First Half Results 2008-2009
Timely cost reduction measures limit the impact from unfavourable business and exchange environment
• Gross margin of 13.1% from sales of 120.3 million Euros
• Operating Loss of 9.4 million Euros in line with guidance
• Net loss of 8.0 million Euros
• Cash of 167 million Euros at 30th September
• Reduction of short term demand confirmed for the second half of the year
Bernin, France, November 10th 2008 – Soitec (Euronext, Paris), the leading manufacturer of silicon-on-insulator (SOI) wafers and other engineered substrates today published its consolidated results for the first half of the financial year 2008-2009. Year on year, the Group recorded 20.9% lower consolidated sales of 120.3 million Euros in the first half of the year during which the Dollar weakened by 12% against the Euro. The soft activity, the unfavourable exchange and the costs of the Singapore fab resulted in an operating loss of 9.4 million Euros compared to an operating profit of 2.3 million Euros in the first half of the previous financial year. Taking net interest and financial items into account the net loss came to 8.0 million Euros, compared to a loss of 1.2 million Euros in the same period in 2007-2008. Despite the loss, positive operating cash flow of 12.7 million Euros was generated in the period. After capital expenditure and capital lease repayments, the company had strong cash and cash equivalents of 167 million Euros at end September 2008.
| (in Euros millions) | H1 2007-2008 | H1 2008-2009 |
| Sales | 152.0 | 120.3 |
| Gross margin | 31.2 | 15.8 |
| Research & development | 14.1 | 13.0 |
| SG&A | 14.8 | 12.2 |
| Operating income/(Loss) | 2.3 | (9.4) |
| Net financial (cost)/revenue | (2.4) | 3.0 |
| Net income/(loss) (Group share) | (1.2) | (8.0) |
| Diluted EPS (in Euros) | (0.01) | (0.10) |
Strong cost reductions limit the impact of lower sales and weak exchange
In the first half of the financial year 300 mm, which represented 81% of total wafer sales, were lower than the prior year by 6.9% but up by 6.9% at constant exchange. Similarly all other wafer sales were down on a year on year basis by 55.5% or 51.8% at constant exchange taking into account the previously announced fact that a major client switched all 200mm to 300mm production from August 2007. Licensing revenues contributed 2.2 million Euros in the first half of the financial year, with Tracit and Picogiga contributing combined sales of 5.0 million Euros.
Unfavourable exchange and the costs of the Singapore fab essentially explain the year on year reduction in the Group's gross margin from 20.6% to 13.1% of sales. Wafer sales gross margins remained more or less stable in total because 300mm improved strongly to offset lower margins from small diameters resulting from very reduced activity. The 300mm margin improved because timely management action to reduce costs and the positive benefits from the ramp-up of refresh activities leading to lower unit material costs more than offset the weak exchange rate and overall selling prices in line with business conditions. Net R&D expense remained at 10.8% of sales to sustain future growth and SG & A expenses were sharply decreased year on year by 18% equal to 2.7 million Euros helping to limit the operating loss to 9.4 million Euros, which is -7.8% of sales. Excluding the impact of Singapore, to have a like for like comparison, this operating margin would be -2.9% of sales, which is an improvement over the operating margin for the first half last year of -6.2% corrected for exchange (versus a reported margin of 1.5%). In total Singapore costs for the period were 8.9 million Euros in line with the full year guidance. Net interest income and financial items were positive at 3.0 million Euros resulting in a net loss for the period of 8.0 million Euros compared to a net loss of 1.2 million Euros for the same period last year.
Overall in terms of cash management, the net cash outflow was limited to 20.2 million Euros. Positive operating cash flow of 12.7 million Euros and 10 million Euros from the Paceo contract capital increase was offset by capital expenditure of 31.3 million Euros and loan repayments and related interest of 16.4 million Euros. 22 million Euros of the capital expenditure related to Singapore investment accrued at 31 March 2008. The balance sheet at the end of the period is strong with cash and cash equivalents of 167 million Euros and negative gearing of 15%.
Reductions to short term demand confirmed
The Group remains cautious for the second half of the financial year as short term demand reductions from some large customers have been confirmed resulting in an overall lowering of the anticipated second half sales of between 15% to 20 % lower versus H1 at constant exchange. However, despite the current unfavourable macro economic and business environment, the current expectation is for a full year operating margin similar to last year (on a like for like basis: at constant exchange and before the cost impact associated with the Singapore fab estimated to be around USD 30 million) because the adverse impact of the reduced activity in H2 should be compensated by the benefits resulting from the cost reduction programs initiated earlier. Also the recent recovery in the value of the Dollar should have a positive impact on margins.
Outlook
The Group remains confident that SOI and other high value added engineered materials based on SmartCut™ technology will continue to gain ground in the market and materialize when macro economic environment will improve. Recent announcements throughout the SOI eco-system, including enlarged customers offer through their foundries activities and release of new design libraries dedicated to SOI as well as SOI Industry Consortium initiatives, emphasize the future spread of SOI into new applications, such as graphics, mobile telephones and memories in the coming years. Singapore factory will provide a cost efficient base for improving usage cost of material as well as a cost effective facility for future volume manufacturing and a Dollar cost base.
Agenda
Third-quarter sales for the 2007-2008 financial year will be published on January 19th 2009 after the closure of the Paris Bourse.
About Soitec:
The Soitec Group is the world’s leading innovator and provider of the engineered substrate solutions that serve as the foundation for today’s most advanced microelectronic products. The group leverages its proprietary Smart Cut™ technology to engineer new substrate solutions, such as silicon-on-insulator (SOI) wafers, which became the first high-volume application for this proprietary technology. Since then, SOI has emerged as the material platform of the future, enabling the production of higher performing, faster chips that consume less power.
Today, Soitec produces more than 80 percent of the world’s SOI wafers. Headquartered in Bernin, France, with two high-volume fabs on-site, Soitec has offices throughout the United States, Japan and Taiwan, and a new production site in the process of customers’ qualification in Singapore.
Two other divisions, Picogiga International (Les Ulis) and Tracit Technologies (Bernin), complete the Soitec Group. Picogiga focuses on delivering advanced substrates solutions, including III-Vs epiwafers and gallium nitride (GaN)-based wafers, to the compound material world for the manufacture of high-frequency electronics and other optoelectronic devices. Tracit, on the other hand, focuses on thin-film layer transfer technologies used to manufacture advanced substrates for power ICs and microsystems, as well as generic circuit transfer technology for applications such as image sensors and 3D-integration. Shares of the Soitec Group are listed on Euronext Paris. For more information, visit www.soitec.com.
Soitec, Smart Cut and UNIBOND are trademarks of S.O.I.TEC Silicon On Insulator Technologies.
For all information, please contact:
Soitec
Iain Murray
Financial Director
Tel: +33 4 76 92 75 14
email: investors@soitec.fr
Soitec
Olivier Brice
Investor Relations – Financial Communication
Tel: +33 4 76 92 93 80
email: olivier.brice@soitec.fr