1st half of 2019/20

AT&S shows solid development in a challenging environment; annual guidance confirmed

• Well on track at the operating and strategic level
• Macroeconomic environment partially burdens earnings
• Market for mobile devices was characterised by lower ramp of the new smartphone generation
• Half-year revenue down slightly by 5%; EBITDA margin, at 20.6%, in the target range
• Management Board confirms annual and medium-term guidance

Leoben, 7 November 2019 – In an overall challenging environment AT&S held its ground well in the first half-year. Revenue, at € 490.3 million, declined slightly by 5.1% compared to the previous year: increases in sales volume in the IC Substrates and Medical & Healthcare segments were offset by declining figures in the Mobile Devices and Industrial segments. The Automotive segment maintained the level of the previous year despite the current radical changes in the mobility market.

The decline in revenue in the Mobile Devices segment is attributable to a lower ramp of the latest smartphone generation and the changing product mix. Consequently, the Automotive and Industrial segments are currently faced with lower demand and higher price pressure.

The general macroeconomic situation also continues to contribute to the currently challenging environment: trade disputes (in particular between the USA and China) and political uncertainties (i.a. Brexit) have led to caution in the industry. Uncertainties in the automotive industry regarding the future powertrain and far-reaching technological change as well as the weak industrial business caused underutilization also at AT&S.

The current market situation and investments in the future of AT&S took a toll on earnings: EBITDA amounted to € 101.1 million (previous year: € 138.3 million) and the EBITDA margin to 20.6% (previous year: 26.8%). However, EBIT, at € 29.4 million (previous year: € 71.9 million), picked up significantly again compared with the first quarter of this financial year (€ -0.6 million). Finance costs – net improved from € -0.1 million in the previous year to € 2.8 million. Net profit for the period amounted to € 19.5 million (previous year: € 55.4 million).

In preparation for future technology generations and to implement the modularization strategy, AT&S heavily invests in research and development. These expenditures also make the company future-proof and increase the earnings potential in the medium term. Andreas Gerstenmayer, CEO of AT&S AG: “We consider the current developments in our markets a great opportunity for significant growth. However, as entrepreneurs we must also be prepared to invest in building the relevant knowledge. As the technology leader, we are best equipped to ensure that the expansion of expertise is implemented successfully.”

The financial position remained very solid at the reporting date. The equity ratio decreased to 42.5%, down 2.5 percentage points compared with 31 March 2019, with the balance sheet total increasing slightly. The two main raisons were currency effects (€ -23.6 million) and the dividend payment (€ -23.3 million). Net debt rose by € 83.4 million or 55.5% from € 150.3 million to € 233.7 million. The net gearing ratio increased from 18.7% to 30.4%.

Cash and cash equivalents amounted to € 259.6 million. In addition, AT&S has financial assets of € 243.5 million and unused credit lines of € 185.4 million to secure financing of the future investment programme and any repayments due in the short term.

FINANCIALS Acc. to IFRS; (in EUR million)	2018/19 01.04.2018-30.09.2018	2019/20 01.04.2019-30.09.2019	Change
Group
Revenue	516.9	490.3	(5.1%)
EBITDA	138.3	101.1	(26.9%)
EBITDA margin (in %)	26.8	20.6
EBIT	71.9	29.4	(59.2%)
EBIT margin (in %)	13.9	6.0%
Profit/loss for the period	55.4	19.5	(64.7%)
Cash flow from operating activities	58.0	62.2	7.2%
Net CAPEX	37.9	92.0	>100%
Net debt	150.3*	233.7**	55.5%
Earnings per share (in EUR)	1.32	0,40	(70.0%)
* As of 31.03.2019 ** As of 30.09.2019

At mid-year, the Management Board adopted additional investments for a targeted capacity increase at the locations in Chongqing and Leoben: in the coming five years, up to € 1 billion will be invested in strengthening the business with IC substrates. The investments will focus on Chongqing. AT&S implements the project in close cooperation with a leading semiconductor manufacturer. In addition to production, the partnership also comprises the technology development of future substrate architectures. The first significant revenue from this investment is expected for the financial year 2022/23. In view of its steady earnings power, AT&S will use existing resources, among other things, to finance the new project.

Regarding the background of this investment decision: as a result of the increased use of artificial intelligence, ever greater data volumes are created and have to be recorded and processed at ever greater speed. IC substrates, which act as translators between the micro-world of the printed circuit board and the nano-world of chips, enable the architectures required to do so. Market demand for IC substrates for the application in high-performance computer modules will increase significantly in the years to come. These investments allow AT&S to strengthen its position in the market for IC substrates and to further balance its product portfolio, thus reducing previous dependencies and promoting the diversification of the customer portfolio. Andreas Gerstenmayer: “The trend of miniaturization and modularization addresses many applications in the electronics industry and consequently also the area of microprocessors. We expect the circle of industries interested in our solutions to expand substantially in the coming years.”

As after the first quarter, the Management Board also confirms the earnings forecast for the full year after the first half of the financial year: As demand has picked up and capacity utilization is currently good in the Mobile Devices segment, revenue is expected to be at the level of the previous year, with an EBITDA margin in the range of 20% to 25%. This forecast is supported by the further expansion of the customer and application portfolio in the Mobile Devices segment and the investments made so far. They enable AT&S to partially balance out market fluctuations.
A volume of € 80 to 100 million is planned for basic investments (maintenance and technology upgrades). Depending on the market development, an additional € 100 million for capacity and technology upgrades may be incurred. For the capacity expansion in the area of IC substrates, expenses for investments of up to € 180 million are planned. Based on the progress of the project, the Group’s capital expenditures will total up to € 340 million.

The Management also confirms the medium-term guidance, which was increased after the first quarter: As part of the strategy “More than AT&S”, the Group expects revenue to double to € 2 billion in the next five years (previous revenue guidance at the beginning of the financial year: € 1.5 billion). This corresponds to a compound annual growth rate (CAGR) of roughly 15%. Based on the stronger focus on high-end applications, the historical trend of a continuous and sustainable margin improvement can be continued, and an EBITDA margin in the range of 25% to 30% can be achieved in the medium term. The Group’s medium-term ROCE target is more than 12%.

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