Infineon closes 2021 fiscal year with record quarter

Today, Infineon Technologies AG is reporting results for the fourth quarter and for the full 2021 fiscal year, both of which ended on 30 September 2021.

“Infineon has closed the 2021 fiscal year with an outstanding fourth quarter. We are stronger than ever and report revenue of over €11 billion for a full fiscal year for the first time, with significantly higher profitability,” said Dr. Reinhard Ploss, CEO of Infineon. “Our corporate strategy is fully focused on the key trends of electrification and digitalization. We have established a first-class position that is enabling us to shape both of these fields with innovative technologies. In light of the continued high demand for semiconductors needed for the energy-efficient, connected world, we expect the 2022 fiscal year to be a strong one. We are investing significantly more in order to take advantage of opportunities to grow. We are continuing to expand our manufacturing capacities – for silicon as well as for the compound semiconductors silicon carbide and gallium nitride.”

Group performance in fourth quarter of the 2021 fiscal year
In the fourth quarter of the 2021 fiscal year, Group revenue grew by €285 million to €3,007 million, compared with €2,722 million in the previous three-month period. The main reason for the significant 10 percent growth in revenue was the seasonally strong upturn in demand in the Power & Sensor Systems (PSS) segment. The Automotive (ATV) and Connected Secure Systems (CSS) segments also reported higher revenue than in the previous quarter, while revenue in the Industrial Power Control (IPC) segment decreased slightly.

The gross margin improved from 39.1 percent in the third quarter to 41.2 percent in the final three-month period. The adjusted gross margin came in at 43.9 percent, up from 41.8 percent one quarter earlier.

The Segment Result improved from €496 million to €616 million, with the Segment Result Margin rising accordingly from 18.2 percent to 20.5 percent.

The fourth-quarter non-segment result was a net loss of €138 million, compared with a net loss of €149 million in the previous three-month period. The non-segment result for the quarter included €83 million of cost of goods sold, €57 million of selling, general and administrative expenses and €6 million of research and development expenses. Net other operating income amounting to €8 million was also recorded in the fourth quarter.

Operating profit for the fourth quarter of the 2021 fiscal year rose to €478 million, compared with €347 million in the previous three-month period.

The financial result amounted to minus €37 million compared with minus €56 million in the previous quarter.

Tax income amounted to €16 million for the three-month period, compared with a tax expense of €49 million one quarter earlier. The tax income in the fourth quarter was influenced by the positive impact of the revaluation of deferred tax assets and the reduction of tax risk positions.

Profit from continuing operations increased to €465 million quarter on quarter, compared with €245 million in the preceding three-month period. Loss from discontinued operations in the fourth quarter was €1 million, compared with a break-even result for the previous three-month period. The profit for the period amounted to €464 million, up from €245 million in the third quarter.

Earnings per share from continuing operations increased to €0.36 (basic and diluted), compared to €0.18 one quarter earlier. Adjusted earnings per share1 (diluted) improved from €0.27 to €0.41 quarter on quarter.

Investments – which Infineon defines as the sum of purchases of property, plant and equipment, purchases of other intangible assets and capitalized development costs – rose to €596 million in the fourth quarter of the 2021 fiscal year, compared with €285 million in the preceding three-month period. Depreciation and amortization increased from €380 million to €397 million quarter on quarter.

Due to the significantly higher level of investments in the fourth quarter, free cash flow2 decreased to €378 million, compared with €477 million in the third quarter. Net cash provided by operating activities from continuing operations increased from €762 million to €971 million.
Despite the early partial repayment in September of borrowing amounting to €310 million taken out in connection with the acquisition of Cypress, the gross cash position increased to €3,922 million at the end of the fourth quarter, compared with €3,863 million at 30 June 2021. Financial debt decreased by only €223 million during the fourth quarter due to offsetting exchange rate effects and stood at €6,585 million as of 30 September 2021, compared with €6,808 million as of 30 June 2021. Net debt declined further from €2,945 million to €2,663 million over the course of the three-month period.

Outlook for first quarter of the 2022 fiscal year
Based on an assumed exchange rate of US$1.20 to the euro, Infineon expects to generate revenue of around €3 billion in the first quarter of the 2022 fiscal year. Revenue growth for the Automotive and Connected Secure Systems segments is forecast to be within a mid-to-high single-digit percentage range. By contrast, revenue generated by the Industrial Power Control and Power & Sensor Systems segments is expected to decrease by a low to mid-single-digit percentage. The Segment Result Margin should come in at around 21 percent if the forecast level of revenue is achieved.

Outlook for the 2022 fiscal year
Based on an assumed exchange rate of EUR/US$ 1.20, revenue of €12.7 billion (plus or minus 500 million) is forecast for the 2022 fiscal year. At the mid-point of the guided revenue range, Segment Result Margin is predicted to come in at about 21 percent. Automotive and Connected Secure Systems segments revenue is expected to increase at a higher percentage rate than Group revenue overall. The revenue growth rate in the Power & Sensor Systems segment is forecast to be at a similar level to that of the Group. Industrial Power Control segment revenue is expected to increase by a mid-to-high single-digit percentage.

Investments – which Infineon defines as the sum of purchases of property, plant and equipment, purchases of other intangible assets and capitalized development costs – are planned at around €2.4 billion for the 2022 fiscal year. The main focus is on expanding front-end manufacturing capacities with a view to enabling Infineon to continue meeting the expected growth in customer demand in the medium term.

Depreciation and amortization are predicted to be between €1.6 billion and €1.7 billion in the 2022 fiscal year. Approximately €400 million of that amount relates to depreciation and amortization resulting from purchase price allocations, mainly in connection with the acquisition of Cypress and, to a lesser degree, the acquisition of International Rectifier. Free cash flow is forecast at around €1 billion.

Proposed dividend for the 2021 fiscal year: €0.27 per share
Infineon’s dividend policy is aimed at allowing its shareholders to participate appropriately in the success of the business. However, due to the economic impact of the coronavirus pandemic, the risks that existed back then, and in order to maintain sufficient financial flexibility, a dividend of €0.22 was paid for the 2020 fiscal year, i.e. €0.05 lower than the amount distributed for the 2019 fiscal year. Due to Infineon’s good economic performance in the 2021 fiscal year and its positive outlook for the current fiscal year, the dividend is now to be increased again by €0.05. Accordingly, a proposal is planned to be put forward at the Annual General Meeting in February 2022 to distribute a dividend of €0.27 per share for the 2021 fiscal year. The number of shares in issue totaled 1,305,921,137 as of 30 September 2021. The figure includes 4,545,602 shares owned by Infineon that are not entitled to a dividend. The total dividend available for distribution would therefore increase to €351 million, compared with €286 million in the previous fiscal year.

Segment earnings for the fourth quarter of the 2021 fiscal year
ATV segment revenue totaled €1,267 million in the fourth quarter of the 2021 fiscal year, compared to €1,205 million in the previous three-month period, with nearly all product areas contributing to the 5 percent growth. The Segment Result improved from €199 million to €211 million quarter on quarter. The Segment Result Margin for the fourth quarter came in at 16.7 percent, compared with 16.5 percent for the previous three-month period.

IPC segment revenue decreased from €412 million to €407 million quarter on quarter. Demand for products relating to renewable energy remained high. Revenue went down for transportation, but increased slightly for industrial drives and home appliances. Segment result amounted to €72 million in the fourth quarter compared to €82 million in the previous quarter, with the Segment Result Margin decreasing from 19.9 percent to 17.7 percent.

PSS segment revenue increased significantly to €945 million in the fourth quarter, up from €757 million in the preceding three-month period. The 25 percent increase was driven primarily by the seasonal upswing in demand for smartphone-related components, but also by growth in other areas, such as power supply for data centers. The Segment Result climbed to €276 million in the fourth quarter, up from €167 million in the previous three-month period. The fourth-quarter Segment Result Margin improved to 29.2 percent, after a margin of 22.1 percent was reported for the previous quarter.

CSS segment revenue grew by 12 percent from €346 million to €386 million quarter on quarter. An increasing share of higher-value products, improvements in own manufacturing as well as additional solutions business helped generate higher revenue in the areas of contactless payment cards, authentication, microcontrollers and connectivity. The Segment Result rose from €47 million to €60 million quarter on quarter, with the Segment Result Margin improving from 13.6 percent to 15.5 percent.
CT Bureau