. The Segment Result Margin increased significantly to 32.4 percent, from 28.8 percent in the prior quarter.

PSS segment revenue in the second quarter of the 2023 fiscal year was €925 million, compared with €1,043 million in the prior quarter. The reason for the 11 percent decline was a reduction in the revenue derived from a variety of applications, especially those in the consumer area. On the other hand, the demand trend for charging stations for electric vehicles and onboard chargers continued to be positive. The Segment Result in the second quarter of the current fiscal year was €197 million, compared with €301 million in the preceding quarter. The Segment Result Margin was 21.3 percent, compared with 28.9 percent in the prior quarter.

CSS segment revenue increased in the second quarter of the 2023 fiscal year to €550 million, up from €531 million in the first quarter of the fiscal year. The main areas contributing to the 4 percent revenue growth were payment cards, microcontrollers, government identification and embedded SIMs. The Segment Result increased in the second quarter of the current fiscal year to €155 million, from €125 million in the prior quarter. The Segment Result Margin improved in the past quarter to 28.2 percent, from 23.5 percent in the first quarter.


 

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