26 July 2012

Aixtron’s revenue rebounds by 10%; non-LED activities gaining traction

Deposition equipment maker Aixtron SE of Herzogenrath, Germany says that, for second-quarter 2012, its revenues and orders have stabilized at the levels of Q1/2012.

Q2 revenue was €46.1m, up 10% on €42m in Q1. However, for first-half 2012, revenue was €88.1m, down 77% (€292.9m) on €381m on H1/2011, due mainly to the drop in demand for metal-organic vapor phase deposition (MOCVD) reactors for LED production. By region, Asia has slumped from 90% of total revenue in full-year 2011 to 77% in H1/2012, while the USA has risen from 6% to 16% and Europe from 4% to 7%.

Quarterly Revenue

Gross margin rose from 25% in Q1 to 32% in Q2, due mainly to a favorable product mix and currency effects. Nevertheless, H1/2012 gross margin of 28% is down from 48% in H1/2011, due to the decline in sales volume and the disproportionately lower percentage decrease in cost of sales resulting from the fixed cost effect of ongoing facility, production and service costs.

The earnings before interest and taxes (EBIT) operating result remained negative, but improved by 10%, from -€18.3m in Q1 to -€16.5m in Q2. The H1/2012 EBIT fell from €129.2m in H1/2011 to -€34.7m in H1/2012, due mainly to significantly reduced gross profit (resulting from the lower sales volumes) coupled with an increasing absolute operating cost base (driven mainly by higher investments into R&D and currency effects).

Free cash flow was -€31.9m in Q2, down from -€5.6m in Q1. Correspondingly (and after a dividend payment of €25.4m), cash & cash equivalents (plus cash deposits) fell 19% during the quarter, from €288.9m to €234.6m.

In line with expectations, order intake volume remained stable in Q2. New orders amounted to €30m, down 5% on Q1’s €31.5m, possibly marking the trough in the current investment cycle. Total H1/2012 order intake was €61.5m, down 86% on H1/2011’s €432.5m. Correspondingly, equipment order backlog of €137.7 m at the end of H1/2012 is down 63% on €373.5m a year ago but down just 2.1% on €136.2 at the end of Q1/2012.

Graphic: Aixtron’s 24-month business development, showing upturn in revenue and expected trough in orders.

Aixtron says that, as well as the sequential improvement in financial results, there is also evidence of improved capacity utilization among LED producers. In particular, spare parts & services grew from Q1 to Q2, comprising 29% of total revenue in H1/2012 (up from just 8% in H1/2011), representing higher demand from consumables in production. Also, current quotation levels suggest that a bottom in the order intake cycle may have been reached.

In addition, Aixtron is seeing its non-LED business gaining traction. The firm recorded an increase in silicon equipment orders during H1/2012, strongly influenced by a major order placed by a leading Korean DRAM manufacturer for the next-generation QXP-8300 atomic-layer deposition (ALD) system. The firm also recorded several orders from the potentially huge power electronics market for both R&D and production tools.

President & CEO Paul Hyland also remains confident that Aixtron will benefit from the next major LED investment cycle: “Recent reports from lighting companies confirm the increased growth dynamics of the LED lighting market, which we believe will trigger significantly higher demand for LED production equipment in the coming years.”

He reiterates the importance of strong R&D, for which expenses rose 41% from €24m in H1/2011 to €34m in H1/2012, while selling expenses fell 25% and general & administrative expenses fell 38%. Meanwhile, R&D staffing has risen from 32% of total staffing to 35%. “As part of our long-term strategy to retain Aixtron’s technology market leadership, we continue to pursue our focused R&D programs, which are not just limited to the development of next-generation MOCVD tools, they also include technologies for other promising growth markets,” says Hyland. “As a result of these activities, we are today gaining traction in new emerging MOCVD applications and other technology markets, including silicon semiconductor and organic material applications, which include OLEDs.”

Management continues to believe that orders and revenues in second-half 2012 will pick up compared to the first half. However, the recent perceived higher short-term macro-economic risks in the end markets that Aixtron addresses has made the magnitude and timing of the equipment demand pick-up still difficult to forecast with any certainty. Since order intake and shipment commitments in Q3 and early Q4 will largely determine the full extent of the year-end performance, this may also affect the firm’s aim to be EBIT profitable in fiscal 2012. The firm nevertheless expects to return to profitability in the course of second-half 2012.

Meanwhile, Aixtron says that it will continue to review and implement appropriate cost-saving measures to optimize year-end results. The firm notes however that it expects to see significantly higher demand and growth in 2013, driven by a significant increase in demand from LED lighting manufacturers.

See related items:

Aixtron’s revenue falls 70% in Q1 as Asia slumps from 92% to 76% of sales

Aixtron reports loss in Q4 on revenue down 38% year-on-year

Aixtron’s Q3 revenue down nearly 50% due to Asian market correction and credit tightness

Aixtron’s revenue and margins dip in Q2 after China customer delays

Aixtron’s revenue drops 9% in Q1

See: Aixtron Company Profile

Tags: Aixtron MOCVD

Visit: www.aixtron.com

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