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Aixtron Profitable In 2017

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Revenues rose by 17 percent year-on-year to €230.4m with a net profit of €6.5m

Aixtron, a provider of deposition equipment to the semiconductor industry, has announced its financial results for fiscal year 2017 and the fourth quarter 2017.

Driven by the continued demand for MOCVD systems for the production of VCSELs and other lasers, red-orange-yellow (ROY) and special LEDs as well as power electronics and memory chips, order intake including spare parts and service in 2017 amounted to €263.8m, 17 percent higher than in the previous year.

The equipment order backlog as of December 31, 2017 increased to €108.6m, an increase of 39 percent over the previous year's figure and 9 percent over the value per September 30, 2017.

The positive development in order intake and order backlog was also reflected in revenues, which rose by 17 percent year-on-year to €230.4m in 2017. The largest revenue contribution came from MOCVD systems for the production of LEDs with 42 percent of equipment revenues, including red-orange-yellow and specialty LEDs, followed by systems for the production of optoelectronics with 25 percent.

Gross profit and gross margin also improved significantly year-on-year in 2017 to €74.0m or 32 percent. In the sequential quarterly comparison of Q4/2017 to Q3/2017, both figures were almost stable.

The operating result (EBIT) improved year-on-year totalling €4.9m in the financial year 2017. In Q4/2017, EBIT rose sequentially to €24.4m.

Net result in the financial year 2017 improved to €6.5m profit and in Q4/2017 exceptionally rose to €27.2m in the sequential quarter-on-quarter comparison. Included in that figure were positive special effects from the sale of the ALD/CVD product line which brought the company to the profit zone one year earlier than planned.

Business Development

Last year, Aixtron implemented the company's reorientation while concluding fiscal year 2017 with a net profit of €6.5m, thanks to the sale of the ALD/CVD product line. For 2018, Aixtron continues to pursue its goal of returning to sustainable profitability in its operating business. This process is supported by the continuing market demand for MOCVD systems for the production of VCSEL and other laser applications, ROY and special LEDs as well as for power electronics.

On October 1, 2017, APEVA SE, a wholly-owned subsidiary of Aixtron SE for its OLED deposition technology, officially commenced operations. Aixtron is currently negotiating with potential industrial and financial partners to form a joint venture with APEVA.

Last year, the company's cost structure continued to improve. In 2017, although cost of sales increased year-on-year they did not increase as fast as revenues, which grew by 12 percent from €140.2m to €156.4m. This was mainly due to a larger portion of higher margin products which more than offset a number of effects. Those included low margin sales of AIX R6 tools from inventory as well as write downs from having frozen further technology development of products for three-five on silicon materials (TFOS: €1.0m in Q1/2017) as well as for thin film encapsulation (TFE: €1.3m in Q2/2017). Consequently, 2017 cost of sales relative to revenues decreased to 68 percent.

At €69.1m, total operating expenses in 2017 were 11 percent lower than the previous year's figure (2016: €77.7m). The operating costs included restructuring effects of €12.8m from the previously described freezing of TFOS and TFE activities as well as positive effects from the sale of the ALD/CVD product line for memory chips. The operating costs relative to revenues decreased in 2017 to 30 percent (2016:40 percent).

Management Review

Bernd Schulte, executive board member of Aixtron SE, said: "We are pleased that Aixtron has already achieved a positive result in 2017 and that we were able to achieve our financial targets at the upper end of the specified range. This was mainly due to the demand for MOCVD systems for optoelectronics and power electronics, which benefited from numerous new applications such as face recognition on smartphones and was reflected in the very pleasing order situation. In addition, we successfully sold our ALD/CVD product line for memory products to Eugene Technology, which resulted in both a one-off gain and lower R&D costs."

"With Aixtron's comprehensive reorientation, thecCompany is focusing on its core MOCVD equipment business. We supply systems in various end markets with attractive growth potential and expect to be clearly profitable again in our operating business in 2018. This is supported by a strong order backlog and stable order intake. Our OLED subsidiary APEVA is working on the qualification for one of the major Asian display manufacturers. In addition, we are in discussions with several companies about a partnership in the OLED sector, which should complement APEVA's range of products and services", adds Dr. Felix Grawert, Executive Board member of Aixtron SE.

Guidance

For 2018, the board expects growth in its core business, in particular from MOCVD systems for the production of lasers for applications in 3D sensor technology or optical data transmission. In the medium term, the adoption of power components based on the wide-band gap materials SiC and GaN opens up further potential.

Based on the current corporate structure and estimated orders, management expects both revenues and total orders in a range between €230m and €260m for 2018 at the budget rate of USD/ €1.20. This represent a growth between 20 percent and 35 percent based on the revenues of the continuing business of €191.6m, excluding the sold ALD/CVD product line.

Hence, Aixtron expects to achieve a gross margin of 35 percent to 40 percent and an EBIT of 5 percent to 10 percent of revenues in 2018. Furthermore, Management expects to achieve a positive operational cash flow which will be lower compared to 2017. This is due to the positive effects from the sale of the ALD/CVD product line in the amount of €51.0m which were included in cash flow 2017. Cash flow in 2018 will include the settlement of liabilities towards third parties of the ALD/CVD business in the amount of €11.7m. These expectations for 2018 include the results of the Aixtron subsidiary APEVA with all planned investments to further develop the OLED activities.


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