November 12, 2018 / 7:33 AM / 6 months ago

Infineon lifts provision against legal dispute, knocking shares

FRANKFURT/MUNICH (Reuters) - German chipmaker Infineon Technologies (IFXGn.DE) took a further multi-million euro provision to cover a legal dispute, overshadowing strong quarterly results and an upbeat outlook to send its shares sharply lower on Monday.

FILE PHOTO: Reinhard Ploss, CEO of German semiconductor manufacturer Infineon arrives for the annual news conference in Neubiberg near Munich, Germany, November 14, 2017. REUTERS/Michael Dalder

Munich-based Infineon increased provisions by 159 million euros ($179 million) to cover the cost of a possible settlement with the administrator of its former memory chip unit Qimonda, which went into administration in 2009.

“We are open to an out-of-court settlement on reasonable terms,” Chief Financial Officer Dominik Asam told analysts on a conference call.

Qimonda’s administrator had sued Infineon for 3.35 billion euros, arguing that it had transferred operations to the business at an inflated price. Infineon set aside provisions of 305 million euros in 2012 that were mostly drained by an earlier partial settlement of 260 million euros.

Infineon made the new provisions, which bring total current provisions to over 180 million euros, to cover the costs of a settlement based on a new report by an independent expert.

Infineon’s shares initially rallied on the upbeat results and outlook, only to turn 5.6 percent lower on concern over the Qimonda provisions and signs that the global economy is cooling.

“I don’t see any major negative to justify this share price reaction,” said Baader Helvea analyst Guenther Hollfeder, who rates the company a ‘buy’.

“The shares had a good run over the past two weeks from the lows, but nevertheless it’s a really good set of figures and guidance.”


Infineon said it would achieve revenue growth of 9 to 13 percent in the 2018/19 business year, with its automotive division leading the way, although it cautioned there were some signs of weakness in the global economy.

Infineon’s largest business line is automotive, where car makers have issued a slew of profit warnings due to weakening demand and trade frictions.

Infineon sees itself as a play on the boom in electric vehicles, with the typical battery-powered car containing $750 worth of semiconductors.

The firm has just broken ground on a 1.6 billion euro plant in Austria that will enter production in 2021, just as its existing 300-mm facility in Dresden is expected to hit capacity constraints.

The company is keeping a close eye on demand, CEO Reinhard Ploss told analysts, and can tweak investments to manage any possible softening of market conditions.

Some analysts said the guidance for the year ahead implied a softening of Infineon’s forecast when the recent strengthening of the dollar was taken into account.

Fourth-quarter revenues were 2.047 billion euros ($2.31 billion), up 5 percent from the prior quarter. That was above both the company’s own 3 percent forecast and mean expectations in a Reuters poll of 13 analysts.

Infineon said it expected a sequential decline in revenues of 4 percent, plus or minus 2 percentage points, in the current quarter, which is typically seasonally weak.

The company will propose an increase in its dividend to 27 euro cents a share, up from 25 cents a year ago but a cent shy of market expectations.

Infineon also announced the acquisition of Dresden startup Siltectra GmbH for 124 million euros, which has developed a technology that can double the number of chips that can be made from one silicon carbide wafer.

Additional reporting by Danilo Masoni in Milan; Editing by Jan Harvey and Keith Weir

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