First half of 2016/17: AT&S with stable development in the core business, earnings still influenced by start-up effects of the new plants in China.
- Good customer demand and capacity utilisation – especially in the second quarter of 2016/17
- Revenue close to the strong level of the previous year – despite stronger seasonality in the first quarter 2016/17
- Start-up effects from the new plants in Chongqing influence earnings
- Ramp-up of plant 1 in Chongqing still flatter than expected due to necessary process optimisations; effects of delay included in the adjusted guidance
Leoben, 5:38pm – AT&S, one of the global technology leaders for high-end printed circuit boards, recorded a stable development in the core business in the first six months of the financial year compared with the first half of the previous year, with start-up effects from the new plants in Chongqing, China.
Andreas Gerstenmayer, CEO of AT&S, commented: “We showed a stable development in the core business in the first half of 2016/17 and profitability is still high. In relation to the very high prior-year level, we came close to matching the level of last year despite stronger seasonality in the first quarter and higher price pressure. Customer demand is very good at present: We could take in significantly more orders if we had more capacity. However, the new plants in Chongqing still have an impact on our results in the ramp-up phase, and the start-up curve for IC substrates is still flatter. Because of that and the fact that we have to temporarily reduce capacity at our existing plant in Shanghai due to the adaption to a new technology, we had to adjust our outlook for the year as part of the quarterly forecasting process. We still see growing markets in all customer segments, but as a result of these factors, we expect slightly slower growth and lower profitability than originally assumed.“
Asset, financial and earnings position
AT&S matched the strong revenue figures of the previous year in the first half of 2016/17. At EUR 386.5 million, revenue maintained the high level of EUR 387.1 million in the previous year. First revenues from IC substrates nearly fully compensated the stronger seasonality in the first quarter in the Mobile Devices & Substrates segment.
Based on the start-up effects for the Chongqing project (EUR 37.3 million), EBITDA declined by EUR 41.1 million or -44.1% from EUR 93.2 million to EUR 52.1 million in the first half of the year. Adjusted for these start-up effects, EBITDA amounted to EUR 89.4 million, down 4.6% on the high level of the previous year. This slight decline results from a price/product mix effect in the Mobile Devices & Substrates segment and could not be fully compensated even though cost-saving measures were implemented.
The EBITDA margin was 13.5% in the first half of the year and thus -10.6 percentage points below the very high level of 24.1% in the previous year. Adjusted for the Chongqing project, the margin of 23.8% nearly matches the high, adjusted prior-year level of 24.3%. In the core business, AT&S maintained its relative profitability stable at the very high prior-year level despite the challenging market environment.
Depreciation of property, plant and equipment and amortisation of intangible assets amounted to EUR 57.9 million (prior-year period: EUR 42.5 million). This higher depreciation and amortisation, which is predominantly related to the Chongqing project, reduced EBIT by EUR 56.5 million to EUR -5.8 million. Adjusted for the Chongqing project, EBIT totalled EUR 51.7 million, down EUR 3.7 million on the adjusted prior-year value. The EBIT margin amounted to -1.5% (prior-year period: 13.1%). The adjusted margin was 13.8% and thus -0.6 percentage points below the adjusted prior-year level of 14.4%.
Finance costs dropped significantly from EUR 0.0 million in the prior-year period to EUR -10.0 million, which was among other things due to negative currency effects and a higher net interest result. The tax rate amounted to 6.5%.
The profit for the period fell by EUR -56.9 million from EUR 42.1 million in the prior-year period to EUR -14.8 million due to the start-up effects of the Chongqing project and significantly higher negative finance costs. As a result, earnings per share declined from EUR 1.08 in the prior-year period to EUR -0.38.
Cash flow and statement of financial position
Cash flows from operating activities before changes in working capital amounted to EUR 36.9 million vs. EUR 85.4 million in the previous year. Cash flow from investing activities – investments in the plants under construction in Chongqing, technology investments in other locations and investments in financial assets – totalled EUR -155.1 million (prior-year period: EUR -97.5 million).
Equity decreased from EUR 568.9 million to EUR 531.9 million due to the loss for the period, the dividend paid of EUR 14.0 million and negative currency differences of EUR 8.2 million. The resulting equity ratio, at 36.4%, was -5.9 percentage points lower than at 31 March 2016 as expected, also because of the increase in total assets.
Net debt rose by EUR 176.0 million from EUR 263.2 million at 31 March 2016 to EUR 439.2 million. This expected increase resulted from the high investment activities and the increase in working capital, which cannot be financed from the operating result. Consequently, the net gearing ratio, at 82.6% at 30 September 2016, was substantially higher than at 31 March 2016 (46.3%).
Key financials:
| According to IFRS; | H1 2015/16 | H1 2016/17 | Change |
|---|---|---|---|
| in EUR million | 01.04.-30.09.2015 | 01.04.-30.09.2016 | |
| Revenue | 387.1 | 386.5 | -0.2% |
| EBITDA | 93.2 | 52.1 | -44.1% |
| EBITDA margin (in %) | 24.1 | 13.5 | - |
| EBITDA adjusted1) | 93.7 | 89.4 | -4.6% |
| EBITDA margin adjusted (in %)1) | 24.3 | 23.8 | - |
| EBIT | 50.7 | -5.8 | > -100% |
| EBIT margin (in %) | 13.1 | -1.5 | - |
| EBIT adjusted 1) | 55.4 | 51.7 | -6.7% |
| EBIT margin adjusted (in %)1) | 14.4 | 13.8 | - |
| Profit/loss for the year | 42.1 | -14.8 | > -100% |
| Cash flows from operating activities before changes in working capital | 85.4 | 36.9 | > -100% |
| Net CAPEX | 98.2 | 142.5 | 45.1% |
| Equity ratio | 42.3% | 36.4% | - |
| Net debt | 263.2 | 439.2 | 66.9% |
| Earnings per average number of shares outstanding | 1.08 | -0.38 | > -100% |
| (in EUR) |
1) Adjusted for the Chongqing project
Segment Mobile Devices & Substrates with stronger seasonality, earnings influenced by Chongqing start-up effects
Demand for high-end printed circuit boards for mobile devices was good in the first half of the year; however, it was characterised by considerably stronger seasonality in the first quarter in comparison with the prior-year period. Revenue from IC substrates compensated this development, but this segment recorded negative currency effects. Revenue therefore amounted to EUR 269.7 million in the first half of 2016/17, down -1.1% on the prior-year figure. EBITDA was significantly influenced by start-up effects from the new plants in Chongqing and therefore decreased by EUR 43.1 million or -63.8% to EUR 24.5 million in comparison with the prior-year period. Adjusted for the Chongqing effect, EBITDA amounted to EUR 58.5 million, resulting in an adjusted EBITDA margin of 22.7%, which is lower than the adjusted prior-year value of 25.3%. This is attributable to price and product mix effects.
Automotive, Industrial, Medical segment with increases in revenue and earnings
With revenue growth of 2.9%, this segment increased the prior-year figure from EUR 169.5 million to EUR 174.4 million. The main drivers were continued strong revenue from high-end printed circuit boards in the Automotive segment, which reflect the trend towards more electronic components in cars, and very strong growing revenue in the Medical sector. Revenue in the Industrial sector remained at the high level of the previous year. EBITDA rose by 19.9% from EUR 19.2 million to EUR 23.0 million. With an increase by 1.9 percentage points from 11.3% to 13.2%, the EBITDA margin clearly exceeded the prior-year level. Adjusted for the segment’s share in the start-up effects of the Chongqing project, EBITDA amounts to EUR 26.3 million and the adjusted EBITDA margin to 15.4% (prior-year period, adjusted: 11.0 %). The segment also benefited from the reversal of a provision for unused space as this space is now used again.
Status Chongqing: still flatter ramp-up phase in plant 1 for IC substrates, ramp plant 2 for substrate-like printed circuit boards is proceeding well
As at 30 September 2016, AT&S invested EUR 392.9 million in the Chongqing project. However, the optimisation of the highly complex production facilities for IC substrates is still causing a flatter ramp-up. The production line is running at full capacity, but the volume output and yield are not yet satisfactory. The effects resulting from this delay were taken into account in the adjusted guidance for the year. The ramp-up for the first production line for substrate-like printed circuit boards is proceeding well.
Investment in new technology generation at the Shanghai plant Based on customer demand, AT&S is preparing the new technology generation in the core business for the Mobile Devices & Substrates segment at the Shanghai plant earlier than originally planned. Serial production of this technology is scheduled to start at the beginning of the second half of the calendar year 2017. The resulting technological adaptations of the production facilities cause a temporary capacity reduction at the Shanghai plant. With this technology, AT&S positions itself as a high-end supplier in continuously growing customer segments.
Outlook for the financial year 2016/17 adjusted Provided that the macroeconomic environment remains stable, the USD-EUR currency relation stays at a similar level as in the past financial year 2015/16 and demand is stable in the core business, AT&S expects an increase in revenue of 4-6% for the financial year 2016/17. The EBITDA margin should range between 15-16% primarily due to the start-up effects in Chongqing. However, the EBITDA margin in the core business should be at a similar level as in the financial year 2015/16. Higher depreciation and amortisation of an additional approx. EUR 40 million for the Chongqing project in the financial year 2016/17 will have a significant influence on EBIT.
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