2 March 2012

Aixtron reports loss in Q4 on revenue down 38% year-on-year

For full-year 2011, deposition equipment maker Aixtron SE of Herzogenrath, Germany has reported revenue of €611m. This is the firm’s second best year, but down 22% on 2010’s €783.8m due to market weakness in second-half 2011. After quarterly revenue fell 49% from Q2’s €175.6m to Q3’s €89.8m, Q4 saw a rise of 56 % to €140.1m, but this was still down 38% on €224.7m a year ago.

“However we look at 2011, it was certainly an extraordinary year by any standard,“ says president & CEO Paul Hyland. “We were still delivering strong revenues in the first half of the year, whereas in the second half, the market environment changed dramatically, resulting in an abrupt reduction in demand for MOCVD systems [due partly to financing pressures on some Asian LED makers, including both sovereign and bank suppression of credit lines and bank loans],“ he adds. Second-half revenue of €229.9m was down 40% on the first-half’s €381m.

Nevertheless, Aixtron was able to quickly adapt to the deteriorating business environment during second-half 2011, and consequently still delivered reasonable profit margins for the full year. Although down from 2010’s 53%, gross margin was 38%. Earnings before interest and taxes (EBIT) fell from 2010’s €275.5m (an operating margin of 35% of revenue) to €112.9m (18% margin). However, in Q4 gross margin was just 8% (down from 43% in Q3 and 52% a year ago), and EBIT was -$16.9m (-12% margin), down from $86m (38% margin) a year ago.

Full-year net profit was €79.5m (13% of revenue), down from 2010’s €192.5m (25% of revenue). However, compared to Q3’s net profit of €61.6m, Q4 saw a net loss of €10.9m.

Compared with free cash flow of €95.9m in 2010, €36.2m was consumed in 2011. Overall, cash & cash equivalents plus cash deposits fell during 2011 from €384.7m to €295.2m.

Total order intake in 2011 was €513.4m, down 31% on 2010’s €748.3m. Intake slowed dramatically in second-half 2011 (by 81%, from first-half’s €432.5m to just €80.9m). Specifically, after falling 77% from Q2’s €222.2m to Q3’s €51.5m, intake fell a further 43% in Q4 to just €29.3m (down 86% on €204m a year ago). Order backlog was €141m (down from €244.8m at the end of Q3 and almost half the €274.8m at year-end 2010). However, this includes a decision in mid-September to reduce order backlog by €100m after receiving increased requests for delivery deferrals since August.

“Our 2011 full-year result still underlines the benefit of the company's flexible business model and stable financial position, which has enabled us to effectively cope with these severe market fluctuations, whilst maintaining our commitment to strategic investments in R&D [up by 9% from €46.1m in 2010 to €50.4m in 2011],“ Hyland says.

Following an assessment of the market outlook for Aixtron’s specific industry and the firm‘s currently limited visibility, management has concluded the likelihood of a continuation of the low level of market activity seen towards the end of 2011 into first-half 2012. In view of this and the consequent likely reduction in inventory turnover, combined with the timing of new product developments in the pipeline, management has decided to make a provision against the potential risk of unsold excess inventories of about €40m, resulting in reduced year-end total inventory of €184.6m.

“We have made the necessary adjustments to our order book and inventory and executed immediate cost-saving measures, including headcount reductions, without jeopardizing our ability to quickly respond to an uptick of demand or diluting our R&D focus,” says Hyland. Indeed, Aixtron plans to further incease R&D spending in 2012.

Aixtron management says that, despite the current market conditions, it remains convinced that the development of a sustainable LED lighting industry will follow this temporary period of uncertainty.

“Our substantial multi-year investment program is not exclusively limited to the development of next-generation LED manufacturing tools,“ says Hyland. “We are also focusing on the development of new technologies for other end markets we believe we can address with the expertise that we have within Aixtron,” he adds.

“In the short term, we believe that the next substantial investment cycle will be triggered by MOCVD demand from the emerging LED lighting market,“ Hyland summarizes. “We continue to see very encouraging signals in the form of increasingly proactive governmental engagement and clear market preparation and positioning activities from significant industry players, specifically targeting the LED lighting opportunity,“ he adds. “The mid- to long-term prospects for the LED industry remain excellent, particularly in view of the increasing worldwide acceptance of the environmental and cost benefits that come with using LED technology for general lighting applications.”

“With currently very limited order visibility, it is far more difficult than in previous years to provide a full year guidance,“ says Hyland. “However, management believes that 2012 looks set to be a transitional year between LED investment cycles with potentially lower revenues.“ Consequently, Aixtron expects that in 2012 it will remain EBIT profitable on the basis of a break-even model of €275m in revenue (€136.8m backlog, revalued at $1.40/€, plus €40m in assumed spares & non-equipment revenues, plus €98m in shippable equipment orders still required) at a gross margin of 40% with operating expenditure of €110m.

See related items:

Aixtron’s Q3 revenue down nearly 50% due to Asian market correction and credit tightness

Aixtron’s revenue and margins dip in Q2 after China customer delays

Aixtron’s revenue drops 9% in Q1

Aixtron’s revenue grows more than 2.5-fold in 2010

Aixtron reports revenue up 11% in Q3 to record €212.7m

See: Aixtron Company Profile

Tags: Aixtron MOCVD

Visit: www.aixtron.com