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Infineon reports Q3 increase in revenue, earnings and margin

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Automotive, renewables and power conversion strong

Infineon Technologies AG has reported results for the third quarter of its 2016 fiscal year (period ended June 30, 2016).

"Revenue, earnings and margin all increased in line with expectations in the third quarter. Demand was particularly strong for our automotive electronics, renewables and power supply solutions," stated Reinhard Ploss, CEO of Infineon. 

"Despite the current contraction of the semiconductor market and contrary to many of our competitors, Infineon has grown once again compared to the prior year's corresponding quarter, reflecting its focus on sub-markets with structural growth. We therefore continue to forecast a long-term compound annual growth rate of 8 percent," he added.

"We are enabling cleaner and safer cars, greener energy and even faster mobile communication. The planned acquisition of Wolfspeed will secure us a decisive technological advantage in the long term and help us grow our system understanding. We are thereby focusing on promising growth areas such as electromobility and the Internet of Things."

Review of group financials Q3 2016

Revenue of the Infineon Group increased from €1,611 to €1,632 million quarter-on- quarter. Contributions to this 1 percent revenue growth were made by the Automotive (ATV), Industrial Power Control (IPC) and Power Management & Multimarket (PMM) segments. As expected, revenue reported by the Chip Card & Security (CCS) segment decreased slightly.

The gross margin improved quarter-on-quarter from 35.1 percent to 36.6 percent. The Q3 figure includes acquisition-related depreciation and amortisation and other expenses attributable to the International Rectifier acquisition totaling €24 million. The adjusted gross margin amounted thus to 38.1 percent after 36.6 percent in the prior quarter.

Operating income increased from €174 million in the second quarter to €193 million in the third quarter of the current fiscal year. Income from continuing operations totaled €184 million, compared with €177 million in the second quarter. Income from discontinued operations amounted to €2 million, compared with €3 million in the preceding quarter. 

Net income increased from €180 million to €186 million quarter-on- quarter. The figure for the second quarter included €21 million of tax income, compared with €3 million recorded in the third quarter. Tax income primarily results from the reduction of deferred tax liabilities relating to the acquisition of International Rectifier and from the revaluation of deferred tax assets relating to German and foreign entities.

Earnings per share (basic and diluted) remained unchanged at €0.16 in the third quarter. Adjusted earnings per share1 (diluted) improved from €0.18 in the second quarter of the current fiscal year to €0.19 in the third. For the purpose of calculating adjusted earnings per share (diluted), a number of items were eliminated, most notably acquisition-related depreciation/amortization and other expenses (net of tax) as well as valuation allowances on deferred tax assets.

Q4 outlook 

In the fourth quarter of the 2016 fiscal year, Infineon expects quarter-on-quarter revenue growth of 3 percent (plus or minus 2 percentage points). This forecast is based on an assumed exchange rate of US$1.10 to the euro. At the mid-point of the forecast revenue range, the Segment Result Margin is expected to come in at 17 percent.

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