AIXTRON: Further Stabilization of Results

AIXTRON SE, a leading provider of deposition equipment to the semiconductor industry, today reported revenues of €182.9 million (2012: €227.8 million) and an EBIT of -€95.7 million (2012: €-€132.3 million) for the full fiscal year 2013. In the fourth quarter of 2013, revenues were up sequentially to €51.5 million (Q3/2013: €46.2 million). The Q4 EBIT (excluding unusual items) of -€8.3 million (Q3/2013 excluding unusual items: -€9.2 million) came in slightly above the previous quarter.

In spite of a 20% decrease in revenues, the company’s earnings benefited from positive cost effects and efficiency gains from the 5-Point-Program initiated in Q1/2013. Thereby, operating costs (excluding unusual items) were reduced in fiscal year 2013 to less than the previously targeted €100 million (operating costs 2012, excluding unusual items: €124.9 million).

Although capacity utilization rates in AIXTRON’s target industries have increased significantly, for example at leading Taiwanese and Korean LED chip manufacturers, demand for AIXTRON’s production equipment remained at a very low level throughout the fiscal year 2013. Consequently, equipment order intake at €133.2 million was broadly unchanged year-on-year compared to €131.4 million of the fiscal year 2012. The total equipment order backlog of €59.6 million at Dec. 31, 2013 was 25% lower than the €79.4 million at the same point in time in 2012. This sustained weakness in demand was also reflected in the reduced revenues.

Influenced by several unusual items, the company’s gross profit in 2013 decreased year-on-year from €0.4 million to -€7.4 million, resulting in a negative gross margin of -4% (2012: 0%). Decreased revenue-related costs were more than offset by lower selling prices for MOCVD equipment and the negative effect of -€5.1 million from inventory destroyed in a fire.

Throughout the fiscal year 2013, the AIXTRON management has put a special focus on liquidity. Although the company recorded an increased cash outflow from restructuring related payments, the significantly improved free cash flow of -€1.1 million (2012: -€61.6 million) underlines the successful liquidity management. As a result of the capital increase executed in October 2013, AIXTRON has further strengthened its financial position. With a total of €306.3 million in cash and cash equivalents (including cash deposits with a maturity of at least three months) at the end of the year, the company maintains a sound capital base for its future business development.

At the Annual General Meeting on May 23, 2013, Martin Goetzeler, president and CEO of AIXTRON, introduced a 5-Point-Program to restore the company’s sustainable profitability even under difficult market conditions. A number of targeted individual projects were designed to address the following topics: 1) focus on customer benefits; 2) utilization of the company’s technology and product portfolio; 3) process structures; 4) attention to clearly defined financial targets; 5) strengthening of AIXTRON’s management and corporate culture. A pivotal element of this program is to improve the company’s cost efficiency as well as proactively manage its assets.

“The structural improvement of the result in particular within the second half of 2013 has reinforced our view that we have set out on the right path by consolidating and reorienting AIXTRON,” said Goetzeler. “As planned, we did not only manage to reduce our 2013 operating costs excluding unusual items by more than 20% to less than the targeted €100 million through our 5-Point-Program, but we also generated a nearly balanced free cash flow that also contributed to the stabilization of our financial position. Moreover, and in spite of all our cost reduction and process optimization efforts, we have continued our targeted research and development investments in the most important technology fields to further strengthen and diversify AIXTRON’s future product portfolio.”

Due to the still very low order visibility, AIXTRON management is unable to provide any precise guidance for the company’s revenues and earnings for the current fiscal year 2014. As a consequence of the already advanced restructuring of the company and the realized cost reductions, management expects a further year-on-year improvement of the result in 2014. Based on its consideration of the current market demand, management believes that 2014 revenues will be on par with 2013 with a still negative but significantly improved operating result. Based on the assumption of a target gross margin of 40% and operating costs of approximately €100 million, EBIT break-even may now be reached with revenues of approximately €250 million.