Infineon sees 2015 margin flat in challenging market

Auto and industrial chipmaker Infineon said its 2015 operating margin would remain roughly flat, disappointing the market, as sales at its high-margin industrial power-control unit would grow more slowly than the group average. The German company said on Thursday it expected fiscal 2015 revenues to rise between 6 and 10 percent as automotive, power-management and security chip sales would offset a drop in industrial product demand.
At the mid-point of the revenue range, operating margin is expected to be about 14 percent, flat compared with the previous year, and below an average of 16 percent expected by analysts surveyed for a Reuters poll. "Despite a challenging market environment, we plan to continue growing in the current 2015 fiscal year," Chief Executive Reinhard Ploss said in a statement. Infineon shares fell more than 4 percent in early trading and by 0945 GMT were down 2.8 percent to 7.8 euros, the leading decliners in the German DAX, which rose 0.6 percent.
"Obviously costs are growing faster than revenue," said DZ Bank analyst Harald Schnitzer, who rates the stock a "buy" but said he would be reviewing the assumptions behind his rating. The outlook for the fiscal year ending in September 2015 translates into revenues of 4.58 billion to 4.75 billion euros, which was light of forecasts among analysts, which ranged from 4.48 billion euros to 5.73 billion euros Infineon, whose chips activate car airbags, enable cruise control, manage power supplies and cut vehicle emissions, reported a 27-percent rise in operating profit, excluding special items, to 188 million euros ($235 million) in its fiscal fourth quarter to end-September.
That was slightly below the average forecast of 193 million euros in a Reuters poll, with estimates of six analysts surveyed ranging from 180 million to 210 million euros. Demand for its automotive products, which account for more than 40 percent of revenues, was stable and fuelled by German premium car makers, Infineon said. Its chips, which are used in payment and ID cards also did well as governments and mobile companies placed extra orders, giving sales a 15-percent boost from the previous quarter. Infineon said it expected first-quarter revenue to drop between 5 and 9 percent, reflecting typical seasonal declines, with its automotive unit expected to post the smallest decline. Operating margins are expected to drop to between 10 percent and 13 percent from 16 percent in the fourth quarter.