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SUSS MicroTec AG: Significantly Higher Order Entry in Q2
- Order Entry in Q2: EUR 37.5 Million – Sales Stable at EUR 37.0 Million
- Q2 EBIT: EUR 2.2 Million, Half Year EBIT Margin 8 Percent
- 2007 Guidance Reconfirmed
The SUSS MicroTec Group (ISIN DE0007226706) has noticed a significant upturn in new business. After the first quarter’s order entry fell below expectations, new orders booked between April and June 2007 totaled EUR 37.5 million. That was EUR 0.6 million more than in the second quarter of 2006 when investment in semiconductor equipment was extremely high. Sales at EUR 37.0 million failed to reach the previous year’s level (EUR 43.1 million). H1 2007 sales at EUR 76.4 million were 7 percent down on the previous year when sales totaled EUR 82.1 million.
The earnings trend continues to reflect pressure on margins due to industry-specific cyclical weakness in the first quarter. Earnings before interest and taxes (EBIT) fell in the second quarter to EUR 2.2 million (Q2/06: EUR 7.8 million) and the EBIT margin was down on the year to 6.0 after 18.0 percent. First-half EBIT was EUR 6.1 million after EUR 12.6 million in H1/06. The first-half EBIT margin was 8 percent after 15.3 percent accordingly. Second-quarter earnings after taxes (EAT) were EUR 2.0 million (Q2/06: EUR 6.3 million) as no material tax or interest factors took effect. First-half EAT was down 44.7 percent to EUR 5.5 million from EUR 10.0 million.
Reasons for the decline in earnings were, along with the above-mentioned pressure on margins, higher administrative and sales costs (up 10.6 percent on a half-yearly basis). The EUR 1.2 million (10.1 percent) increase in sales costs in particular was due to a deliberate strategic personnel buildup.
The second-quarter gross profit margin was 47 percent (Q2/06: 48.5 percent). In the first quarter of 2007, it was only 42 percent. The first-half margin was 44.5 percent (H1/06: 46.8 percent). As in the first quarter, pressure on margins was primarily due to important customers having in part built up surplus capacities last year and now requiring less new investment in machinery. That enabled customers in some cases to achieve price discounts. The product mix of tools sold in Q2 had no significant effect on the margin.
The net cash position (the balance of cash and cash equivalents and financial liabilities) rose in the half year comparison to EUR 11.7 million from EUR 8.4 million but was down EUR 3.4 million on December 31, 2006, due primarily to a decline in cash and cash equivalents. The decline was primarily a result of the fact that in spite of positive EAT only a balanced cash flow from operating activities was achieved (previous year: EUR 4.8 million). Lower customer prepayments are the main reason. The trend was apparent in the first quarter and has continued.
Free cash flow at the end of the first half of 2007 amounted to minus EUR 4.1 million (June 30, 2006: EUR 1.2 million).
SEGMENT OVERVIEW LITHOGRAPHY: In this, the most important segment for SUSS MicroTec, from January to June sales totaled EUR 43.2 million (H1/06: EUR 51.7 million). Order entry was EUR 30.0 million (H1/06: EUR 47.3 million) with the second quarter at EUR 17.2 million showing a distinct improvement on the first quarter’s EUR 12.7 million. The segment result was down – due to the sales decline – to EUR 8.3 million from EUR 13.7 million. In the second quarter, good margins in the Mask Aligner business partly offset the poorer margins in Coaters. The EUR 33.3 million order backlog at the end of June 2007 ensures high capacity utilization and a stable sales and earnings development.
SUBSTRATE BONDER: At EUR 9.9 million, first-half sales in 2007 were higher than the previous year’s EUR 8.6 million. Order entry amounted to EUR 12.0 million (H1/06: EUR 6.4 million) and the order backlog was EUR 12.2 million, therefore there is a good chance of segment sales exceeding EUR 20 million for the first time in 2007. At this rate, SUSS MicroTec will soon be a market leader in the industry sector. Thus, the heavy R&D investment in the segment (EUR 1.6 million after EUR 0.5 million in the first half of 2006) is beginning to pay dividends, although higher marketing and sales costs still burden the result, which was minus EUR 0.3 million (Q1/06: minus EUR 0.1 million).
DEVICE BONDER: Sales totaling EUR 3.5 million are in the books here after EUR 2.8 million the previous year. Order entry was EUR 3.0 million (H1/06: EUR 4.1 million) and the segment result was EUR 0.2 million (H1/06: EUR 0.5 million). SUSS MicroTec AG has since completed the sale of its Device Bonder business, as reported on July 13.
TEST SYSTEMS: In the first half of 2007, this segment posted EUR 12.4 million in sales, which was roughly on a par with the previous year’s EUR 12.7 million. Order entry was EUR 13.0 million (H1/06: EUR 13.3 million) and the segment result at minus EUR 0.2 million was only slightly in the red (H1/06: EUR 0.9 million). This result was due to a lower gross profit margin as a result of continuing pressure on margins and to higher sales expenses in Asia and higher product development costs in the first half. Special mention must be made here of the opening of an applications and measurement center in Singapore. Generally speaking, orders were up in the optoelectronics market (LEDs and infrared sensors), whereas traditional markets such as error analysis and microchip characterization showed no growth.
OTHER: This category included the final acceptance of a number of tools supplied to IBM with the result that first-time sales of EUR 1.2 million were booked as part of the C4NP project.
2007 GUIDANCE SUSS MicroTec continues to be confident of achieving 2007 sales (of approximately EUR 150 million) and an EBIT margin (of approximately 10 percent) at the previous year’s level. As stated at the Shareholders’ Meeting, achieving the EBIT margin will pose the greater of the two challenges.
SUSS MicroTec anticipates a further increase in order entry in the third quarter, whereas sales and earnings will reflect the first quarter’s lower order entry.
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