Infineon lowers sales outlook

Infineon disappointed investors with a gloomy forecast for the year ahead, with the German chipmaker saying sales would probably decline more steeply than analysts had expected amid the worsening global economic outlook.

Sales in the quarter to the end of December are set to drop more than previously estimated, Infineon said on Wednesday, with sales of chips for industrial, chip card and security uses particularly hard hit.

“We are not immune to cycles,” said Peter Bauer, chief executive. “We perform well during the current economic slowdown and remain fully confident in the long term growth and margin prospects of our business.”

Demand for chips from industrial customers is a bellwether of broad economic demand.

Infineon said it would not be reining in investment, saying it wanted to be able to meet an expected increase in demand in 2013.

“We have to act in the 2012 fiscal year,” Mr Bauer said. “The market trends in the fields of energy efficiency, mobility and security are intact. A new upswing will come ... compared to the last crisis, we currently have a financial foundation upon which we can build.”

But Mr Bauer did say investment in 2012, while comparable to this year’s level of €887m, would represent a cut of about 20 per cent against original plans for capacity growth.

Infineon, which made a robust start to its fiscal year just ended and in February raised profit margin forecasts, said annual sales in the year to the end of September rose 21 per cent to €4bn. The company’s annual “total segment margin” – a measure relating earnings to revenues – also reached a high of almost 20 per cent.

This margin would probably sink to a “low to mid-teens” range for 2012, Infineon said, while sales would probably fall by a mid-single digit percentage.

The decline in the first quarter would be about 10 per cent, Infineon said, with the global economy likely to be in a “correction phase until the middle of next year”.

Sales in its automotive division would hold up better, Infineon predicted. Analysts say the company’s products are used mainly in premium vehicles where sales are relatively robust.

Mr Bauer noted that sales and order intake fluctuations were smaller than for many competitors and said Infineon was still sticking to a goal of 10 per cent revenue growth across an economic cycle.

Net income in the fourth quarter was €120m compared with €190m in the prior quarter and €390m in the fourth quarter last year.

Infineon’s shares were down 3.6 per cent at €6.22 in afternoon trading in Frankfurt.