Infineon shares surge on industry-beating growth forecast

By Douglas Busvine and Irene Preisinger

FRANKFURT/MUNICH (Reuters) - Germany's Infineon (IFXGn.DE) forecast industry-beating sales growth for its next fiscal year on Tuesday, driving shares in the chipmaker 5 percent higher despite a slowdown in quarterly sales caused by a weaker dollar.

The top supplier of power controls to auto and industrial markets forecast revenue growth of 9 percent in the year to Sept. 30, 2018, broadly in line with analysts' expectations but ahead of expected industry growth of about 5 percent.

Management cautioned, however, there was margin pressure in the automotive division that accounts for 40 percent of total sales. "Automotive is obviously aggressive in pricing," CEO Reinhard Ploss told analysts on a conference call.

Last year, eight out of 10 of the world's top-selling battery or plug-in electric vehicles were powered by Infineon chips, according to the company.

Infineon is the top maker of microcontrollers used in the central powertrains of many luxury vehicles, although it lags Renesas , NXP (NXPI.O) and Texas Instruments (TXN.O) in the wider market for car microcontrollers.

Sales of products for plug-in electric vehicles and advanced driver assistance grew at rates of between 60-80 percent in the year just ended as manufacturers introduce new models.

Management declined to forecast growth for the products, but said they could be expected to contribute 2 percentage points to growth, assuming an overall rate of 8-9 percent. Margins would be below the group average due to tough competition.

Rising costs for wafers were a concern as Infineon ramps up production at its 300 mm facility in eastern Germany which is now expected to reach full capacity by the turn of the decade.

PRICING POWER

Infineon's growth outlook for next year puts it in line with the compound rate it has enjoyed since being spun off from Siemens in the late 1990s.

The margin forecast for its operating segments, at 17 percent, was broadly in line with expectations but some analysts see it expanding further out.

"The company is ... best positioned to benefit from rising sales of electric vehicles," Liberum analysts said in a note, viewing any share-price weakness as a buying opportunity.

Infineon said it expected a seasonally typical slowdown in sales of 2 percent in the current quarter from the previous one, within a range of 2 percentage points either way, and a segment result margin of 15 percent.

Finance chief Dominik Asam said any seasonal price decline in the March quarter was expected to be in line with previous years.

Infineon reported fourth-quarter operating income of 177 million euros (£158.4 million), a year-on-year decline of 22 percent, below the average forecast of 281 million euros in a Reuters poll of analysts.

Revenues rose 9 percent from a year earlier to 1.82 billion euros but were down 1 percent from the previous quarter. The consensus forecast was for 1.84 billion euros, according to 15 analysts polled by Reuters.

Revenues would have grown by 11 percent year-on-year and by 3 percent from the prior quarter, after adjusting for currency effects, Ploss said.

(Reporting by Irene Preisinger and Douglas Busvine; Editing by Louise Heavens and Mark Potter)