Last updated: November 16, 2010 11:38 pm

Infineon to pay first dividend in 10 years

Infineon, the German chipmaker, pleased markets on Tuesday as it announced its first dividend payment in a decade, along with a higher fourth-quarter profit margin than expected and plans for a share buy-back.

Infineon Q4 results
Sales Net profit Earnings per share Dividend
€942m €390m €0.36 €0.10 (f/y)
↑55% €11m €0.01

The chipmaker, which has struggled with associations of poor corporate governance and low shareholder performance, said on Tuesday it would pay investors a dividend of €0.10 per share.

This will be only the second pay-out since the company floated on the stock market at the height of the internet bubble 10 years ago.

The move is the latest in a series of pay-out increases from German industrial companies. BASF, Daimler and Siemens have pledged substantial dividend rises after a year of rapid sales and profit growth that has overfilled their cash levels.

Infineon has this year amassed €1.3bn ($1.8bn) in net cash, which will soon be increased by a further €1bn from the sale of its wireless unit to US rival Intel in early 2011.

Peter Bauer, chief executive, said Infineon would from now on aim to pay a regular dividend that would rise or fall with the group’s cash flows.

He further pleased investors when he announced plans for a buy-back of up to 10 per cent of the shares.

The news sent Infineon’s share price up 5 per cent to €6.27, its highest level in two years.

In the fourth quarter, Infineon’s operating margin rose to 18.2 per cent from 15.6 per cent in the previous three months, in line with its own long-term target and higher than analysts polled by Inquiry Financial had expected.

Revenues in its three core areas – industrial, automotive and security – rose 55 per cent to €942m year-on-year in the fourth quarter, from €602m last time.

Mr Bauer said Infineon, whose chips are used in cars, mobile phones and other electronic devices, expected a cooling-down from October to December, when sales would remain flat or fall slightly compared with the previous three months.

He forecast 2011 full-year sales to rise at a rate of “close to 10 per cent” and the operating margin to reach a mid-to-high-teens percentage of sales.

Infineon sought state aid in 2009 after the steepest downturn its sector has seen in decades.

But it has been catapulted back from the brink this year, as the group profited from rampant demand from carmakers such as Daimler and industrial companies such as former parent company Siemens.

Mr Bauer has realigned the company, long known to be a never-ending restructuring case, in the past two years by slashing costs, reducing debt and concentrating it on semiconductors for the car sector, industrial applications and chip cards.

He said Infineon would lift its capital expenditure this year by two-thirds to €550m, as the group’s plants were running at full capacity.

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