Infineon Reports 4% Growth in Total Segment Results

Infineon Technologies AG's revenues in the first quarter of its 2011 fiscal year reached Euro922 million, down 2 percent compared to the fourth quarter of the 2010 fiscal year. On a constant currency basis, total sales for the first quarter were flat with the fourth quarter of the previous fiscal year.

First quarter Total Segment Result was Euro177 million, an increase of 4 percent compared to Euro 171 million in the prior quarter. Total Segment Result margin in the first quarter reached 19.2 percent, up from 18.2 percent in the fourth quarter. Total Segment Result margin marked an all-time-high on a comparable basis.

Infineon reported income from continuing operations of Euro149 million, down from Euro193 million in the fourth quarter. The decline occurred mainly because income taxes in the fourth quarter of the 2010 fiscal year contained a non-recurring benefit of Euro 69 million from recording a deferred tax asset. Basic earnings per share from continuing operations were Euro0.14, down from Euro0.18 in the previous quarter. Diluted earnings per share from continuing operations were Euro0.13 versus Euro0.16 in the preceding quarter.

Income from discontinued operations, net of income taxes, was Euro83 million for the first quarter, down from Euro197 million in the preceding quarter. Net income from discontinued operations decreased as income from discontinued operations in the fourth quarter of the 2010 fiscal year contained a non-recurring benefit from recording a Euro82 million deferred tax asset related to the expected gain on the sale of the Wireless mobile phone business and as the first quarter result of the 2011 fiscal year contained a negative valuation impact of foreign exchange options used to hedge the proceeds from the divestiture of Infineon’s Wireless mobile phone business of Euro32 million.

Net income for the group was Euro232 million in the first quarter, a decrease from Euro390 million in the previous quarter. First quarter basic earnings per share were Euro0.21 and diluted earnings per share were Euro0.20, down from Euro0.36 and Euro0.33, respectively, for basic and diluted EPS in the fourth quarter of 2010 fiscal year.

Working capital amounted to negative Euro71 million at the end of the first quarter, but deteriorated from negative Euro130 million at the end of the prior quarter, mainly due to lower provisions and higher inventories. Of the increase in inventories from Euro514 million at the end of the prior quarter to Euro573 million at the end of the first quarter of the 2011 fiscal year, an amount of approximately Euro20 million is related to the closing of the divestiture of the Wireless mobile phone business. The company also recorded an increase in work-in-progress in anticipation of higher revenues going forward.

Investments from continuing operations, which the company defines as the sum of purchases of property, plant, and equipment, purchases of intangible assets and capitalized research and development (R&D) assets, were Euro131 million in the first quarter of the 2011 fiscal year, compared to Euro163 million in the prior quarter. Depreciation and amortization was Euro83 million, down from Euro85 million in the fourth quarter of the 2010 fiscal year. Free cash flow from continuing operations for the first quarter was Euro4 million, down from Euro236 million in the fourth quarter of the 2010 fiscal year.

For its second quarter, Infineon expects revenues to be up slightly compared to the first quarter, with Total Segment Result margin of 18 to 20 percent. Within the expected sequential revenue increase, Automotive (ATV) revenues are expected to grow markedly, Chip Card & Security (CCS) turnover should show some growth, and Industrial & Multimarket (IMM) sales are expected to increase only slightly.

Infineon expects full-year revenue growth to be a mid-teens percentage, compared to a rate of close to 10 percent guided for so far. Within this outlook, the company anticipates greater than group average growth for both ATV and IMM and below group average growth for CCS revenues.

Total Segment Result margin for the 2011 fiscal year is expected to be a high teens percentage of sales, compared to a mid to high teens percentage guided for thus far.

In response to continued high levels of order intake and sustained allocation across multiple product lines, Infineon now anticipates that investments will total around Euro700 million in the 2011 fiscal year, compared to the previous guidance of Euro550 million and compared to Euro325 million in the 2010 fiscal year.

Depreciation and Amortization is now expected to slightly exceed Euro400 million for the 2011 fiscal year, compared to Euro336 million in the 2010 fiscal year and compared to the previous guidance of about Euro400 million.

Infineon