Infineon: 'Our cost reduction measures are beginning to take effect'

In the Automotive (ATV), Industrial Power Control (IPC) and Power Management & Multimarket (PMM) segments, the decline was roughly in line with group average. Revenue recorded by the Digital Security Solutions (DSS) segment was only slightly down, the company states in its 1Q20 report. The gross margin improved quarter-on-quarter from 35.5% to 37.0%. This includes acquisition-related depreciation and amortization as well as other expenses totaling EUR 18 million, mainly relating to the acquisition of International Rectifier. The adjusted gross margin improved from 36.3% to 37.9%. The first-quarter Segment Result amounted to EUR 297 million, compared to EUR 311 million in the final quarter of the preceding fiscal year. The Segment Result Margin increased from 15.1% to 15.5%. The improvement in gross margin and Segment Result Margin, despite lower revenue, was influenced by a positive non-recurring effect of approximately EUR36 million arising in connection with the refined allocation of centralised, production-related overhead costs across the various stages of the manufacturing process. Operating income increased from EUR 246 million to EUR 266 million quarter-on-quarter. The financial result improved from a net expense of EUR 18 million in the final quarter of the 2019 fiscal year to a net expense of EUR 13 million in the first quarter of the 2020 fiscal year. Income from continuing operations amounted to EUR 210 million, up from EUR 163 million in the previous three-month period. Income from discontinued operations for the first quarter was nil, compared to a loss of EUR 2 million reported for the final quarter of the previous fiscal year. Thus, first-quarter net income improved to EUR 210 million, up from EUR 161 million one quarter earlier. "Our well-diversified business performed robustly at the beginning of the fiscal year. Under difficult conditions, revenue fell in line with expectations. Our cost reduction measures are beginning to take effect. Those measures and several non-recurring factors caused the Segment Result to come in slightly better than expected," says Dr. Reinhard Ploss, CEO of Infineon, in the report. "Demand for the latest generation of our silicon microphones is growing dynamically. We are also seeing signs of improvement in individual areas such as the server business. Overall, however, we do not expect to see a broad based recovery of demand before the second half of the fiscal year. Our long-term growth drivers remain intact and we are making a crucial contribution to shaping the future of mobility and energy efficiency,” Ploss continues.