Elmos Interim Report Q3

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  • Elmos Interim report July 1 September 30, 2016 | 1

    Products on the cutting edgeInterim report Q3 2016

  • 2

    Elmos Interim report Q3 2016

    IN FOCUS-> Positive performance of sales and EBIT in the course of the year-> Guidance 2016 confirmed

    1Prior-year amounts adjusted for the repurchase of land and building from prematurely terminated leases in the amount of approx. 14 million Euro2Cash flow from operating activities less capital expenditures for/plus disposal of intangible assets and property, plant and equipment3Prior-year amounts adjusted according to new definition

    Due to calculation processes, tables and references may produce rounding differences from the mathematically correct values (monetary units, percentage statements, etc.).

    Key figures

    3rd quarter 9 months

    in million Euro or percent unless otherwise indicated

    7/1 9/30/2016

    7/1 9/30/2015 Change

    1/1 9/30/2016

    1/1 9/30/2015 Change

    Sales 56.4 54.6 3.3% 165.1 164.3 0.5%

    Semiconductor 50.7 49.4 2.6% 150.9 147.6 2.2%Micromechanics 5.7 5.2 9.1% 14.2 16.7 14.7%

    Gross profit 24.4 22.5 8.2% 67.3 68.3 1.5%

    in percent of sales 43.2% 41.3% 40.8% 41.6%R&D expenses 8.5 8.8 2.3% 26.9 28.1 4.3%

    in percent of sales 15.2% 16.0% 16.3% 17.1%Operating income before other operating income/expenses () 6.1 4.7 29.8% 11.1 12.5 11.2%

    in percent of sales 10.9% 8.7% 6.7% 7.6%Exchange rate losses ()/gains 0.2 0.1 n/a 0.3 1.8 n/aOther operating income/expenses () 0.3 2.2 84.7% 1.1 3.2 64.6%EBIT 6.3 7.1 10.6% 11.9 17.5 32.2%

    in percent of sales 11.2% 12.9% 7.2% 10.7%Net income for the period after non-controlling interests 4.1 4.7 13.3% 7.7 11.8 34.3%

    in percent of sales 7.2% 8.6% 4.7% 7.2%Basic earnings per share in Euro 0.21 0.24 13.7% 0.39 0.60 34.7%

    Operating cash flow 12.0 15.6 22.7% 20.2 31.9 36.9%

    Capital expenditures for intangible assets and property, plant and equipment1 2.4 7.6 69.1% 19.6 21.9 10.5%

    in percent of sales 1 4.2% 14.0% 11.8% 13.3%

    Adjusted free cash flow1, 2, 3 9.8 8.0 22.0% 0.7 11.0 93.7%

    in million Euro or percent unless otherwise indicated 9/30/2016 12/31/2015 Change

    Equity 222.0 219.4 1.3%in percent of total assets 74.8% 71.5%

    Employees (reporting date) 1,127 1,109

    Overview

  • Elmos Interim report July 1 September 30, 2016 | 3

    BUSINESS PERFORMANCESales performance and order situation

    In the first nine months of 2016 Elmos Semiconductor AG recorded sales of 165.1 million Euro (9M 2015: 164.3 million Euro). Sales revenues showed a positive development in the course of the year 2016.

    Sales generated with customers based in the Asia/Pacific region continued their pleasant performance, meanwhile contributing about a third or rather 55.7 million Euro to total sales. This volume equals 9.9% growth over the prior-year period. Sales generated in the EU countries picked up 4.9% to 91.4 million Euro. This development is due particularly to shifts in shipping addresses from the United States to Europe. Accordingly sales with U.S. based customers went down

    from 17.8 million Euro in the first nine months of 2015 to 12.0 million Euro in the reporting period.

    The Semiconductor segment gained 2.2% to 150.9 million Euro in the first nine months of 2016 compared to the prior-year period (9M 2015: 147.6 million Euro). Partly due to new additions to the product portfolio, the business of the Micromechanics segment went down to 14.2 million Euro (9M 2015: 16.7 million Euro).

    The Semiconductor segments ratio of orders received to sales, the so-called book-to-bill, was above one at the end of the first nine months of 2016.

    Third-party sales1/1 9/30/2016

    thousand Euroin percent

    of sales1/1 09/30/2015

    thousand Euroin percent

    of sales Change

    EU countries 91,433 55.4% 87,177 53.1% 4.9%U.S.A. 11,983 7.3% 17,786 10.8% 32.6%Asia/Pacific 55,720 33.7% 50,712 30.9% 9.9%Others 5,972 3.6% 8,610 5.2% 30.6%Consolidated sales 165,108 100.0% 164,285 100.0% 0.5%

    62.6% 61.6% 56.8%

    7.7% 7.1%6.0%

    9.2% 7.9%10.5%

    20.5%23.4%

    26.7%

    9M 2016

    33.7%

    7.3%3.6%

    55.4%

    165.1

    2012

    180.1

    2013

    189.1

    2014 2015

    209.5

    31.4%

    10.6%4.8%

    53.2%

    219.6

    Interim group management report

    Interim group management report

    EU countries

    Others

    U.S.A.

    Asia/Pacific

    SALES BY REGION

    Total sales

    (in million Euro)

  • 4

    Elmos Interim report Q3 2016

    Profit, financial position as well as assets and liabilities

    The gross profit went down slightly in the first nine months of 2016 and came to 67.3 million Euro or rather a gross margin of 40.8% (9M 2015: 68.3 million Euro or 41.6%). This development is essentially attributable to weak earnings of the first quarter of 2016.

    Research and development expenses came to 26.9 million Euro or 16.3% of sales in the reporting period and were thus slightly down (9M 2015: 28.1 million Euro or 17.1%). Contrary to that was the development of distribution and administrative expenses, increasing slightly year-over-year at 14.9 million Euro and 14.4 million Euro respectively (9M 2015: 14.5 million Euro and 13.2 million Euro). Altogether, the development of operating expenses remained almost constant in relation to sales (9M 2016: 34.1% vs. 9M 2015: 34.0%). Due to the higher cost of sales, operating income before other operating income/expenses was therefore slightly below the prior-year amount of 12.5 million Euro at 11.1 million Euro for the first nine months of 2016.

    Earnings before interest and taxes (EBIT) went down from 17.5 million Euro to 11.9 million Euro in the reporting period. This reflects in an EBIT margin of 7.2% (9M 2015: 10.7%). The prior-year periods EBIT benefited from exchange rate gains in the amount of 1.8 million Euro as compared to exchange rate losses of 0.3 million Euro incurred over the first nine months of 2016. Furthermore, other operating income of 3.2 million Euro was collected in the previous year,

    particularly including one-off effects from the termination of lease contracts and prior-period income/expenses from renegotiations with suppliers and partners. Other operating income for the reporting period came to 1.1 million Euro.

    After taxes, Elmos achieved a consolidated net income attributable to owners of the parent in the amount of 7.7 million Euro in the reporting period (9M 2015: 11.8 million Euro). This equals basic earnings per share (EPS) of 0.39 Euro (9M 2015: 0.60 Euro).

    The cash flow from operating activities came to 20.2 million Euro in the first nine months of 2016 and thus fell short of the prior-year amount (9M 2015: 31.9 million Euro). Apart from a lower consolidated net income, this development is accounted for by tax payments in the amount of 9.8 million Euro (9M 2015: 2.7 million Euro) and a higher decrease in trade payables in the amount of 6.0 million Euro (9M 2015: 1.4 million Euro) among other factors.

    Capital expenditures for intangible assets and property, plant and equipment came to 19.6 million Euro or 11.8% of sales in the reporting period (9M 2015: 21.9 million Euro or 13.3% of sales). Despite these cash-effective payments, at 0.7 million Euro a positive adjusted free cash flow (cash flow from operating activities less capital expenditures for/plus disposal of intangible assets and property, plant and equipment) was achieved in the first nine months of 2016 (9M 2015: 11.0 million Euro1). The prior-year amounts of capital

    expenditures for intangible assets and property, plant and equipment and the adjusted free cash flow have respectively been adjusted for the repurchase of land and building from prematurely terminated leases in the amount of approx. 14 million Euro.

    Cash and cash equivalents and marketable securities amounted to 82.3 million Euro as of September 30, 2016 (December 31, 2015: 90.5 million Euro). Apart from the dividend payment in the amount of 6.5 million Euro, this decrease reflects tax payments and the reduction of trade payables. Accordingly net cash dropped from 53.7 million Euro as of December 31, 2015 to 46.0 million Euro as of September 30, 2016.

    The equity ratio has slightly increased to 74.8% as of September 30, 2016 (December 31, 2015: 71.5%).

    Economic environment

    The international car markets have not shown a consistent trend since the beginning of the year. China and Western Europe are the growth drivers while the number of new registrations continues to stagnate in the U.S.A., and in Japan that number is even down compared to the prior-year period. These developments are reported by the German Association of the Automotive Industry (VDA).

    1 Prior-year amount adjusted according to new definition

  • Elmos Interim report July 1 September 30, 2016 | 5

    Compared to the prior-year period, the automotive market in Western Europe gained 7.1% from January through September 2016 to 10.8 million new vehicles. Above-average growth was recorded by Italy (+17.4%) and Spain (+11.5%). Germany achieved +6.1% growth, France chalked up 5.7%, and Great Britain showed significantly below-average growth of +2.6%, according to the European Automobile Manufacturers Association (ACEA).

    The stagnation of the U.S. market continues in the reporting period. The market for light vehicles (passenger cars and light trucks) merely shows a slight gain of +0.4% for the first nine months of 2016 to 13.0 million new vehicles, according to the VDA.

    China continues to be the growth driver of the global automotive economy. The number of 16.2 million new car registrations in the nine-month period was +17.7% above the mark of the prior-year period.

    Car demand in Japan continues to be weak with a decrease by 3.7% compared to the prior-year level to 3.2 million units.

    Significant events

    The Management Board explained the past fiscal year and the forecast for 2016 at the annual press conference and analysts conference as well as at the Annual General Meeting held in March and May 2016 respectively. The shareholders agreed to the proposed dividend of 0.33 Euro per share at the Annual General Meeting.

    The Supervisory Board of Elmos has appointed Guido Meyer as new member of the Management Board effective January 1, 2017. He will be responsible for Production and Logistics. Acting Management Board member for Production, Reinhard Senf (64), will retire as of December 31, 2016.

    Furthermore, the Supervisory Board has reappointed Dr. Arne Schneider as CFO until 2022. He has been the Companys CFO since mid-2014.

    In January 2016 Elmos acquired shares in a company concerned with sensor technology. This company is included in the consolidated financial statements as an associated company.

    In the first nine months of 2016 Elmos presented its products at the trade shows embedded world 2016 in Nuremberg, electronica China in Shanghai, and Sensor+Test in Nuremberg and received highly positive customer feedback.

    Moreover, Elmos has introduced new semiconductors, among them a new signal readout IC. In addition to that, an updated product catalog and a video showing the wide range of applications for Elmos components in the layout of a high-performance LED system were presented. SMI managed to retain the services of another distributor and introduced new pressure sensors for medical applications and other fields of use.

    OTHER DISCLOSURESStaff development

    The Elmos Groups workforce came to 1,127 employees as of September 30, 2016, thus increased slightly compared to the number of employees as of December 31, 2015 (1,109 employees).

    Elmos share

    The stock markets have showed high volatility so far in 2016. Contributing factors were the geopolitical crises and the weak raw materials markets as well as the political debate in Great Britain and the U.S. presidential election campaign. The DAX closed at 2.2% at the end of the reporting period.

    12/31/2015 09/30/2016

    1,109

    845

    1,127

    862

    Interim group management report

    STAFF DEVELOPMENT ELMOS GROUP

    Other subsidiaries

    Silicon Microstructures

    Elmos NRW

  • 6

    Elmos Interim report Q3 2016

    The market indices of relevance to Elmos showed similar performances: TecDAX and Technology All Share recorded losses of 1.6% and 2.5% respectively. DAXsector Technology was the only relevant index to disconnect from this trend, climbing 15.6% in the first nine months of 2016.

    The Elmos share closed on September 30, 2016 at 13.34 Euro or rather at 16.7%. It reached its high on January 4, 2016 at 15.04 Euro and its low on February 25, 2016 at 10.20 Euro. Market capitalization amounted to 267.1 million Euro as of the reporting date, based on 20.0 million shares issued (Xetra closing prices all).

    The daily trading volume of the first nine months of 2016 was 23.2 thousand shares on average (Xetra and Frankfurt floor) and thus at the level of the 2015 average of 22.9 thousand shares. The treasury stock was reduced by servicing stock options with treasury shares, among other factors, to 192,880 shares as of September 30, 2016 (December 31, 2015: 214,587 shares).

    On June 6, 2016, Internationale Kapitalanlagegesellschaft mbH (Germany) exceeded the voting rights threshold of 3% and held 3.01% or 599,826 voting rights as of that date.

    COMPANY BOARDS Supervisory Board

    Prof. Dr. Gnter Zimmer, chairmanGraduate physicist | Duisburg

    Dr. Burkhard Dreher, deputy chairmanGraduate economist | DortmundMember and deputy chairman of theSupervisory Board until May 11, 2016

    Dr. Klaus Weyer, deputy chairmanGraduate physicist | PenzbergDeputy chairman as of May 11, 2016

    Dr. Gottfried Dutin Graduate engineer | KleveMember of the Supervisory Board as of May 11, 2016

    Dr. Klaus EggerGraduate engineer | Steyr-Gleink, Austria

    Thomas Lehner1

    Graduate engineer | Dortmund

    Sven-Olaf Schellenberg1

    Graduate physicist | Dortmund

    1 Employee representatives

    Management Board

    Dr. Anton Mindl, chairmanGraduate physicist | Ldenscheid

    Dr. Arne SchneiderGraduate economist | Munich

    Reinhard SenfGraduate engineer | Iserlohn

    Dr. Peter GeiselhartGraduate physicist | Ettlingen

  • Elmos Interim report July 1 September 30, 2016 | 7

    OUTLOOKOpportunities and risks

    Risk management and the individual corporate risks and opportunities are described in our Annual Report 2015. No material changes of the Companys risks and opportunities as detailed therein have occurred in the first nine months of 2016.

    Economic framework

    The German economy continues to be strong, according to the Bundesbank, even though it lost some of its momentum during the summer months. The Bundesbank explained in its monthly report of October that private consumption and the construction boom drive the German economy. Consumers are in a spending mood, the Bundesbank adds.

    The International Monetary Fund (IMF) has revised its forecast for the German economy slightly upward in its October report. For this year the IMF now expects growth of 1.7% instead of 1.6%. Growth at a similar level is predicted for Europe. For the U.S.A. the Funds experts have revised their growth forecasts downward to merely 1.6% this year; previously 2.2% growth had been anticipated.

    Chinas economy is expected to gain 6.6% according to the forecast, indicating a slight slowdown in growth compared to the previous year (2015: 6.9%). For global growth the Fund...