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Second quarter and half-year results 2020
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Second quarter and half-year results 2020
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Agenda
- PASSION. PRECISION. PURITY.
2020 second-quarter and half-year results August 6, 2020 1 - - PowerPoint PPT Presentation
2020 second-quarter and half-year results August 6, 2020 1 - - PowerPoint PPT Presentation
Second quarter and half-year results 2020 PASSION.PRECISION.PURITY. 2020 second-quarter and half-year results August 6, 2020 1 PASSION. PRECISION. PURITY. Agenda Second quarter and half-year results 2020 1 Highlights Mike Allison, CEO 2
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Second quarter and half-year results 2020
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Q2 and H1 growth driven by ongoing recovery in semiconductors; EBITDA margin near 30% as operational improvements continue
- PASSION. PRECISION. PURITY.
H1 results reflect continued focus on cost and technology innovation Sequential quarterly sales up in all business segments except Industry; year on year up in Valves (Display, Semi) and Global Service Further market share gains, supported by high number of spec wins EBITDA margin recovery continues; H1 20 margin above H2 19 and 460 bps above H1 2019 COVID-19 pandemic successfully mitigated so far: plans in place to secure business continuity, VAT employees fully engaged Positive market expectations for remainder of 2020; strength of recovery depends on COVID-19
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Second quarter and half-year results 2020
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EBITDA margin recovery continues in H1 2020
- PASSION. PRECISION. PURITY.
1 Margin based on segment net sales
Segment
(% of total net sales)
H1 net sales
CHF 55m Global Service (17%) Industry (3%) Valves (80%) CHF 256m CHF 319m
H1 EBITDA margin1
40.7% 15.3% 31.2% 29.7% VAT Group AG (100%) CHF 7m
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Second quarter and half-year results 2020
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Market trends remain mixed across our major business units in 2020
- PASSION. PRECISION. PURITY.
Semiconductors
- WFE investments continue to recover, driven by memory; foundry and advanced logic
- Technology advances continues; industry preparing for next nodes
- H2 outlook remains positive with strength in foundry, NAND and China
Display
- Healthy demand for mobile and flexible OLED displays in H1, fading in H2 with overcapacity
- Investment conditions challenging in LCD investment as cycle fades
Solar
- Downturn in 2020 as COVID-19 uncertainty and overcapacity delay investments
- Migration starting from PERC to Heterojunction in H2
- Expect H2 to be stronger than H1
Industry & Research
- R&D projects remained on track in H1 but industrial and automotive slower due to Covid19
- Growth prospects in several industrial applications, including batteries, medical, etc.
- Optimistic outlook for government research spending in 2020
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Second quarter and half-year results 2020
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39% 41% 46% 49% 49% 52%
2015 2016 2017 2018 2019 6M 2020
Innovation, business continuity and customer focus –
- No. 1 market position further strengthened
- PASSION. PRECISION. PURITY.
Source: VLSI Research July 2020, based on 1Q20 actual plus 2Q20 estimated
1 All Industries includes semi & related, general vacuum. 2 Semi & related includes Semiconductors, Displays, Solar, LED Lighting, Hard Disk Drive. 3 Semi includes Semiconductors, LED and HDD
Market share All Industries 1
45% 47% 53% 55% 57% 59%
2015 2016 2017 2018 2019 6M 2020
Market share Semi & Related 2
Total vacuum valve market size
2015: USD 531m 2016: USD 688m 2017: USD 855m 2018: USD 807m 2019: USD 587 6M 2020E: USD 351m
Total vacuum valve market size
2015: USD 804m 2016: USD 969m 2017: USD 1’179m 2018: USD 1’138m 2019: USD 874m 6M 2020E: USD 472m
54% 56% 62% 63% 65% 69%
2015 2016 2017 2018 2019 6M 2020
Market share Semi 3
Total vacuum valve market size
2015: USD 350m 2016: USD 400m 2017: USD 539m 2018: USD 502m 2019: USD 369m 6M 2020E: USD 238m
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Second quarter and half-year results 2020
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Agenda
- PASSION. PRECISION. PURITY.
Highlights Mike Allison, CEO
1
Second-quarter and half-year 2020 financial review Stephan Bergamin, CFO
2
Remainder of 2020 priorities, conclusion and outlook Mike Allison, CEO
3
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Second quarter and half-year results 2020
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Half-year 2020 – Group key figures
- PASSION. PRECISION. PURITY.
Third party net sales CHF 319 m +21% EBITDA CHF 95 m +44% EBITDA margin 29.7% (+4.6pp) EBIT margin 23.3% (+7.0pp) Free cash flow CHF 40 m
- 12%
Free cash flow margin 12.5% (-4.7pp) Free cash flow conversion 42% (-26.5pp) LTM1 Net debt/EBITDA 1.3x
1 LTM: Last Twelve Month
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Second quarter and half-year results 2020
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134 177 262 358 112 154 2019 2020 Q2 order intake Half-year order intake Order backlog
Q2 2020
- rder intake
+32%
H1 2020 order intake up 37% as market recovery and share gains continue
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Half-year 2020 order backlog +38%
1Order backlog as of June 30, 2019 and June 30, 2020
in CHF million
Half-year 2020 order intake +37%
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Second quarter and half-year results 2020
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Recovery continues with strong order and sales development
- PASSION. PRECISION. PURITY.
- Orders at high level following recovery that began in H2 2019
- Book-to-bill ratio at or above 1x for sixth consecutive quarter
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 50 100 150 200 250 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Order intake Net sales Book to bill
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Second quarter and half-year results 2020
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VAT’s business model generates consistently high economic profit on invested capital
- PASSION. PRECISION. PURITY.
- Return on invested capital (ROIC) and cash return on invested capital (CROIC) both substantially above
VAT’s 10.4% weighted average cost of capital (WACC) (from 2019 impairment test)
- Sustainable generation of economic profit over the cycle benefits all VAT stakeholders
- ROIC calculated as NOPAT over invested capital
- CROIC calculated as Free cash flow over invested capital
- Net operating profit less adjusted taxes (NOPAT) is calculated as EBITDA minus depreciation and amortization (excluding amortization of acquired technology and customer relationships) plus finance income (including net
foreign exchange gains/losses from financing activity and excluding other finance income) less taxes at the average Group rate of 15.8% (previous year 17.6%).
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 50 100 150 200 250 300 350 400 2015 2016 2017 2018 2019 6M 2020 Invested Capital LTM NOPAT LTM Free Cash Flow ROIC CROIC WACC1
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Second quarter and half-year results 2020
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135 173 263 319 66 95 2019 2020 Q2 net sales Half-year net sales Half-year EBITDA
EBITDA margin growth from higher volumes and continued
- perational improvements
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29.7%
25.1%
EBITDA margin* Sales +21%
in CHF million
- Higher topline results positively affect half-year EBITDA and EBITDA margin
- Focus on cost, production efficiency is key to VAT’s flexible operating model
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Second quarter and half-year results 2020
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Margin recovery continues despite COVID-19 pandemic
- PASSION. PRECISION. PURITY.
- Semiconductor recovery that started in H2 2019 continues
- EBITDA margin continues to improve sequentially and year-on-year
in CHF million 31.6% 29.9% 25.1% 28.7% 29.7% 20% 25% 30% 35% 50 100 150 200 250 300 350 400 450 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020 Net Sales EBITDA EBITDA-Margin
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Second quarter and half-year results 2020
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Net income increases on higher EBITDA, lower depreciation and reduced taxes
- Lower depreciation as a result of lower capital expenditure in 2019
- Lower tax charge in 2020 the result of tax reform-related costs in 2019 and some recognized
loss carryforwards outside Switzerland in 2020
- PASSION. PRECISION. PURITY.
in CHF million
6M 2020 6M 2019
Change
EBITDA
94.8 65.9 43.8% Depreciaton and amortization
- 20.4
- 23.0
- 11.3%
EBIT 74.4 43.0 73.2% Finance net
- 9.9
- 4.6
116.8% EBT 64.5 38.4 68.0% Income tax expenses
- 8.8
- 13.5
Effective tax rate
- 13.6%
- 35.2%
Net income 55.7 24.9 124.0%
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Second quarter and half-year results 2020
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Growth-driven NWC requirements impacted free cash flow generation in H1 2020
- PASSION. PRECISION. PURITY.
- Trade working capital at 27% of sales, substantially above medium-term target of 20%
- Capital expenditures above very low 2019 levels
52 45 52 40 (7) (12)
Free cash flow
Cash flow from operating activities Cash flow from investing activities Free Cash Flow
6M 2019 6M 2020 100% 88% 79% 86% 57% 51% 39% 58% 69% 91% 42% 6M 2015 2015 6M 2016 2016 6M 2017 2017 6M 2018 2018 6M 2019 2019 6M 2020
Free cash flow conversion
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Second quarter and half-year results 2020
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Net debt largely unchanged vs 2019; seasonally higher due to May dividend payment
- PASSION. PRECISION. PURITY.
- Stable debt situation, liquidity at comfortable level
- Gross debt on June 30, 2020 comprises CHF 200
million bond and partial use of CHF 300 million RCF
- Mid-year leverage of 1.3x seasonally above 1.0x target but
lower than in 2019
- Full-year leverage expected to fall below 1.0x level in line
with previous years
330 334 (94) (104) 236 230 Net debt development
Gross debt Cash and cash equivalents Net debt 6M 2019 6M 2020
1.9 1.4 0.9 1.1 0.7 1.0 0.7 1.5 0.9 1.3 Dec 31, 2015 June 30, 2016 Dec 31, 2016 June 30, 2017 Dec 31, 2017 June 30, 2018 Dec 31, 2018 June 30, 2019 Dec 31, 2019 June 30, 2020
Target level of 1.0x Net Debt/EBITDA
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Second quarter and half-year results 2020
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Summary of H1 2020 financial results and priorities for rest of 2020
- PASSION. PRECISION. PURITY.
Achievements H1 2020
- Continued EBITDA margin recovery, successful mitigation of COVID-19 impacts, and further
improvements in cost and productivity (e.g., ERP standardization)
- Free cash flow in line with expectations, reflecting NWC needed to support growth
- Capex above 2019 levels reflecting Malaysia ramp-up and investments in Switzerland
Finance priorities for H2 2020
- Continued focus on cost and productivity
- Trade working capital in line with production ramp, mid-term target of 20% of net sales remains
- Disciplined approach to capex, expected around CHF 30 million
- Drive ERP improvement project across the business to capture more value
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Second quarter and half-year results 2020
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Agenda
- PASSION. PRECISION. PURITY.
Highlights Mike Allison, CEO
1
Second-quarter and half-year 2020 financial review Stephan Bergamin, CFO
2
Remainder of 2020 priorities, conclusion and outlook Mike Allison, CEO
3
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Second quarter and half-year results 2020
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Our three medium-term growth dimensions remain in place
- PASSION. PRECISION. PURITY.
1st dimension: End market growth
- Medium-term digitalization growth trends such as IoT, AI, AR remain in place
- Hyperscale applications, cloud storage support memory recovery in 2020; foundry remains
healthy
- 5G build-up gaining steam, paving the way for new applications
2nd dimension: Equipment growth
- Growth in equipment investments expected to continue as memory supply and demand
balance stabilizes during 2020
- Technology advances now progressing in all segments (> 100 level NAND, 5nm logic)
3rd dimension: Vacuum valve and vacuum component growth
- Record number of new platforms and applications being developed
- EUV lithography firmly established in small nodes, ecosystem requires more vacuum
- “Zero” particle environments drive opportunities for VAT motion components and modules
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Second quarter and half-year results 2020
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Macro uncertainties remain, but semiconductor equipment visibility is improving with high single-digit growth expected in 2020
- PASSION. PRECISION. PURITY.
1 VLSI research July 2020; 2 DSCC July 2020; 3 PV-Tech Solar Media July 2020
Market 2019 2020 Semiconductor IC1
- 13%
+6% Semiconductor Capex1
- 3%
+0.5% Semiconductor WFE1
- 8%
+9% Semiconductor Vacuum WFE1
- 13%
+9% Display Equipment2
- 25%
+20% Solar Cells Capex3 +4%
- 6%
Solar Fabrication Equipment1
- 34%
- 26%
Semiconductor
- Equipment order visibility improving but
COVID-19 uncertainty remains
- Growth driven by advanced logic/foundry
with broader memory pickup expected in H2 Display
- Equipment had a strong H1 in 2020 but this
is slowing due to overcapacity and LCD investment cycle ending Solar
- Slowdown in H1 2020 due to COVID-19 but
we expect improvements in H2
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Second quarter and half-year results 2020
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Investment in innovation remains VAT’s key to future growth and market share gains
- PASSION. PRECISION. PURITY.
- VAT continues to invest in innovation and the
development of leading-edge technologies
- Further increase in R&D personnel, focus on
new product adjacencies such as modules, motion components and new SMART components – 22% increase in spending in these areas since 2018
- IP protection key to securing our competitive
advantage
Semi Display & Solar Global Service General Vacuum Total
Spec win development
2016 2017 2018 2019 6M 2020
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Second quarter and half-year results 2020
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Our market summary and focus for H2 2020
- General investment sentiment in semiconductor market expected to remain
positive in 2020, first indications suggest growth continuing into 2021
- Service business returning to growth with record order and sales growth in
May and June as upgrade business restarts
- COVID-19 pandemic still biggest uncertainty factor: customers focusing on
business continuity and readiness for a potential second wave
- VAT continues to focus on innovation and internal efficiency improvements to
drive further market share gains and sustainable profitable growth
- PASSION. PRECISION. PURITY.
Market trends and VAT focus
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Second quarter and half-year results 2020
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Full-year 2020 outlook and net sales guidance for Q3
- Semiconductor outlook remains positive; strength of recovery depends on
macro impact of pandemic
- Assuming no substantial demand deterioration vs. H1, VAT expects FY
2020 net sales1, EBITDA, EBITDA margin and net income to be substantially above 2019
- Mid-term EBITDA margin target of 33% confirmed
- 2020 capital expenditure at ca CHF 30 million; free cash flow depends on
working capital needs, may be lower than 2019
- PASSION. PRECISION. PURITY.
- VAT expects net sales1 of CHF 175-190 million
Full-year 2020
1 at constant foreign exchange rates
Q3 2020 guidance
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Second quarter and half-year results 2020
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Q&A Session
PASSION.PRECISION.PURITY.
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Second quarter and half-year results 2020
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Information
- PASSION. PRECISION. PURITY.
Investor information Contact information Listing: SIX Swiss Exchange Michel Gerber Currency: CHF Head of Communications & Ticker symbol VACN Investor Relations ISIN CH 031 186490 1 Phone: +41 81 772 42 55 E-mail: m.gerber@vat.ch Financial calendar 2020 Q3 2020 trading update Friday, October 16, 2020 Capital Markets Day Wednesday, December 2, 2020 Financial calendar 2021 Full-year 2020 results Thursday, March 4, 2021 Q1 2021 trading update Thursday, April 15, 2021 Half-year 2021 results Thursday, August 5, 2021 Q3 2021 trading update Friday, October 15, 2021
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Second quarter and half-year results 2020
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Forward looking statements
- PASSION. PRECISION. PURITY.
Forward-looking statements contained herein are qualified in their entirety as there are certain factors that could cause results to differ materially from those anticipated. Any statements contained herein that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should be considered to be forward-looking statements. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the company to be materially different from those expressed or implied by such forward looking
- statements. Many of these risks and uncertainties relate to factors that are beyond the company’s ability to control
- r estimate precisely, such as future market conditions, currency fluctuations, the behavior of other market