AT&S records slight upward trend in the first quarter

AT&S records slight upward trend in the first quarter

• Revenue in Q1 2024/25 increases 1% to € 349 million compared to Q4 2023/24 (€ 345 million) and is 3% lower than in the prior-year quarter (Q1 2023/24: € 362 million)
• Adjusted EBITDA of € 97 million corresponds to a margin of 27.6%
• Guidance for FY 2024/25 and 2026/27 confirmed

Leoben – “As expected, we are still operating in a difficult market environment where forecasts keep changing. The market is recovering as projected, but the recovery is slower than anticipated. We expect the situation to stabilize towards the end of the current financial year,” CEO Andreas Gerstenmayer outlines the situation and emphasizes that the company is preparing for continuing price pressure. “Thanks to the timely intensification of our efficiency and cost optimization programs and the progressing customer diversification, we were able to increase revenue slightly over the previous quarter, while EBITDA even rose by 63%. This upward trend confirms the ongoing transformation process on which we continue to work very hard.”

“We are convinced that AT&S is well positioned in market segments benefiting greatly from digitalization and electrification, and that artificial intelligence will bring further opportunities. To that effect, we are swiftly driving our projects in Kulim and Leoben forward and are highly satisfied the progress achieved,” Gerstenmayer outlines the company’s perspectives and announces: “We will start production at the two new plants in Malaysia and Austria in the current financial year and position our global IC substrate triangle Chongqing-Kulim-Leoben in line with market requirements,” Gerstenmayer explains.

In comparison with the same quarter of the previous year, consolidated revenue declined by 3% to € 349 million (PY: € 362 million) in the first quarter of 2024/25. Adjusted for currency effects, consolidated revenue decreased by 4%. This decline was primarily driven by strong price pressure both for printed circuit boards and IC substrates, which AT&S had already been confronted with in the second half of the previous year.

EBITDA declined by 14% from € 75 million to € 65 million. The reduction in earnings is primarily attributable to the increase in price pressure. In order to counter the effects from the currently difficult market environment, such as price pressure and inflation, AT&S continued to consistently implement its comprehensive cost optimization and efficiency program. In addition to price pressure, the start-up costs in Kulim, Malaysia, and Leoben, Austria, as well as costs related to the cost optimization and efficiency program had a negative impact on earnings. Adjusted for these costs, EBITDA amounted to € 97 million (PY: € 92 million), which corresponds to an increase by 4%.

The EBITDA margin amounted to 18.5% (adjusted EBITDA margin: 27.6%), falling short of the reported prior-year level of 20.7% (adjusted EBITDA margin: 25.5%).

Depreciation and amortization increased by € 6 million to € 73 million (21% of revenue) due to additions to assets and technology upgrades. EBIT declined from € 8 million to € -8 million. The EBIT margin amounted to -2.3% (PY: 2.3%). Finance costs – net fell from € -5 million in the previous year to € -20 million primarily due to higher interest expenses. This development was largely driven by a significant increase in financial liabilities and the related finance costs. The loss for the period fell from € -2 million to €-34 million, leading to a decline in earnings per share by € 0.81 from €-0.18 to € -0.99.

The seasonally weak cash flow from operating activities amounted to € 14 million in the first quarter of 2024/25, down 94% on the previous year. The exceptionally good prior-year value benefited, on the one hand, from working capital optimizations totaling roughly € 115 million and, on the other hand, from higher payments related to the communicated major projects, which declined by approximately € 85 million year-on-year as planned. Based on the current planning, the company expects a seasonally significantly higher cash flow from operating activities of approximately € 70 million¹ in the second quarter of 2024/25.

Key figures

¹⁾ Adjusted for start-up and restructuring costs

²⁾ Incl. leased personnel, average. As at June 30, 2024: 13,512

The asset and financial position as of June 30, 2024 was still characterized by investing activities and the related financing activities. Total assets declined, mainly due to market-driven adaptations to capacity expansions. As a result of the transfer of assets ordered by a customer, total assets decreased by 1% compared to March 31, 2024 and amounted to € 4,636 million, despite additions to assets. The transfer of assets also led to a reduction in financial liabilities and the outstanding repayment volume of € 95 million in the financial year 2024/25. The equity ratio decreased by 0.4 percentage points to 20.3% due to the negative result for the period attributable to shareholders and the high investment volume

Cash and cash equivalents increased to € 691 million (March 31, 2024: € 676 million). In addition, AT&S has unused credit lines of € 432 million to secure the financing of the future investment program and short-term repayments.

Expected market environment

After the extreme fluctuations of the past quarters, volume has already stabilized in some business segments. A continuous increase in demand can be expected in the medium to long term as the implementation of the key business drivers, i.e. digitalization and electrification, continues to progress. In the short term, seasonal effects will contribute to the recovery.

The expectations for AT&S’s individual segments are currently as follows: In the area of mobile devices, new AI applications give rise to optimistic forecasts. Despite the slight recovery anticipated for mobile devices, the market in the printed circuit board segment will remain challenging due to persisting price pressure. The module printed circuit board business will continue to develop positively.

Although the PCB market is currently still under pressure in this area, among other things due to higher inventory levels in the supply chain and due to weak demand for e-mobility, it promises a growth trend in the medium term as the electronic content per vehicle continues to increase. In the industrial segment, the market is expected to stagnate at the week level of the previous year in 2024.

The market for notebooks is generally subject to quarterly fluctuations. In the markets for IC substrates, demand for notebooks in 2024 is expected to be higher than in 2023. This should lead to higher demand for IC substrates since inventories have now normalized. However, price pressure will continue.

Since a high share of investments in the server market is currently directed towards high-priced products focused on artificial intelligence, the reduction of inventories is proceeding more slowly than initially expected. Inventory levels should have normalized by the second half of the financial year 2024/25, and demand for server products is expected to pick up again. The most recent order planning of AT&S’s main customers also indicates such a development. Due to the expected change in architecture, further positive changes in product mix are anticipated, with the trends towards technologically higher-end IC substrates also expected to continue; AT&S will benefit from this trend.

Outlook 2024/25

Based on the stabilization on the volume side, demand is expected to recover, in particular in the second half of the financial year 2024/25. Nevertheless, the company assumes that strong price pressure will continue. The consistent implementation of and further focus on the already ongoing efficiency programs are intended to counter this pressure. In addition to comprehensive cost-cutting measures, a reduction of up to 1,000 employees will be implemented at the existing locations.

After the high investments of € 996 million in 2022/23 and € 855 million in 2023/24, net capex will decline significantly in the coming years. The management is still planning investments of roughly € 500 million for the financial year 2024/25 depending on the market environment and progress of projects. The majority of these investments will be used for the IC substrate production at the new plants in Kulim and Leoben.

With the start of high-volume production at the two plants at the end of the financial year 2024/25, revenue effects from the successful diversification of the customer base for IC substrates will increasingly show an impact. The significant capacity increase as a result of the two new plants is already attracting interest and visitors have regularly been impressed by the two new plants. Based on the positive reputation gained as a high-tech supplier, interest in the additionally created capacity is also increasing among existing and potential new customers.

AT&S expects to generate annual revenue in the range of € 1.7 to € 1.8 billion in the financial year 2024/25[1]^{and thus confirms the outlook for the current financial year. Excluding effects from the start-up of the new production capacities in Kulim and Leoben as well as one-off costs from the implementation of the cost optimization and efficiency program (including redundancy costs) of up to € 88 million, the adjusted EBITDA margin is expected to range between 25 and 27%.}

Guidance 2026/27

The production capacity expansion in Kulim and the expansion of the site in Leoben are still developing positively despite the currently challenging global economic situation. AT&S assumes that revenue of approximately € 3.1 billion will be generated in the financial year 2026/27¹ and expects an EBITDA margin of 27 to 32%. This forecast does not include potential revenue from the second plant built by AT&S in Kulim. The management monitors the currently tense geopolitical situation very carefully in order to be able to respond to developments at any time and to make strategic adaptations.

 ^[1] Refers to the current company structure, including the plant in Ansan, Korea