Infineon Upgrades Guidance, Plans EUR5 Bln Plant Investment After Demand Fuels 4Q Beat — Update

By Ed Frankl

Infineon Technologies AG on Monday upgraded its long-term financial targets on the backdrop of increasing demand for semiconductors, as it posted fourth-quarter earnings that beat expectations.

The German chip maker said it will benefit disproportionately thanks to its strategic positioning in the semiconductor space, and that it will also invest about 5 billion euros ($5.18 billion) in a new factory in Dresden.

The plant in eastern Germany will be for 300 millimeter semiconductors and due to start production in 2026, with the investment subject to adequate public funding.

The company said it expects revenue growth over its business cycle to be more than 10%, from more than 9% previously, with a margin for its segment result–a key profitability metric–expected to reach an average of 25%, compared with 19% under previous guidance.

It also includes an adjusted free cash flow target for the first time, set at 10%-15% of revenue over the cycle.

The guidance raise comes as Infineon posted a net profit in its fourth quarter, which ended in September, of EUR735 million, exceeding consensus expectations of EUR645 million, according to analysts’ estimates provided by the company. Profit was also above last year’s EUR464 million.

Investors reacted positively to the news, with shares up 6.2% to EUR31.06 at 1548 GMT.

Revenue for the three-month period was EUR4.14 billion, above expectations of EUR3.94 billion and last year’s EUR3.01 billion, as the company saw growth in all its segments.

Infineon’s segment result climbed 25% on year to EUR983 million.

The Bavaria-based company proposed a 2022 dividend of EUR0.32 a share, up from EUR0.27 a share last year.

Infineon said it expects to generate revenue of around EUR4.0 billion in the first quarter of its fiscal 2023, which began in October, and EUR15.5 billion, plus or minus EUR500 million, for the full year.

The DAX-listed company also said it planned investments in 2023 of around EUR3 billion and free cash flow of about EUR800 million.

However, heightened vigilance is required in the coming quarters in view of continued macroeconomic and geopolitical uncertainties, said Chief Executive Jochen Hanebeck.

The outlook is based on an exchange rate of parity between the U.S. dollar and the euro.

Write to Ed Frankl at edward.frankl@dowjones.com

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