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Cypress strengthens business: Infineon share nonetheless friendly: Infineon warns of lower sales due to corona effects | message


Chip maker Infineon expects sales to decline in the current financial year due to the corona pandemic. In 2020, the proceeds should be 7.6 billion euros, 5 percent lower than in the previous year, the DAX group announced on Monday evening in Neubiberg. Including the recently acquired US competitor Cypress Semiconductor, sales are expected to be around 8.4 billion euros, up or down 5 percent. The segment result margin is expected to reach around 12 percent. Last year, revenues had risen to around EUR 8 billion, and the operating margin had reached 16.4 percent.

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 slumped by 24 percent. In the PSS division, where the business is bundled with chips for the power supply and chips for mobile devices such as smartphones and tablets, the segment result declined by 5 percent. 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

Solid quarterly figures and a better-than-expected outlook for the year partially dispelled the concerns of Infineon shareholders with regard to business development. After significant losses in the past two trading days, the chip manufacturer from Munich gained 4.2 percent in early XETRA trading to 16.486 euros, while the DAX also recovered by 1.9 percent.

It is still a long way back to the level before the Corona crash at the end of February around 21 euros. Since its low on March 19 at EUR 10.132, the share had already recovered by 77 percent in strong up and down movements by the end of April. However, it was unable to keep above the 200-day line, which the share had temporarily tested in the weak market on April 30, in the very weak market environment. This line signals investors interested in chart technology the long-term trend. This average price is currently 17.83 euros.

Analyst Veysel Taze from Bankhaus Lampe pointed out that the “solid quarterly figures” were above his and the market trends. The outlook given by Infineon is also better than expected, which is mainly due to cheaper exchange rate assumptions, he wrote. For 2019/20, Infineon’s management is forecasting a decline in sales of 5 percent to 7.6 billion euros. “At the same time, however, a more favorable exchange rate ratio of 1.10 US dollars per euro is now expected, compared to previously 1.13 dollars,” emphasized Taze.



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