April 29, 2020 / 6:31 AM / a month ago

Sensor maker AMS gives upbeat outlook, shares up 22%

VIENNA (Reuters) - Shares in sensor producer AMS (AMS.S) jumped 22% after the Apple supplier gave an upbeat forecast for the current quarter and the remainder of the year, soothing investors who fear a slump in smartphone demand due to the coronavirus crisis.

FILE PHOTO: The Logo of Austrian sensor specialist AMS is seen on their factory in Unterpremstaetten, Austria October 3, 2019. REUTERS/Leonhard Foeger

AMS, which is in the process of taking over the leading car headlight producer Osram (OSRn.DE) to diversify into the auto business, said demand from smartphone makers continued to be strong despite the pandemic.

It forecast a profit (EBIT) margin of 17-20% on revenue of $440-480 million for the second quarter after reaching $501 million in revenue and a margin of 20% in the January-March period.

“The second-quarter guidance is much better than expected,” said Credit Suisse analysts. However, the auto and industrial business will likely see a stronger negative impact in the second quarter due to COVID-19, they added.

The gains in the Swiss-listed company’s shares erased part of their 60% drop this year amid investor worries about demand from its main customer Apple APPL.O, weak auto trends at Osram and high levels of debt.

AMS is in constant discussions with all its customers to ensure that its guidance is as accurate as possible, said Chief Executive Alexander Everke in a call.

Asked about the remainder of the year, he said it was “likely that we see a general seasonal pattern with a higher second half like in other years”. He had the impression that smartphone makers continued their development, design and other preparation activities despite the economic damages caused by the coronavirus.

AMS’s upbeat outlook echoed comments from Asian tech firms including Huawei [HWT.UL] and Foxconn (2317.TW).

However, Samsung Electronics (005930.KS) said on Wednesday it expected profit to decline in the current quarter due to a coronavirus-related slump in sales of smartphones and TVs, although the chip business would remain solid.

OSRAM BUY ON TRACK

The Osram acquisition was fully on track, AMS said.

The company plans to pay for the Osram shares tendered under its takeover offer largely with the proceeds of its 1.75 billion Swiss franc (1.66 billion euros) capital increase, its finance chief said.

The 4.4 billion euros bridge loan for the takeover, provided by UBS (UBSG.S), HSBC (HSBA.L) and Bank of America Merrill Lynch, will be refinanced through a combination of different debt instruments, Michael Wachsler-Markowitsch said. However, up until now AMS only pulled down around 450 million and therefore was in no rush to tap the market.

The Osram deal will be the largest purchase in AMS’s history. In the 1990s, the group had miscalculated with two acquisitions in Germany and South Africa and had to sell the businesses later at a loss.

Osram withdrew its 2020 guidance in March, saying the pandemic would affect demand in its semiconductor and automotive divisions, which account for more than half its sales.

Osram will report second-quarter results on May 7.

Additional reporting by Linda Pasquine, editing by Andrew Heavens and David Evans

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