Elettronica
Okmetic Oyj Interim report 1 January - 30 September 2015: Good profitability and cash flow in slowing market
Unless otherwise stated, figures in parenthesis refer to the corresponding period of the previous year.
Demand for semiconductors in 2015 is anticipated to remain flat or fall slightly from the previous year's level. The final quarter is expected to be weaker than the rest of the year. The decline in the value of the silicon wafer market is believed to have stopped. When measured in surface area, the market is at a record high.
Demand for Okmetic's sensor wafers and other special wafers included in the sensor wafer category is expected to maintain its sustained growth in 2015. These wafers have more stable demand and price level than semiconductor wafers, which are more sensitive to economic fluctuations and also come under greater price pressure. Demand was at its highest in the beginning of the year, and in line with the normal seasonal fluctuation, the last quarter of the year is expected to be weaker than the rest of the year.
The company retains its existing guidance, according to which net sales and operating profit in 2015 are estimated to clearly exceed the level of 2014.
" Demand for silicon wafers slowed down in the third quarter. The value of the wafer business in comparable currencies remained close to the level of 2014. Okmetic's sensor wafer demand continued strong concerning both wafers used for sensor applications and other high value-added silicon wafers. Growth in the value of sensor wafer deliveries slowed in the third quarter, but was still at a good 15.8 percent level against the comparison period. In terms of net sales, the third quarter fell short of the previous two quarters. This is not in keeping with normal seasonal fluctuation and points to slowing growth in Okmetic's customer industries in the second half of the year.
The latest forecasts for the semiconductor market as a whole suggest that growth will level off in 2015 for the first time since 2012. At its worst, the demand for semiconductors is estimated to decline by approximately one percent, driven in particular by slowing sales in the PC and smart phone markets. For automotive and other industrial electronics applications, changes in demand are expected to be more moderate. The rest of the year is going to be a time of softer demand also for Okmetic, although the strongest fluctuations are taking place outside the company's target markets.
T he value of deliveries saw strong growth both in the third quarter and in January-September in North America, which has regained its position as the biggest market area for Okmetic. The value of deliveries in Europe fell year-on-year, whereas Asia saw healthy growth in deliveries. Demand has been particularly brisk in North America on the back of new and bigger customer accounts, but the market area has also benefited from the strengthening of the US dollar over the course of the year.
In the third quarter, Okmetic's operating profit (17.0% of net sales) was at a very good level thanks to a favourable product mix and slightly lower cost level than in the previous quarters of 2015. As a result of the strong operating profit, net cash flow from operating activities (4.8 million euro) for the quarter exceeded that for the entire first half of the year.
Okmetic revised its long-term financial targets and customer segments in connection with the company's Capital Markets Day on 2 October. The new customer segments are Sensor wafers and Discrete&Analog wafers (D&A wafers). The Sensor wafer segment includes silicon wafers used for MEMS and other sensor applications. The D&A wafer segment consists of high resistivity wafers and high voltage SOI wafers currently included in Sensor wafer category as well as of other semiconductor wafers. The changes come into force from the beginning of 2016. The deliveries of high resistivity wafers used in RF applications have surged during this year, with continued growth expected in the next few years . The new revised customer segments better reflect the company's business dynamics and the kind of segmentation its customers use."
Customer industries sensor and semiconductor industries
Sensor industry
In 2015, the sales value in the sensor industry is estimated to grow by 6-11 percent, and an annual growth rate of 7-17 percent is expected for the next few years. In terms of volume, sensor deliveries are likely to clearly rise to a record level in 2015. The sensor wafer sales have been spurred by the proliferation of mobile devices in particular. (IC Insights, IHS, Semico, Yole)
Certain silicon-based microelectromechanical (MEMS) products within the sensor segment have higher sales growth than the others. As a result of the increasing amount of sensors in mobile devices, the demand for e.g. pressure sensors and microphones has surged. Silicon-On-Insulator (SOI) technology is increasingly used in the manufacture of these products, among others. Okmetic is a pioneering supplier of SOI wafers for the sensor industry.
Semiconductor industry
Sales in the semiconductor industry saw a decline in the third quarter of 2015. Semiconductor industry's sales for the first eight months of 2015 were, however, nearly four percent higher than in the corresponding period last year (SIA). The last quarter of the year is expected to be weaker than the rest of the year, and growth estimates for 2015 have been revised downwards. Growth of -1 to +2 percent in terms of value is forecast for 2015 (Gartner, IC Insights, VLSI, WSTS). Sales are estimated to be around 338 billion US dollars (Gartner) and volume growth approximately six percent (IC Insights). The market is slowing down as a result of seasonal fluctuations, exchange rate effects, stagnant smart phone and tablet markets as well as developments in world economy, and China in particular, that are affecting the automotive industry and consumption in general.
Silicon wafer market
According to the estimate published by SMG, the group of silicon wafer suppliers in SEMI (a global umbrella organisation for semiconductor materials and equipment industry), the surface area of silicon wafer shipments grew by eight percent in the first half of the year compared the corresponding period in 2014 were at a record-high level. According to the company's own estimate, the silicon wafer market reflects the seasonal fluctuations in the semiconductor market and declines slightly in the last quarter of the year. The decline in the market value measured in US dollars is estimated to have stopped. A growth of 1-3 percent in surface area is estimated for the silicon wafer market for the years 2015-2017 (SEMI).
Key customer areas for Okmetic in the silicon wafer market
In line with its strategy, Okmetic seeks niches in the silicon wafer market, where growth exceeds market average and in which the company has special expertise. Okmetic supplies primarily 150 mm and 200 mm wafers.
The sensor/MEMS industry has been a key growth area for Okmetic for a long time. The use of sensors and their requirement level are expected to keep growing owing to proliferation of sensor applications in the automotive industry, industrial process control and in portable devices like smart phones, cameras, game consoles, and wearable electronics. In the future, a central growth driver for the sensor industry will be the Internet of Things, which will utilise sensor-produced data in communication between devices.
In the semiconductor market, Okmetic's growth areas include wafers for the production of discrete and power semiconductors as well as analog circuits. In these wafer markets, areas for growth include, among others, components used in the production of renewable energy, increasing automotive electronics, electric cars, portable consumer products, as well as different solutions related to power supply and efficiency improvement. Okmetic has launched new products for these areas.
In January-September, Okmetic's net sales amounted to 64.5 (55.4) million euro. Net sales grew by 16.4 (7.2) percent from the corresponding period last year, especially due to strong demand for sensor wafers and strengthening of US dollar. In the third quarter, net sales amounted to 20.8 (19.3) million euro and increased by 7.8 (5.9) percent from the corresponding period in 2014. Okmetic's market share remained stable in the product groups important to the company.
S ilicon wafer net sales growth with comparable US dollar exchange rate was 3.4 percent in January-September and 0.7 percent in July-September.
As of 1 January 2015, Okmetic has reported the value of deliveries in euros instead of percentage shares. In addition, Other business is reported under semiconductor wafer deliveries. These reporting changes are explained more in detail in the interim report published on 29 April 2015.
As of financial year starting on 1 January 2016, the company will report the net sales of its new customer segments, Sensor wafers and Discrete&Analog wafers (D&A wafers), instead of value of deliveries.
Value of deliveries per customer area
Demand for sensor wafers continued at a good level in the third quarter. In January-September, the value of sensor wafer deliveries grew by 25.7 (12.3) percent from the comparison period last year. The continued growth in production and delivery volumes of the strategically important SOI wafers was particularly positive.
The value of semiconductor wafer deliveries grew by 7.0 (decreased by 3.8) percent in January-September from the comparison period last year.
Value of deliveries per market area
Both in January-September and in July-September, the value of deliveries showed strong growth in North America. In Europe, the value of deliveries decreased compared to the figures in the corresponding period last year. In Asia, which is of strategic importance, demand continued to grow both in January-September and July-September.
July-September
In July-September, Okmetic's operating profit amounted to 3.5 (2.8) million euro, corresponding to 17.0 (14.3) percent of net sales. The operating profit was improved by a lower cost level than in the previous quarters as well as a favourable product mix. Profit for the period was 2.7 (2.2) million euro. Basic earnings per share was 0.16 (0.13) euro. Diluted earnings per share was 0.16 (0.13) euro.
January-September
Okmetic's operating profit for January-September amounted to 9.4 (4.8) million euro, corresponding to 14.5 (8.7) percent of net sales. Operating profit was improved due to strong sales growth in sensor wafers and SOI wafers in particular, as well as strengthening of US dollar compared to euro. Profit for the period was 7.0 (3.7) million euro. Basic earnings per share was 0.42 (0.22) euro. Diluted earnings per share was 0.42 (0.22) euro.
The company's financial position is solid. In January-September, net cash flow from operations amounted to 9.3 (6.2) million euro.
The company's interest-bearing liabilities amounted to 11.9 (14.5) million euro on 30 September 2015. At the end of the period, cash and cash equivalents amounted to 10.9 (10.3) million euro. The company's net interest-bearing liabilities amounted to 1.0 (4.2) million euro on 30 September 2015. The company has ensured liquidity with credit facilities of 6.0 million euro. On 30 September 2015, the credit facilities were fully unused (as well as on 30 September 2014).
Return on equity was 14.7 (8.4) percent. Return on investment was 16.3 (9.1) percent. The company's equity ratio was 70.9 (70.6) percent. Equity per share amounted to 3.78 (3.69) euro.
In January-September, capital expenditure amounted to 4.5 (2.5) million euro. The investments focused mainly on increasing capacity and capability of SOI and 200 mm wafers.
In May, the board of directors of Okmetic Oyj approved investments of 8.4 million euro in total in the Vantaa plant. The investments are targeted at the manufacture of 200 mm silicon wafers as well as production and capability of more advanced SOI wafers. The investments are scheduled for productional use during 2016. Okmetic published a stock exchange release concerning the investment decision on 28 May 2015.
In January-September, the company expensed 1.9 (1.8) million euro in product development projects, corresponding to 2.9 (3.2) percent of net sales. Product development costs have not been capitalised.
In January-September, focus areas in Okmetic's product development projects included process development of sophisticated C-SOI wafers, development of SOI products enabling new application areas and deployment of processes to improve productivity. The product development organisation was strengthened through recruitment of additional people for these projects.
Okmetic employed on average 397 (371) people in January-September. At the end of the period, Okmetic employed 384 (363) people, of which 336 worked in Finland, 42 in the US, five in Japan, and one in Hong Kong.
There have been no significant changes in the company's near future risks and uncertainties. However, changes in macro economy may indirectly have an influence also on Okmetic's business.
Okmetic's business is confronted by risks, which may arise from the company's operations or changes in its operating environment. Risks that, if materialised, can have an adverse effect on the company's operations and valuation are described below.
Okmetic's silicon wafer sales are targeted at the sensor and semiconductor producers in the electronics industry. The demand for semiconductor wafers is sensitive to economic fluctuations, and changes in the market situation can be sudden and dramatic. The demand for sensor wafers is more stable. The proliferation of sensors in consumer electronics applications may, however, increase the susceptibility of this market too to economic fluctuations.
Okmetic has existing polysilicon purchasing obligations partly until 2016. Due to the purchasing obligations, the company's net working capital will remain at a high level relative to the size of the operation far into 2016.
Okmetic's share of the global silicon wafer market is around one percent, and market prices have a notable effect on the price development of the company's products. The company has considerable pricing power only with its own special products. The pricing of other wafers is largely based on global market price.
Okmetic operates globally, and therefore the company's business is affected by risks due to exchange rate fluctuations, consisting of cash flows from purchases and sales. A significant part of sales is conducted in US dollars. Despite hedging of the forecasted open currency position, the company remains exposed to exchange rate fluctuations.
Substantial volumes of electricity are used in Okmetic's production. Despite hedging, the company is exposed to fluctuations in the price of electricity.
On 30 September 2015, Okmetic Oyj's paid-up share capital, as entered in the Finnish Trade Register, was 11,821,250.00 euro. The number of shares was 17,287,500. The shares have no nominal value attached. Each share entitles its holder to one vote at general meetings. The company has one class of shares. The company's shares are included in the Finnish book-entry securities system.
A total of 4.2 (2.8) million shares were traded between 1 January and 30 September 2015, representing 24.5 (16.1) percent of the weighted average of share total of 17.3 (17.3) million during the period. The lowest quotation during the period was 4.80 (4.38 euro), the highest 7.70 (5.25) euro, and the average 6.34 (4.67) euro. The closing quotation of the period on 30 September 2015 was 7.08 (4.95) euro. At the end of the period, the market capitalisation amounted to 122.4 (85.6) million euro.
According to the decision of the annual general meeting, Okmetic Oyj transferred a total of 10,634 own shares to the board members as payment of the annual remuneration on 20 May 2015.
At the end of the reporting period, Okmetic held 406,129 (416,763) own shares corresponding to approximately 2.3 (2.4) percent of all Okmetic shares and votes.
Okmetic announced of the revision of its customer segmentation as well as new long-term financial targets in its Capital Markets Day on 2 October 2015.
The company's new customer segments are Sensor wafers and Discrete&Analog (D&A wafers ). The revised customer segmentation facilitates the company's positioning in the semiconductor industry's value chain and better reflects the company's business focus. The Sensor wafer segment includes silicon wafers used for MEMS and other sensor applications. The D&A wafer segment consists of high resistivity wafers and high voltage SOI wafers currently included in Sensor wafers as well as of other semiconductor wafers. As a result of these changes, Okmetic has two growing customer segments that are equal in size. New customer segmentation will be applied in financial reporting as of financial year starting on 1 January 2016. At the same time, the company will start reporting net sales of the two customer segments instead of the value of deliveries.
Following the changes in customer segmentation, Okmetic's long-term financial targets change as well. As of financial year starting on 1 January 2016, they will be as follows:
These interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting.
In preparing these interim financial statements, Okmetic has followed the same accounting policies as in the financial statements for 2014 except for the effect of changes required by the adoption of certain new or revised standards and interpretations as of 1 January 2015, which have been described in financial statements 2014. The adoption of the new and revised standards and interpretations has not had an effect on the figures presented from the reporting period.
1)"Other reserves" contains hedge reserve and translation differences.
Acquisition of shares of Okmetic Management Oy is treated as acquisition of non-controlling interest. Okmetic Management Oy was merged in the parent company on 30 November 2014.
The contract price of the derivatives has been used as the nominal value of the underlying asset.
Fair value estimation
The group's financial instruments that are measured at fair value comprise derivatives used for hedging and held for trading.
Fair values of level 1 instruments are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Fair values of level 2 instruments are based on other data than quoted prices in active markets, but on the data from which the asset or liability is observable, either directly (i.e. price) or indirectly (i.e. derived from the prices).
Electricity derivatives are classified as level 1, currency derivatives as level 2.
Fair value determination
The fair values of electricity derivatives are based on quoted market prices. The fair values of currency forwards and options are determined on the basis of market and contract prices of the agreements at the reporting date by applying commonly used valuation techniques.
When calculating equity per share, Okmetic's own shares and the Okmetic shares owned by Okmetic Management Oy are deducted from the total number of shares. Okmetic Management Oy was merged in the parent company on 30 November 2014.
1) The figure for 2014 contains the dividend distributed in January 2015, 0.30 euro per share and the dividend distributed in April 2015, 0.15 euro per share.
All figures of the financial tables are rounded, and consequently the sum of individual figures can deviate from the presented sum figure.
The future estimates and forecasts in this interim report are based on the company management's current knowledge. Actual events and results may differ from the estimates presented here.
A briefing for investors, analysts and media will take place today, Thursday 22 October at 8.30 a.m. in Helsinki Stock Exchange building, Fabianinkatu 14, Helsinki (2nd floor, entrance via Nasdaq's reception). The result will be presented by President Kai Seikku.
Board of directors
For further information, please contact:
President Kai Seikku, Okmetic Oyj,
tel. +358 5028 0232, email: kai.seikku@okmetic.com
Senior Vice President, Finance, IT and Communications Juha Jaatinen, Okmetic Oyj,
tel. +358 9 5028 0286, email: juha.jaatinen@okmetic.com
Copyright GlobeNewswire
Attachment(s)
http://hugin.info/132025/R/1960509/714701.pdf
Regulatory News
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: %s via Globenewswire