First half of 2018/19
AT&S increases profitable growth in the first half-year
- Revenue at new record level of € 516.9 million
- EBITDA up 32.5% thanks to higher earnings from Chongqing
- Excellent profitability with an EBITDA margin of 26.8%
- Second expansion phase in Chongqing to secure technology leadership initiated
- Outlook for 2018/19: Revenue growth of 6 to 8% and EBITDA margin of 24 to 26%
Leoben, 06:23 pm – In the first six months of the current financial year, AT&S recorded a very positive revenue and earnings development compared with the prior-year period, which also led to an upgrade of the outlook for the financial year 2018/19.
Revenue rose by 6.4% from € 485.7 million to € 516.9 million, thus reaching the highest level to date. This increase resulted primarily from the additional capacity at the plants in Chongqing, which were in part still in the start-up phase in the comparative period of the previous year, and generally very strong demand for IC substrates. In addition, a good development was recorded in the Medical & Healthcare sector in particular. However, supply shortages for important components are currently slowing down demand in the Automotive and Industrial sectors. Moreover, stricter emission test procedures in the wake of the diesel scandal imply a reduction in demand in the Automotive sector.
Exchange rate effects, especially due to the weaker US dollar, had a negative impact of € 15.3 million or 3.1% on the development of revenue. The application of the new accounting standard (IFRS 15) led to early revenue realisation of € 6.3 million or 1.3% due to an early recognition of revenue for some customers.
EBITDA improved by 32.5% to € 138.3 million (previous year: € 104.4 million). The increase results from significant improvements in earnings in Chongqing. Chongqing was partially still in the start-up phase in the same period of the previous year, resulting in the corresponding negative effects on earnings. The current period already reflects measures to enhance efficiency and improve productivity, which were successfully implemented in the past quarters. The negative currency effects from revenue were nearly fully offset by positive FX valuation effects in EBITDA. The EBITDA margin amounted to 26.8% in the first six months, up by 5.3 percentage points on the prior-year level of 21.5%.
“The current business development confirms the strategy of AT&S. The continuation of our growth strategy shows the successful positioning in the markets served by AT&S. We can participate in the growing demand for IC substrates, in particular in the high-end technology segment. The operating performance at the plants is also developing very well. We are thus strengthening our position as one of the global top 3 companies for high-end interconnect solutions,” Andreas Gerstenmayer, CEO of AT&S, commented the development of the first half of the year.
EBIT rose by € 35.0 million from € 36.9 million to € 71.9 million. The EBIT margin amounted to 13.9% (previous year: 7.6%).
Finance costs – net improved to € -0.1 million (previous year: € -5.6 million), which was predominantly attributable to positive exchange rate effects and the optimisation of interest expenses. Tax expenses amounted to € 16.5 million in the first six months (previous year: € 15.9 million). Due to the significantly improved operating result and the improvement in finance costs – net, profit for the period was up by € 40.0 million from € 15.4 million to € 55.4 million. As a result, earnings per share rose from € 0.40 € to € 1.32. Interest on hybrid capital of € 4.2 million (previous year: € 0.0 million) was deducted in the calculation of earnings per share.
Statement of financial position and cash flow
Based on the increase in equity and the higher total assets resulting from the issue of the promissory note loan, the equity ratio, at 40.5%, was 6.0 percentage points lower than at 31 March 2018.
Net debt declined slightly from € 209.2 million to € 196.7 million. Cash flow from operating activities amounted to € 58.0 million in the first six months of 2018/19 (previous year: € 43.6 million). The significantly higher net CAPEX in the prior-year period was attributable to the start-up phase in Chongqing.
|Gem. IFRS; (in Mio. EUR)||H1 2017/18||H1 2018/19||Change|
|EBITDA margin (in %)||21.5||26.8|
|EBIT margin (in %)||7.6||13.9|
|Profit/loss for the period||15.4||55.4||>100%|
|Cash flow from operating activities||43.6||58.0||33.0%|
|Net CAPEX||95.0||37.9||-60.1 %|
|Equity ratio (in %)||46.5*||40.5**||-|
|Earnings per average number of shares outstanding (in EUR)||0.40||1.32||> 100%|
|* At 31.03.2018|
|** At 30.09.2018|
Mobile Devices & Substrates segment with clear revenue growth
In the first half-year, the segment benefited from substantially higher revenue and earnings from the plants in Chongqing. This gratifying development was supported by a higher-value product portfolio of IC substrates (for example server applications). Despite negative currency effects of roughly € 13 million, which are not fully reflected in the earnings number, the segment’s revenue increased by 9.1% from € 358.9 million to € 391.5 million.
EBITDA improved by 38.4% from € 80.3 million to € 111.2 million. In addition to the absence of start-up costs for the Chongqing plant, the increase in earnings results from the measures to enhance efficiency and to improve productivity, which were successfully implemented in the past quarters. Overall, this resulted in an EBITDA margin of 28.4%, which significantly exceeds the prior-year level of 22.4%.
Automotive, Industrial, Medical segment slightly below previous year
The segment’s revenue, at € 178.9 million, was slightly lower than in the previous year. Strong demand was recorded especially in the Medical & Healthcare sector in the first half of the year. The Automotive sector faced a decline in demand due to the diesel scandal and the resulting drop in sales among car manufacturers. In addition, supply shortages for important components slowed down the demand for printed circuit boards in the Automotive and Industrial sectors.
The segment’s EBITDA, at € 24.4 million, exceeded the prior-year level of € 23.0 million. Earnings contribution from a better product mix and positive currency effects offset the decline in volume. As a result, the EBITDA margin rose from 12.4% to 13.6%.
Future-oriented investment in new technology development
In view of the current mega trends such as connected systems, autonomous driving or artificial intelligence with higher data rates and volumes as well as high performance density, the requirements for interconnect technology are also increasing. AT&S benefits from this development as the growing data flows of digitalisation place increasing requirements on the capability of components.
Due to the technological change, AT&S sees a good opportunity to take the next step for the technology development, and hence the second expansion phase at plant 1 in Chongqing. The plan is to gradually realise the technology implementation in the next two to three years, which may lead to an investment volume of up to € 160 million. With this strategically important step, AT&S is setting another milestone in the area of high-performance applications along its growth path to become one of the globally leading interconnect solution providers.
Guidance for the financial year 2018/19 upgraded
On the basis of the business development in the first half of the current year, the positive outlook for the coming months and taking into account seasonal effects in the fourth quarter of the current financial year 2018/19, management has increased its forecast for revenue and earnings. Based on stable exchange rates, the management expects revenue growth of 6 to 8% (previously up to 6%) and an EBITDA margin in the range of 24 to 26% (previously up to 23%) for the financial year 2018/19.
In the current financial year, around € 140 to 160 million will be invested in maintenance, technology upgrades for current business operations as well as for capacity and technology expansions, with the capacity increase of high-frequency printed circuit boards in the area of autonomous driving at the sites in Nanjangud, India and Fehring, Austria already being implemented.