MUNICH (dpa-AFX) - Weak demand in the semiconductor industry will continue to weigh on wafer manufacturer Siltronic in 2024. In addition, costs for the ramp-up of production at the new plant in Singapore are weighing on the operating profit margin. In the long term, however, the MDax company still has high hopes for the billion-euro investment. In order to reduce the debt, which has also increased as a result, and due to the gloomy environment, the dividend will fall significantly to 1.20 euros per share - compared to 3.00 euros in the previous year. The share price slipped significantly on Tuesday.

"Due to the weakness in demand caused by increased customer inventories and the associated ongoing postponement of delivery volumes", turnover in 2024 is likely to be at the previous year's level, the company surprisingly announced on Monday evening. The first six months in particular will be affected, which is why revenue in this period is only likely to be at the level of the second half of 2023. According to preliminary figures presented at the beginning of February, earnings for 2023 as a whole fell by 16% to EUR 1.5 billion.

Nevertheless, the company continues to expect stable average sales prices for its semiconductor wafers. These are round silicon wafers that customers use to manufacture memory, logic and other electronic chips.

However, start-up costs for the plant in Singapore will put pressure on the earnings margin before interest, taxes, depreciation and amortization (EBITDA margin). It is likely to be up to three percentage points below the 29% achieved in 2023, the company added. However, the Group had already held out the prospect of start-up costs at the end of November.

Excluding the ramp-up costs, however, the operating margin should remain roughly stable in 2024. Siltronic pointed to an easing of the still high energy and material costs in 2023, although this is likely to be offset by higher personnel costs and a lower result from exchange rate hedging transactions. The operating result (EBIT) is also likely to fall significantly because depreciation and amortization will almost double as a result of the high level of investment in recent years.

Analyst Constantin Hesse from investment firm Jefferies now expects market expectations to fall significantly, with earnings before interest, taxes, depreciation and amortization alone falling by up to 20 percent. This will weigh on the share price.

Shortly after the start of trading, the shares fell to 82.65 euros, their lowest level since December. However, they then recovered a little: at the end of the day, they were at the bottom of the MDax, down 6.8 percent at 86.00 euros. Nevertheless, the upward trend that started last May after an interim low of EUR 58.40 is now shaky. Its lower limit is around 86 euros.

Jefferies expert Hesse sees a significant setback as an opportunity. The semiconductor industry is currently at a cyclical low in view of further declining inventories and a still slow recovery in the end markets. In addition, Siltronic's management is usually conservative in its outlook, so that there could certainly be room for upward movement in the course of the year.

Harry Blaiklock, analyst at the Swiss bank UBS, is more cautious. In view of weak demand, business development is difficult to predict. Therefore, there are certainly risks with regard to the second half of the year, especially as a persistent weakness could ultimately also put pressure on sales prices.

Despite the difficulties, the Siltronic management team led by CEO Michael Heckmeier remains optimistic for the long term. Megatrends such as digitalization and electromobility should provide a tailwind in the coming years. The targets presented at a capital market day in November remain valid. Turnover is set to increase to more than 2.2 billion euros by 2028. Wacker Chemie 's investment is aiming for a high EBITDA margin of 30 percent./mis/mne/jha