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Electronics Production | February 01, 2011

Infineon reports successful start into 2011

"In the first fiscal quarter, we continued with the excellent performance of the 2010 fiscal year. Going forward, we expect to grow faster than the market and see another quarter of revenue growth with consistently high margins.", says Peter Bauer, CEO of Infineon Technologies AG.
Fiscal first quarter 2011 review: Record Total Segment Result margin with sales declining, largely due to foreign exchange impact

Infineon’s revenues in the first quarter of the 2011 fiscal year were Euro 922 million, down two percent compared to the fourth quarter of the 2010 fiscal year. On a constant currency basis, total sales for the first quarter were flat with the fourth quarter of the previous fiscal year.

First quarter Total Segment Result was Euro 177 million, an increase of four percent compared to Euro 171 million in the prior quarter. Total Segment Result margin in the first quarter reached 19.2 percent, up from 18.2 percent in the fourth quarter. Total Segment Result margin marked an all-time-high on a comparable basis.

Infineon reported income from continuing operations of Euro 149 million, down from Euro 193 million in the fourth quarter. The decline occurred mainly because income taxes in the fourth quarter of the 2010 fiscal year contained a non-recurring benefit of Euro 69 million from recording a deferred tax asset. Basic earnings per share from continuing operations were Euro 0.14, down from Euro 0.18 in the previous quarter. Diluted earnings per share from continuing operations were Euro 0.13 versus Euro 0.16 in the preceding quarter.

Income from discontinued operations, net of income taxes, was Euro 83 million for the first quarter, down from Euro 197 million in the preceding quarter. Net income from discontinued operations decreased as income from discontinued operations in the fourth quarter of the 2010 fiscal year contained a non-recurring benefit from recording a Euro 82 million deferred tax asset related to the expected gain on the sale of the Wireless mobile phone business and as the first quarter result of the 2011 fiscal year contained a negative valuation impact of foreign exchange options used to hedge the proceeds from the divestiture of Infineon’s Wireless mobile phone business of Euro 32 million.

Net income for the group was Euro 232 million in the first quarter, a decrease from Euro 390 million in the previous quarter. First quarter basic earnings per share were Euro 0.21 and diluted earnings per share were Euro 0.20, down from Euro 0.36 and Euro 0.33, respectively, for basic and diluted EPS in the fourth quarter of 2010 fiscal year.
Working capital amounted to negative Euro 71 million at the end of the first quarter, but deteriorated from negative Euro 130 million at the end of the prior quarter, mainly due to lower provisions and higher inventories.

Of the increase in inventories from Euro 514 million at the end of the prior quarter to Euro 573 million at the end of the first quarter of the 2011 fiscal year, an amount of approximately Euro 20 million is related to the closing of the divestiture of the Wireless mobile phone business. The company also recorded an increase in work-in-progress in anticipation of higher revenues going forward.

Investments from continuing operations, which the company defines as the sum of purchases of property, plant, and equipment, purchases of intangible assets and capitalized research & development (R&D) assets, were Euro 131 million in the first quarter of the 2011 fiscal year, compared to Euro 163 million in the prior quarter.

Depreciation and amortization was Euro 83 million, down from Euro 85 million in the fourth quarter of the 2010 fiscal year. Free cash flow3 from continuing operations for the first quarter was Euro 4 million, down from Euro 236 million in the fourth quarter of the 2010 fiscal year.

Fully diluted share count down by a full percentage point as Infineon buys-back its 2014 convertible As of December 31, 2010, the company’s gross cash position3 stood at Euro 1,669 million with a net cash position3 of Euro 1,293 million, down from Euro 1,727 million and Euro 1,331 million, respectively, as of September 30, 2010. Both decreased primarily due to the repurchase of a nominal Euro 28 million of the company’s 2014 convertible bond for cash of Euro 80 million. Through the repurchase, Infineon reduced the fully diluted share count by a full percentage point.

Outlook for the second quarter of the 2011 fiscal year: A quarter of revenue growth with consistently high margins

Infineon expects revenues for the second quarter of the 2011 fiscal year to be up slightly compared to the first quarter, with Total Segment Result margin of 18 to 20 percent.

Within the expected sequential revenue increase, Automotive (ATV) revenues are expected to grow markedly, Chip Card & Security (CCS) turnover should show some growth, and Industrial & Multimarket (IMM) sales are expected to increase only slightly.

Outlook for the fiscal year 2011: Raising anticipated growth and margin

Even at an assumed Euro/U.S. Dollar exchange rate of 1.40, Infineon now expects full- year revenue growth to be a mid-teens percentage, compared to a rate of close to 10 percent guided for so far. Within this outlook, the company anticipates greater than group average growth for both ATV and IMM and below group average growth for CCS revenues.

Total Segment Result margin for the 2011 fiscal year is expected to be a high teens percentage of sales, compared to a mid to high teens percentage guided for thus far.

In response to continued high levels of order intake and sustained allocation across multiple product lines, Infineon now anticipates that investments will total around Euro 700 million in the 2011 fiscal year, compared to the previous guidance of Euro 550 million and compared to Euro 325 million in the 2010 fiscal year.
Depreciation and Amortization is now expected to slightly exceed Euro 400 million for the 2011 fiscal year, compared to Euro 336 million in the 2010 fiscal year and compared to the previous guidance of about Euro 400 million.

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