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It was only in March that Infineon withdrew its original forecast for 2020 due to the Corona crisis. The consequences of the pandemic can not be adequately assessed, it was justified at the time. The semiconductor specialist actually wanted to further expand its business in the current financial year. However, CEO Reinhard Ploss had anticipated a difficult first half of the year before the corona pandemic.
Now he made it clear how clearly the semiconductor industry felt the effects of the pandemic. These are unprecedented. “Infineon is also not immune to the massive downturn in the global economy,” said the manager, referring to supply chain and manufacturing problems. The outlook for the second half of the year has “deteriorated significantly”. Infineon expects a sharp drop in sales in the auto business, with which the group makes the lion’s share of its revenues.
Infineon plans to hold back on investments in 2020. They are expected to drop slightly to 1.2 to 1.3 billion euros. The Management Board expects the free cash flow to be significantly negative due to the Cypress acquisition. Excluding the takeover, the value should be around 100 to 300 million euros.
In the current third quarter, sales should now reach 1.9 to 2.3 billion euros after the Cypress acquisition has been completed. The Infineon leadership expects a positive middle single-digit percentage for the segment result margin.
According to the board, the “economic upheavals” caused by the Corona crisis led to a clear uncertainty in the forecast. The temporal course of the global infection rates and the start-up of the business played a major role, especially in the automotive industry. The level and effectiveness of state aid are also important.
The acquired Cypress business has been in the group’s figures since April 16, according to the announcement. Infineon expects Cypress to generate sales of around EUR 0.8 billion in the remainder of the financial year. Ploss was confident that the € 9 billion purchase of Infineon, which had been successful after months of hanging, had taken a big step forward. However, the impact of synergies will not be felt strongly in the short term.
In the completed second quarter, Infineon performed approximately as expected by experts. Revenue rose by around four percent compared to the previous quarter to almost two billion euros. By contrast, the operating result (segment result) fell by eight percent to EUR 274 million. The margin fell from 15.5 to 13.8 percent. Without special effects, it would have increased slightly.
The bottom line was that the consolidated surplus fell by 15 percent to 178 million euros. Compared to the same period in the previous year, the segment result even dropped by 17 percent, the surplus decreased by almost a quarter. By contrast, sales remained at the previous year’s level. Because of the sometimes strong fluctuations, business figures in the semiconductor industry are usually compared to the previous quarter.
Analyst Sandeep Deshpande of JPMorgan said that Infineon’s second quarter was slightly better than expected. However, the signals for the third quarter are clearly worse. Confidence in the targeted annual targets appears to be quite low, even if the Executive Board expects a recovery in the final quarter. Meanwhile, Alexander Duval of the US investment bank Goldman Sachs adjusted his estimates for the gross margin and operating costs slightly, but the rating was “Buy”.
In the past quarter Infineon was able to increase sales in the immensely important automotive business (ATV) by 2 percent compared to the previous quarter, but the segment result dropped by 24 percent. The segment result also fell by 5 percent in the PSS division, which bundles the business with chips for the power supply and chips for mobile devices such as smartphones and tablets. By contrast, Infineon was able to increase sales and operating profit in the smaller Digital Security Solutions (DSS) segment. In the business with chips for industry (IPC), the segment result remained at least stable, while sales increased by 7 percent.
Infineon shares in demand for solid second quarter
A better-than-expected second quarter on Tuesday pushed ahead with the recovery of Infineon shares in XETRA trading. Most recently, it went up 3.81 percent to 16.42 euros. However, the chipmaker’s shares had dropped sharply the previous day by almost 7 percent.
NEUBIBERG (dpa-AFX)
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