Aixtron Aktiengesellschaft's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Aixtron Aktiengesellschaft (AIXG)

Q2 2012 Earnings Conference Call

July 26, 2012 09:00 ET

Executives

Guido Pickert – Director, Investor Relations

Paul Hyland – President and Chief Executive Officer

Wolfgang Breme – Executive Vice President and Chief Financial Officer

Analysts

David Mulholland – UBS

Olga Levinzon – Barclays Capital

Edwin Mok – Needham & Company

Sandeep Deshpande – JPMorgan

Bill Arnold – B. Riley

Andrew Huang – Sterne Agee

Andrew Schenker – Morgan Stanley

David O’Connor – Exane BNP Paribas

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the AIXTRON’s First Half 2012 Results Conference Call. Today’s call is being recorded and I would now like to hand you over to Mr. Guido Pickert, Director of Investor Relations at AIXTRON for opening remarks and introductions.

Guido Pickert – Director, Investor Relations

Good afternoon and good morning everyone. Thank you for attending today’s call. With us today as always are Paul Hyland, President and Chief Executive Officer of AIXTRON, as well as Wolfgang Breme, Executive Vice President and Chief Financial Officer of AIXTRON. As the operator indicated, this call is being recorded by AIXTRON and is considered copyright material. As such, it cannot be recorded or re-broadcast without express permission. Your participation in this call implies your consent to this recording.

As with previous results conference calls, I trust that all participants have our results presentation slides, page two of which contains the usual Safe Harbor statement. I will therefore not read it out loud, but would like to point out that it applies throughout this conference call. You may also wish to have a look at our latest IR presentation, which includes additional information on markets and its technologies.

This call is not being immediately presented via webcast or any other medium. However, we will place an audio file of the recording or a transcript on our website at some point after the call.

I would now like to hand you over to Paul Hyland, AIXTRON’s President and CEO to start the actual presentation. Paul?

Paul Hyland – President and Chief Executive Officer

Thank you, Guido. Ladies and gentlemen, good afternoon to those of you calling in from Europe, good morning to those joining us from the U.S., and good evening to investors calling in from Asia. I’d like to welcome you on behalf of AIXTRON’s Executive Board, to presentation of our 2012 first half year results.

I’m going to open the presentation by giving you an overview on the current market environment as well as some of the key financial elements in the last quarter. Wolfgang will then elaborate on some aspects of our half year financial and business performance, before I close the presentation by discussing our prospects for the rest of the year and beyond.

Let me start by making some general comments. During our Q1 call on April 26, we shared with you our expectation that Q2 would not be any better than Q1 and so it has proved to be. We also shared with you our expectation of a potentially better second half. At this stage, quotation levels suggest that we will see a gradual increase in demand in the second six months, and we continued to believe that we will see significant increased demand in 2013 providing the macroeconomic environment doesn’t deteriorate further.

So, let me set to the macro scene first. The current economic data suggest a much more moderate development of the global economy in the short-term, also evidenced by the latest news that China’s growth rate slowed to 7.6% year-on-year in Q2, the slowest since 2009. Potentially serious implications of this specific economic growth slowdown signal in the biggest end market for LED equipment, is emphasized by China’s recent announcements of a reduced bank interest rate and foreign dividend tax reduction measures clearly taken to encourage investments within China.

There is however some good news. Some of our customers, especially in Taiwan, have been reporting very high utilization rates which is an essential precursor indicator of any capacity driven equipment demand pick up. Unfortunately many of these same customers remain cautious on adding new capacity at this time, principally because of their doubts on the sustainability of the currently high LED backlighting demand. This understandable customer caution makes the magnitude and timing of any system demand pick up still difficult to forecast with any real precision. Nevertheless, we are still of the opinion that next year will be a much stronger year, based on the predicted increased penetration of LEDs and in general LED lighting market, for which AIXTRON is well positioned to capitalize on this opportunity.

Let me now move on to slide three to pick out some of our key financials from the last quarter. As you can see on this slide there are some positive developments to report from the second quarter results. Revenues were up by 10% sequentially to €46 million compared to the €42 million achieved in Q1 2012. The gross margin improved over the prior quarter by 7 percentage points to 32%. Although still in negative territory, the EBIT achieved in Q2 was a 10% improvement sequentially with the operating loss for the quarter amounting to €16.5 million.

Order intake remained broadly in line with the prior quarter at €30 million, leaving us with an order backlog of around €138 million. I’d also like to point out that after a few years in the wilderness in the silicon world. It’s good to be able to report the return on production orders for our silicon semiconductor equipment business. A large part of these orders, placed by a leading Korean DRAM manufacturer with AIXTRON’s next generation QXP-8300 ALD deposition tool. My colleagues and I continued to believe that AIXTRON has a significant growth opportunity with this tool, given the projected growth in sub-30 nanometer DRAM production.

Now let me hand you over to Wolfgang for a more detailed overview of the first half of 2012 numbers. Wolfgang?

Wolfgang Breme – Executive Vice President and Chief Financial Officer

Thank you Paul and welcome also from my side. Let’s move on to slide four, the consolidated income statement. I would now like to elaborate further on a few key financial figures. I will start with the year-on-year comparison H1 2012 versus H1 2011. During the first six months of 2012, AIXTRON reported total revenues of €88.1 million, a decrease of €292.9 million or 77%, compared to €381 million in the same period last year. The most significant factor in this development was the year-on-year decrease in demand for MOCVD deposition equipment for LED applications in line with the current cyclical downturn of the industry.

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