Annual Report 2019 Siltronic Group Key Figures
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Perfect Silicon Annual Report 2019 Solutions Siltronic Group key figures Statement of profit or loss In EUR million 2019 2018 Sales 1,270.4 1,456.7 Gross profit 457.6 631.9 Gross margin % 36.0 43.4 EBITDA 408.7 589.3 EBITDA margin % 32.2 40.5 EBIT 298.3 497.7 EBIT margin % 23.5 34.2 Financial result 4.4 – 9.3 Income taxes – 41.7 – 87.8 Result for the period 261.0 400.6 Earnings per share EUR 7.52 12.44 Capital expenditure and net cash flow In EUR million 2019 2018 Capital expenditure in property, plant and equipment, and intangible assets 363.0 256.9 Net cash flow 81.3 240.4 Statement of financial position In EUR million Dec. 31, 2019 Dec. 31, 2018 Total assets 1,945.0 1,818.2 Equity 930.2 915.7 Equity ratio % 47.8 50.4 Net financial assets 588.9 691.3 Non-financial performance indicators 2019 2018 Efficiency of the use of silicon (100 percent corresponds to the 2016 base) % 103 99 Energy use per wafer area (100 percent corresponds to 2015 base) % 104 91 Waste recycling ratio % 69 70 Water withdrawal per wafer area (100 percent corresponds to 2015 base) % 107 89 Occupational accidents at work per million working hours Number 2.5 1.9 Occupational accidents with chemicals per year (number of affected employees) 5 0 Employees (excluding temporary employees) 3,669 3,914 Company profile Success with wafers Siltronic is one of the world’s leading manufacturers of hyperpure silicon wafers with diameters up to 300 mm and partner of many leading semiconductor companies. The Company has a network of state-of- the-art production sites in Asia, Europe and the USA. Silicon wafers are the basis of modern micro- and nanoelectronics and a key component in semiconductor chips in e.g. computers, smartphones, navigation systems and many other applications. Technology leadership and a consistent focus on improving efficiency form the bedrock for increasing the Company’s value going forward. Content 1 Company profile 14 Combined management report 77 Non-financial report issued by Siltronic AG, Munich 2 Figures and Facts 15 Business and economic conditions 20 Business report 101 Consolidated financial statements 5 To our shareholders 23 Financial position and financial performance 102 Consolidated statement of profit or loss 5 Letter to Shareholders 34 Siltronic AG 103 Consolidated statement of financial position 7 Supervisory Board report 38 Non-financial performance indicators 104 Consolidated statement of cash flows 11 Siltronic on the stock exchange 44 Risk and opportunity report 105 Consolidated statement of 54 Outlook comprehensive income 56 Compensation report 106 Consolidated statement of changes in equity 65 Disclosures relevant to acquisitions 107 Notes to the consolidated financial 68 Report and declaration on statements of Siltronic AG and subsidiaries corporate governance 150 Additional information 1 Siltronic Figures and Facts Our sites End markets for semiconductor applications Germany Munich (Headquarters) Burghausen Freiberg France Italy USA Singapore Taiwan South Korea Japan China Our way to success Founding of Wacker- Acquisition of Freiberger Chemitronic Gesellschaft für Elektronikwerkstoffe Wacker Chemie AG Elektronik-Grundstoffe mbH Produktions- und Vertriebs- Take-over of the majority sells majority stake (‘Wacker-Chemitronic‘) gesellschaft mbH interest in SSW in Siltronic 1962 1968 1978 1995 2006 2014 2015 2017 2018 Development of the Founding of Wacker Foundation of the joint Siltronic successfully Siltronic celebrates its first silicon wafer Siltronic Corporation in venture Siltronic Silicon goes public 50th anniversary Portland (USA) Wafer Pte. Ltd. (SSW) in Singapore Wafer production Future-proof with wafers Wafers made of hyperpure silicon are so versatile in their use that probably almost everyone comes into contact with them. Siltronic‘s technology is to be found in smartphones, PCs and laptops and increasingly in industrial applications and automobiles. And the demand for wafers increases with every technological advancement - good prospects for our business. Since our company was 1. Polysilicon founded over 50 years ago, it has developed just as dynamically as the challenging market envi- ronment in which we operate. With our unique combination of innovative strength and precision, Siltronic we create the conditions for devices and applications to become ever more powerful and faster. Technological innovation and a consistent focus on efficiency gains is the basis for future growth of the company value. 2. Crystal pulling Driving wafer development Short innovation cycles, a highly competitive market. Around 1,850 patents and patent applications clearly demonstrate our claim to be among the technology leaders in the global market. Technology generation in nm 11 11/8 8 8/5 5 5/3.5 3.5 3. Wire sawing 11 nm development mass production 8 nm development mass production 5 nm development mass production 2015 2016 2017 2018 2019 2020 2021 4. Cleaning and etching Global player with strong roots in Germany. 5. Polishing Siltronic is one of the world‘s leading manufac- ≤ 100 mm 125 mm turers of hyperpure 150 mm 200 mm 300 mm silicon wafers with a dia- Silicon wafer meter of up to 300mm 6. The term wafer refers to silicon slices approximately 1 mm thin, which are given an extremely flat surface through and a partner of many technically very demanding processes. The choice of the crystal growing process is determined by the later appli- cation. After various production steps, the customer receives leading chip manufacturers. the wafer manufactured according to his specifications in special packaging that allows the wafers to be used immediately in his production line. Dr. Christoph von Plotho, Rainer Irle, Chief Executive Officer Chief Financial Officer 4 To our shareholders Siltronic Annual Report 2019 / Letter to Shareholders Letter to Shareholders Dear shareholders, dear customers, business partners and employees The past year has once again clearly shown how volatile the semiconductor industry is. At the turn of the year 2018 / 2019, market observers, analysts and above all our customers were still optimistic. This was still evident in December 2018 in the strong demand for our wafers and the prices that could be achieved. We already warned against too much optimism at the beginning of 2019, but the extent of the downturn was not yet foreseeable. Our statement at the end of January that 2019 would see a rather muted development was based primarily on the expected macroeconomic and geopolitical uncertainties. However, due to the market slowdown, we had to make further downward adjustments to our forecast for 2019 in April and June. Among the burdening factors were the ongoing trade dispute between the USA and China, disagreements between Japan and South Korea and possible burdens from Brexit, to name but the most important problem areas. These disruptive factors led to a deterioration in consumer confidence and a slowdown in economic growth in many regions of the world. For example, in October 2019, the International Monetary Fund was only expecting global GDP to increase by 3.0 percent in 2019, compared with plus 3.5 percent at the beginning of 2019. Consumer reticence was reflected in a buildup of finished goods inventories at our customers, which was surprisingly strong in terms of speed and extent. In this challenging environment, our sales declined by 12.8 percent, mainly due to the lower wafer area sold in 2019. We are pleased to report that the average prices for our wafers still rose slightly on a euro basis in the course of the year. The drop in demand affected all wafer sizes, but the decline was more moderate in 300 mm than in the smaller diameters. We recorded a slight decline in market share, reflecting our strong position among the leading memory manufacturers. The EBITDA margin was 32.2 percent. Net cash flow was again positive. Earnings per share amounted to EUR 7.52, after EUR 12.44 in the previous year. Overall, we did quite well and ultimately achieved the second-best result in the company’s history. In accordance with our general dividend policy, which provides for a payout of approximately 40 percent of net income, the Management Board and Supervisory Board propose a dividend of EUR 3.00 for 2019. We cannot rest on the results achieved in previous years, and we will face further challenges in 2020. A positive turnaround in the geopolitical and macroeconomic environment may come quickly, but it does not have to. In our planning we are aware that there are things we can influence and things that are beyond our influence. We hardly have any influence on the demand for our wafers. However, we can influence our technological performance. We have done that and are continuing to work intensively on it. We have used the strong operating cash flow for the years 2017 to 2019 to invest intensively in automation, capabilities, digitization and also a moderate expansion of our 300 mm capacities. In 2019, our investments amounted to around EUR 360 million, compared to just under EUR 260 million in the previous year. Expenditure on automation mainly relates to the German production sites. The investments in capabilities ensure that we can maintain and further expand our position as one of the technolo gy leaders. The strategic goal here is to be able to support all new customer specifications and the new design rule developments from the very beginning within the framework of leading-edge technology. We will continue to make funds available for digitization in order to optimize work processes worldwide. We have been continuously influencing cost trends for years, although there are limits to this, as around 50 percent of our total costs are fixed, which is clearly a burden when production capacity has a lower utilization.