EQS-News: Infineon Technologies AG / Key word(s): Quarter Results/Forecast
Neubiberg, 14 November 2022 – Infineon Technologies AG is increasing its target operating model and reporting its results for the fourth quarter and for the full fiscal year, both of which ended on 30 September 2022.
“Decarbonization and digitalization are causing structurally increasing demand for semiconductors. Infineon will benefit disproportionately from this development thanks to its strategic positioning. This dynamic has further accelerated, so now is the right time for us to define an even more ambitious target operating model," says Jochen Hanebeck, Chief Executive Officer of Infineon. "Furthermore, by the planned investment in a new factory we are continuing the consistent execution of our strategy and are broadening the base for our accelerated profitable growth trajectory in a forward-looking way. We are pleased to have political support for an investment at the Dresden site (Germany) and we are counting on adequate funding through the European Chips Act. We concluded the challenging 2022 fiscal year very successfully, with an excellent fourth quarter. The 2023 fiscal year has also started well. In view of ongoing macroeconomic and geopolitical uncertainties, heightened vigilance is required in the coming quarters. We are prepared to act swiftly and flexibly if necessary."
In its target markets automotive, industrial and IoT applications, as well as renewable energies Infineon sees increasing dynamic and strong structural growth drivers. The company is therefore upgrading its target operating model, which defines financial targets over the cycle. In future, based on an exchange rate of US$1.00 to the euro, the expected average rate of revenue growth will be more than 10 percent, increased from 9 percent + previously. Growth will in particular be driven by electromobility, autonomous driving, renewable energies, data centers and IoT, such growth being accompanied by a significant improvement in profitability: the Segment Result Margin is expected to reach an average level of 25 percent, compared with 19 percent to date. The main factors influencing the rise in earnings will be an increasing proportion of system solutions, a higher-value product/technology mix due to portfolio management, the expansion of cost-effective 300-millimeter production, and operational expenses rising at a lower rate than revenue due to digitalization and economies of scale.
For the first time, Infineon is including an explicit Free Cash Flow target in its target operating model, replacing the investment-to-sales rate previously used. Free Cash Flow, adjusted for major investments in frontend buildings, should be within a range of 10 to 15 percent of revenue over the cycle.
Infineon is planning to continue expanding its 300-millimeter manufacturing capacity, to enable the expected acceleration in growth of analog/mixed-signal and power semiconductors. The intended location is Dresden (Germany). Adequate public funding is required for the investment decision. With a planned total investment of €5 billion, this would be the largest single investment in Infineon’s history. Thereby, the company would strengthen its position as a global semiconductor leader in power systems. When operating at full capacity, the planned factory would have the potential to generate annual revenue equal to the level of the investment. The new factory is expected to create up to 1,000 new highly qualified jobs and according to planning could be ready to start production in autumn of 2026.
ANALYST WEBCAST AND PRESS CONFERENCE ON THE ANNUAL RESULTS
The Management Board of Infineon Technologies AG will host a live webcast for analysts and investors (in English only) on 15 November 2022 at 8:30 am (CET). During the call, the Infineon Management Board will present the company’s new target operating model, its results for the fourth quarter of the 2022 fiscal year and the outlook for the first quarter and the 2023 fiscal year. In addition, the Management Board will host a press conference on the annual results at 11:00 am (CET), which can be followed over the Internet in both English and German. Both conferences will be available live and for download on Infineon’s website at www.infineon.com/investor.
2 The calculation for earnings per share and for adjusted earnings per share is based on unrounded figures.
3 The reconciliation of net income to adjusted net income and adjusted earnings per share as well as of cost of goods sold to adjusted cost of goods sold and adjusted gross margin can be found in the quarterly information at www.infineon.com.
GROUP PERFORMANCE IN THE FOURTH QUARTER OF THE 2022 FISCAL YEAR
In the fourth quarter of the 2022 fiscal year, Group revenue grew by €525 million or 15 percent to €4,143 million, compared with €3,618 million in the previous three-month period. All four segments, Automotive (ATV), Industrial Power Control (IPC), Power & Sensor Systems (PSS) and Connected Secure Systems (CSS) contributed to this revenue growth. The increase in revenue was boosted by the stronger US dollar in the fourth quarter compared to the third quarter.
The gross margin improved from 43.2 percent in the third quarter to 44.4 percent in the final quarter of the 2022 fiscal year. The adjusted gross margin rose to 46.3 percent, compared with 45.4 percent in the previous quarter.
The Segment Result increased in the fourth quarter of the 2022 fiscal year to €1,058 million, from €842 million in the third quarter. The Segment Result Margin improved from 23.3 percent in the previous quarter to 25.5 percent.
The fourth-quarter non-segment result was a net loss of €138 million, compared with a net loss of €152 million in the previous three-month period. The non-segment result for the fourth quarter comprised €81 million relating to cost of goods sold, €56 million relating to selling, general and administrative expenses and €12 million relating to research and development expenses. Also included in the total for the fourth quarter was a net other operating income of €11 million.
Operating profit for the fourth quarter of the 2022 fiscal year rose to €920 million, up from €690 million in the previous three-month period.
The financial result in the fourth quarter was a net financial loss of €33 million, compared with a net financial loss of €40 million in the third quarter of the 2022 fiscal year.
The tax expense in the fourth quarter of the 2022 fiscal year was €166 million, compared with €134 million in the preceding quarter.
Profit from continuing operations rose in the fourth quarter of the 2022 fiscal year to €730 million, up from €525 million in the previous three-month period. The result from discontinued operations in the fourth quarter was a profit of €5 million (third quarter: loss of €8 million). The profit for the period in the fourth quarter of the 2022 fiscal year rose to €735 million, compared with €517 million in the previous quarter.
Earnings per share from continuing operations increased in the fourth quarter to €0.56 (basic and diluted), compared with €0.40 one quarter earlier. Adjusted earnings per share4 (diluted) improved from €0.49 in the third quarter to €0.63 in the fourth quarter of 2022.
Investments – which Infineon defines as the sum of investments in property, plant and equipment, investments in other intangible assets and capitalized development costs – increased significantly in the fourth quarter of the 2022 fiscal year, as expected, to €866 million, up from €542 million in the preceding three-month period. Depreciation and amortization in the fourth quarter was €443 million, compared with €422 million in the third quarter of the 2022 fiscal year.
Free Cash Flow improved in the fourth quarter of the 2022 fiscal year to €709 million, up from €440 million in the preceding quarter. Cash flows from operating activities from continuing operations rose to €1,580 million, compared with €996 million in the third quarter of the 2022 fiscal year.
The gross cash position at the end of the fourth quarter of the 2022 fiscal year was €3,717 million, up from €3,569 million at 30 June 2022. This takes into account the early repayment of the final outstanding amount of US$ 555 million of bank term loans in connection with the acquisition of Cypress. As a result of this repayment, financial debt at 30 September 2022 stood at €5,662 million, down from €6,054 million at 30 June 2022. Net financial debt decreased accordingly, from €2,485 million at the end of the third quarter to €1,945 million at the end of the fourth quarter.
OUTLOOK FOR THE FIRST QUARTER OF THE 2023 FISCAL YEAR
Based on an assumed exchange rate of US$1.00 to the euro, Infineon expects to generate revenue of around €4.0 billion in the first quarter of the 2023 fiscal year. Revenue growth for the ATV segment is forecast to be within a low single-digit percentage range, while revenue in the CSS segment is likely to remain at around the same level as in the quarter before. Due to seasonality revenue generated by the PSS segment is expected to decline by a high single-digit percentage rate, and for the IPC segment a revenue decline of around 10 percent is forecast, in each case compared with the preceding quarter. Based on this revenue forecast, the Segment Result Margin should be around 25 percent.
OUTLOOK FOR THE 2023 FISCAL YEAR
Based on an assumed exchange rate of US$1.00 to the euro, revenue of €15.5 billion (plus or minus €500 million) is forecast for the 2023 fiscal year, equivalent to a growth rate of 9 percent compared with the 2022 fiscal year. Revenue growth for the ATV segment is expected to be above Group average. In the IPC and CSS segments, revenue is likely to grow at around the average rate for the Group. Revenue generated by the PSS segment is forecast to grow below Group average. At the mid-point of the guided revenue range, the adjusted gross margin should be around 45 percent and the Segment Result Margin around 24 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 new factory in Dresden mentioned above, and the continuing expansion of front-end manufacturing capacity, especially in Dresden (Germany) and Villach (Austria).
Depreciation and amortization are predicted to be about €1.9 billion in the 2023 fiscal year, of which approximately €450 million is attributable to purchase price allocations arising mainly from the acquisition of Cypress. Taking the planned expansion in frontend buildings into account, Free Cash Flow is forecast to be around €0.8 billion. Adjusted Free Cash Flow is expected to be around €1.5 billion, or about 10 percent of the forecast revenue for the year.
Predictability of future revenue and earnings is currently strongly limited by various geopolitical and macroeconomic factors, such as the war in Ukraine, the coronavirus pandemic, and also sustained high inflation rates and thus increasing interest rates.
PROPOSED DIVIDEND FOR THE 2022 FISCAL YEAR: €0.32 PER SHARE
Infineon’s dividend policy is aimed at allowing its shareholders to participate appropriately in the success of the business. Following the increase of €0.05 per share compared with the prior year in the dividend distributed for the 2021 fiscal year to €0.27 per share, it is now planned to put forward a proposal to the Annual General Meeting in February 2023 to increase the dividend once again by €0.05 per share due to Infineon’s continously improved business performance in the 2022 fiscal year. Should the Annual General Meeting approve the planned proposal, the dividend payment for the past fiscal year would rise to €0.32 per share. The expected dividend payout would then be €417 million, compared with €351 million in the prior year.
1 Free Cash Flow adjusted for major investments in frontend buildings
4 Adjusted net income and adjusted earnings per share (diluted) should not be seen as a replacement or superior performance indicator, but rather as additional information to the net income and earnings per share (diluted) determined in accordance with IFRS.
Infineon’s segments’ performance in the fourth quarter of the 2022 fiscal year can be found in the quarterly information at www.infineon.com.
ll figures in this quarterly information are preliminary and unaudited.
ANALYST WEBCAST AND PRESS CONFERENCE ON THE ANNUAL RESULTS
The Management Board of Infineon Technologies AG will host a live webcast for analysts and investors (in English only) on 15 November 2022 at 8:30 am (CET). During the call, the Infineon Management Board will present the company’s upgraded target operating model, its results for the fourth quarter of 2022 and the outlook for the first quarter and the 2023 fiscal year. In addition, the Management Board will host a press conference on the annual results at 11:00 am (CET), which can be followed over the Internet in both English and German. Both conferences will be available live and for download on Infineon’s website at www.infineon.com/investor.
The Q4 Investor Presentation is available (in English only) at:
INFINEON FINANCIAL CALENDAR (* preliminary)
Infineon Technologies AG is a global semiconductor leader in power systems and IoT. Infineon drives decarbonization and digitalization with its products and solutions. The company has around 56,200 employees worldwide and generated revenue of about €14,2 billion in the 2022 fiscal year (ending 30 September). Infineon is listed on the Frankfurt Stock Exchange (ticker symbol: IFX) and in the USA on the OTCQX International over-the-counter market (ticker symbol: IFNNY). Further information is available at www.infineon.com
D I S C L A I M E R
This press release contains forward-looking statements about the business, financial condition and earnings performance of the Infineon Group.
These statements are based on assumptions and projections resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks. Actual business development may therefore differ materially from what has been expected.
Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.
Due to rounding, numbers presented throughout this press release and other reports may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
All figures mentioned in this press release are preliminary and unaudited.
14.11.2022 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG.
Infineon Technologies AG
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