Siltronic: Cautious outlook and reduced dividend

Last Updated: 13. Februar 2024By

The German flagship index DAX reached a new all-time high in yesterday’s closing price. However, things did not go as well for wafer specialist Siltronic, which released its forecast for the current year after trading hours, leading to a significant decline in the stock price today.

But let’s start from the beginning. Before I dive into the forecast for 2024 and the stock performance of Siltronic, let me introduce the wafer producer to you.

Siltronic AG in a nutshell Siltronic AG is one of the world’s leading producers of wafers (German: waffles or wafers) made of ultrapure silicon. Silicon wafers are the basis of the modern semiconductor industry and the foundation for chips used in all areas of electronics – from computers and smartphones to electric cars and wind turbines.

According to their own statements, the Bavarian wafer producer is a technology leader and driving force for innovation in the field of silicon wafer production. With their extensive product portfolio, the Munich-based company supplies the top 20 companies in the semiconductor industry.

The Bavarian company is active worldwide and has production facilities in Asia, Europe, and the USA. Around 1,870 patents and patent applications demonstrate the Munich company’s innovation strength.

Siltronic AG employs around 4,500 people worldwide and has been listed on the Prime Standard of the German Stock Exchange since 2015. The company’s shares are included in the MDAX and TecDAX indices.

Profit decline expected in 2024 Let’s take a look at the forecast for the current year, which the Siltronic management released yesterday evening: For the year 2024, a revenue at approximately the same level as the previous year is expected. According to preliminary calculations, revenue in 2023 was just over 1.51 billion euros. That is about 16% less than in 2022, where revenue reached a record value of around 1.81 billion euros.

For operating profit (EBIT), the Munich-based company expects a significant decline compared to the previous year’s value, which according to preliminary calculations was 231 million euros.

The earnings margin before interest, taxes, and depreciation (EBITDA margin) for 2024 is also expected to be in the same range as the previous year, at around 15%. However, the start-up costs of the new 300 mm wafer fab in Singapore will burden the EBITDA margin by up to 3 percentage points compared to the previous year.

Given the restrained annual forecast, the Siltronic management will propose a dividend of only 1.20 euros per share to shareholders at the annual general meeting on May 13, 2024. Last year, the company had distributed a dividend of 3.00 euros per share eligible for dividends.

The restrained forecast for 2024 and the significant dividend cut led to a larger price drop after hours yesterday and throughout the day today. However, the stock has already recovered to a good extent from the pre-market lows of today. In the medium term, the opportunities should outweigh the risks here, as the chip sector is a growth market and Siltronic plays an important role in this market.

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