AIXTRON SE : Q3 Orders and Revenues improve sequentially 15% and 35%

Q3 Orders and Revenues improve sequentially 15% and 35%

EUR 51.5m Inventory write-downs reflecting the slower than expected recovery of demand
LED-lighting gaining further momentum, but customers still hesitant to invest
2012 Revenues predicted to reach ca. EUR 220m with an EBIT loss of EUR 125m

Aachen/Germany, October 25, 2012 - AIXTRON SE (FSE: AIXA; NASDAQ: AIXG), a leading provider of deposition equipment to the global semiconductor industry, has seen its Q3/2012 equipment orders pick up by 15% sequentially to EUR 34.5m. Current Q4/2012 quotation levels suggest a continuation of this development, implying that the order trough point in the current investment cycle has been passed. Q3/2012 revenues increased by 35% sequentially to EUR 62.2m. However, the pickup in order intake and revenues during Q3 was not as strong as expected.

Consequently, Management has reviewed the immediate outlook in comparison to the inventories held and concluded that despite the positive long term outlook for the LED industry that the existing stock held was inappropriately high in comparison to the current subdued level of demand in the market. Management has subsequently decided to write down EUR 51.5m of inventories as excess to requirement. As it is now evident that AIXTRON will not return to profitability during 2012, the Company has now guided towards a 2012 EBIT loss of ca. EUR 125m with revenues of ca. EUR 220m for the fiscal year 2012. 

Key Financials  

Financial Highlights
Q3/2012 Revenues of EUR 62.2m increased on a sequential basis coming in 35% higher (Q2/2012: EUR 46.1m; Q3/2011: EUR 89.8m) than Q2/2012. However, not surprisingly, given the low order intake volumes recorded over the last 12 months, 9M/2012 revenues were 68% lower than the same prior year period (9M/2011: EUR 470.8m).

The Q3/2012 gross profit was reported at EUR -42.3m. This figure was significantly lower than in Q2/2012 (EUR 14.7m), mainly due to the previously described inventory write downs, but also influenced by a less favorable product mix which included a lower level of final customer acceptances and softer pricing on some legacy products. On a year on year comparison, AIXTRON's nine month gross profit of EUR 17.3m was lower than the corresponding 2011 period (Q3/2011: EUR 38.7m; 9M/2011: EUR 219.7m). This is largely due to the effects described above, and from the ongoing fix-cost effects of facility, production and service costs reflected in cost of sales.

As a result of the reduced gross profit, EBIT in Q3/2012 decreased sequentially from
EUR  16.5m to EUR  78.3m (Q3/2011: EUR 0.6m). The 9M/2012 EBIT amounted to EUR  113.0m (9M/2011: EUR 129.8m).

Although customer orders improved less than expected, AIXTRON's order intake volume in Q3/2012 increased from the trough levels recorded in the first half of the year, and came in sequentially at EUR 34.5m (Q2/2012: EUR 30.0m, Q3/2011: EUR 51.5m) which represents a 15% improvement over the previous quarter.

Despite high MOCVD utilization rates, which have historically been seen as a precursor to an imminent pickup in equipment orders, in the current environment, AIXTRON's customers still remain hesitant about adding new LED production capacity. This hesitancy is perceived to be also influenced by the recent highly competitive pricing development in consumer end markets and the consequent margin pressure on LED manufacturers.

The total 9M/2012 order intake of EUR 96.0m compares to a 9M/2011 level of EUR 484.1m. In other end markets, AIXTRON has seen its non-LED business gaining further traction throughout 2012. This includes Silicon Semiconductor equipment, with increasing demand for the new QXP-8300 ALD system, offering a compelling and cost effective technology solution for memory producers.

Similarly; the Company is seeing far greater interest from Power Electronics and LED customers in the recently launched AIX G5+ systems which are optimized for both power electronics devices and GaN-on-Si LED structures. The Company's recently announced PRODOS family of Organic Semiconductor technology has attracted interest in both the R&D community and amongst the emerging OLED production industry. AIXTRON is currently commissioning and qualifying a production system for a major Asian customer.

Management Review
Paul Hyland, President & Chief Executive Officer at AIXTRON remains confident that AIXTRON has the appropriate strategy to capitalize on the next LED-lighting investment cycle and to be able to pursue adjacent growth market opportunities:

"We are clearly getting closer to the start of the third major LED investment cycle, namely for LED general lighting. It is not a question of 'if' this substantial market arrives; it is only a question of 'when'. Despite the difficult macro-economic circumstances we are all contending with, we continue draw cautious optimism from the frequent evidence of increasing adoption momentum towards LED-lighting. It is however increasingly difficult in the current economic environment, to predict accurately the exact timing of that Solid State Lighting inflection point. This difficulty is evidenced by a much slower than expected pick up in orders and revenues, which has led to the EUR 51.5m write down on inventories we reported in Q3.

But whatever the precise timing may be, what is certain is that the absolute volume growth being predicted for LED lighting adoption will eventually require a very substantial buildup of LED manufacturing capacity over the next years. This is a significant growth opportunity for AIXTRON and we are confident that we are well positioned for this next market up cycle with our market-driven R&D investments, our technology track record, our strong local footprint and solid customer relationships.

We have the necessary support of a strong Balance Sheet with a solid cash position and no debt and will continue to look for business efficient cost saving measures to optimize our cost structure going forward."

Outlook
For fiscal year 2012, AIXTRON expects sequentially stronger fourth quarter revenues, albeit considerably less than previously expected. However, as a result of the unexpected slower demand recovery, the Company will not report a profit in fiscal year 2012. The company expects to achieve full year 2012 revenues of ca. EUR 220m and an EBIT loss of ca. EUR  125m.

AIXTRON Management expects an increase in demand for manufacturing equipment in 2013, driven by projected stronger equipment demand from the LED general lighting market as well as other non-LED applications and expects to return to profitability during the year 2013. AIXTRON also expects to gain further traction in emerging MOCVD non-LED applications and other technology markets, including Silicon Semiconductor, Power Electronics and Organic Semiconductor applications.

Financial Tables
The 9M/2012 results presentation as well as the consolidated financial statements (statement of financial position, income statement, cash flow statement, statement of changes in equity) relating to this press release are available at http://www.aixtron.com, section "Investors, Reports/Presentations", as part of AIXTRON's Nine Months Financial Report 2012.