Strong Results for 2006-2007
• Gross margin increases to 29.1% of sales
• Net income more than doubles to 46.2 million Euros
• A healthy and strengthened balance sheet
• Concentration on profitability given short term climate of uncertainty
Bernin, France, May 9th 2007 – Soitec, the leading manufacturer of SOI (Silicon on Insulator) today announced its consolidated results for the financial year ending 31 March 2007. Boosted by the adoption of SOI in consumer markets and the success of its major customers, sales increased by 41.5% and this led to a strong increase in the Group’s results despite the Dollar weakening over the year by 4.6% against the Euro. Gross profit generated rose by more than half to 108.1 million Euros and the gross margin improved to 29.1% of sales compared to 26.6% for the previous year. Operating income was 48.5 million Euros at a margin of 13.0% of sales. Combined with significantly lower net interest expense, this resulted in more than doubled net income for the year of 46.2 million Euros. Operating cash flow generated, equal to 20% of sales, was 74.5 million Euros and this covered loan repayments and almost all capital expenditure. At the year end the Group held cash balances of 307 million Euros. The balance sheet was further strengthened by the full conversion of all outstanding 2001-2006 convertible bonds during the year.
| (€ Million - IFRS) | 2005-2006 | 2006-2007 |
| Sales | 262.8 | 372.0 |
| Gross profit | 70.0 | 108.1 |
| Research & Development | 16.4 | 31.0 |
| SG &A | 17.6 | 28.6 |
| Operating income | 36.0 | 48.5 |
| Net interest (exp)/inc | (12.3) | 0.3 |
| Net income – Group share | 22.5 | 46.2 |
| Net income per share (in Euros – undiluted) | 0.37 | 0.59 |
The Group sets new sales record of 372.0 million Euros
Total wafer sales for the year were 358.9 million Euros equal to growth of 42.7% (or 48.9% at constant exchange rates) predominantly driven by very satisfactory sales of 300mm with growth of 72.9% in performance and representing 69% of total wafer sales. Sales of all other diameters, in particular 200mm, recorded performance growth of 13.5%. Picogiga, licensing and the recently acquired Tracit activity contributed respectively 8.7 million, 3.4 million and 1.0 million Euros for the year.
Significant increase in results with further reinforcement of balance sheet
The combination of increased sales volumes controlled selling prices and continued improvements in industrial efficiency enabled gross margin to improve to 29.1% of sales compared to 26.6% in the previous year, despite the unfavourable movement in the Dollar against the Euro (-4.6% over the year). Net Research & Development increased to 8.3% of sales from 6.2% in the prior year reflecting the Group’s commitment to priority projects such as NanoSmart™ and the development of an SOI ecosystem based on the agreement with ARM that was signed in the year. For the year as a whole, operating income rose by over one third to 48.5 million Euros at an operating margin of 13.0% of sales. Despite higher non-recurrent legal and administrative expenses in the second half of the year the operating margin remained stable excluding the unfavourable sequential exchange rate movement. Almost all the outstanding 2001-2006 bonds converted immediately prior to the redemption date and by the year-end 84.2% of the 2004-2009 instrument had also converted. This led to a very significant reduction in interest expense. Higher interest income generated by cash invested enabled the Group to report net interest income of 0.3 million Euros compared to net interest expense of 12.3 million Euros in the previous year. Group share of net income came out more than double the previous year at 46.2 million Euros equal to 0.59 Euros earnings per share on an undiluted basis.
The Group generated cash flow from operations of 74.5 million Euros, which covered investment in capacity and debt reimbursements. At end March 2007, the Group’s balance sheet was extremely strong with cash available of over 307 million Euros almost unchanged from the situation one year ago.
Medium-term prospects unchanged - Concentration on profitability given short term climate of uncertainty
The Group remains confident that SOI will continue to be widely adopted in the industry. As the technologies transition from 65 nanometer to 45 and below geometries, the partnership with ARM will make available design libraries adapted to Smart CutTM based engineered substrates, widen the SOI ecosystem and stimulate demand for value added new materials from the fabless and foundry world.
In the short term, as the supply chain continues to absorb excess inventories held by its main customers, the Group remains cautious, particularly for the first quarter and anticipates a flat first half in performance for the financial year 2007-2008. New product launches provide positive signs for performance growth over the year as a whole. In this climate of uncertainty, the Group will concentrate on improving its results with measures to adapt its cost structure to the current demand level without impacting the implementation of the new plant in Singapore.
Agenda
The results for the first quarter of the 2007-2008 financial year will be published on Monday 16 July 2007 after the Paris Stock Exchange closes.
About the Soitec Group: The Soitec Group is the world’s leading innovator and provider of the engineered substrates that serve as the foundation for today’s most advanced electronic products and nanotechnologies. Headquartered in Bernin, France, the company manufactures its comprehensive portfolio of engineered substrates, including silicon-on-insulator (SOI) and strained SOI (sSOI), using Soitec’s proprietary Smart Cut™ technology—the de facto industry standard. With its strong global presence, patented technology and industry-leading production capacity, Soitec is helping to drive the performance and power advantages that are key to the smaller, more power-efficient, and increasingly mobile electronic products favored by consumers worldwide. Both shares and convertible bonds are listed on Euronext Paris.
*SOI = Silicon On Insulator and sSOI = strained Silicon On Insulator
Smart Cut and UNIBOND are trademarks of S.O.I. TEC Silicon On Insulator Technologies.
For further information, please contact:
Iain Murray
CFO
Tel: +33 4 76 92 75 14
Email: investors@soitec.fr
Olivier Brice
Investor Relations – Financial Communication
Tel: +33 4 76 92 93 80
Email: olivier.brice@soitec.fr