Business & Strategy Update

Transcription

1 Business & Strategy Update FY rd Quarter Results and EGM 27 November ASM Proprietary Information

2 Safe Harbor Statements All matters discussed in this business and strategy update, except for any historical data, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These include, but are not limited to, economic conditions and trends in the semiconductor industry generally and the timing of the industry cycles specifically, currency fluctuations, the timing of significant orders, market acceptance of new products, competitive factors, litigation involving intellectual property, shareholder and other issues, commercial and economic disruption due to natural disasters, terrorist activity, armed conflict or political instability, epidemics and other risks indicated in the Company's filings from time to time with the U.S. Securities and Exchange Commission. All statements are made as of the date provided and we assume no obligation nor intend to update or revise any forward-looking statements to reflect future developments or circumstances ASM Proprietary Information FY rd Quarter Results and EGM 27 November

3 ASMI s Organizational Structure ASM International HKSE % 53.59% ASM Front-end ASM Back-end 2014 ASM ASM ASM ASM Front-end Manufacturing Europe America Japan Far East Singapore ASM Pacific Technology Total employment as June 30, 2006 ( excl. Temporary & Agency ) Malaysia Singapore China Hong Kong other 282 ASMI has a dual listing on NASDAQ (1981) and AEX (1996) Significant trading volumes on both exchanges 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

4 Investment Highlights Opportunities in Front-end: - Established product lines profitable - Sizeable investments in new technologies Back-end operation: #1 worldwide and growing Outperformed industry over the past 7 years Well positioned for future growth: Front-end: - Innovative technologies for established product lines : Low-k, SiGe, Strained Silicon, New Technology, SOI applications - Product lines under development: ALD and PEALD, RTP - Increased focus on S.E. Asian market Back-end: - State of the art stand-alone products - Integrated solutions - Unique cost base 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

5 EGM 27 November 2006 FY rd Quarter Results and EGM 27 November ASM Proprietary Information

6 Update on Upcoming EGM The EGM will be held on November 27 at 2:00pm CET in Zeist, Netherlands Purpose of EGM: Update on matters discussed and promised at the AGM of May 18, 2006 Matters Resulting from AGM Discussions Steps Undertaken by ASM International Review of nomination and voting procedure for Management and Supervisory Board Proposed changes to the articles of association to be considered and decided upon at the EGM Potential appointment of an additional member to the Supervisory Board with specific industry knowledge Proposed appointment of Mr. Heinrich Kreutzer to be approved at the EGM Appointment of Mr. Gilbert Declerck as advisor to the Supervisory Board Review of the existing strategy and of the merits of the current business model In-depth review of current company strategy and implications for business model completed 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

7 Changes in Corporate Governance Significant Changes in Corporate Governance Proposed Present Corporate Governance Proposed Changes CG Code Compliance Appointment of Board Members Binding nomination by the Supervisory Board Break through requires 2/3 majority of votes cast + simple majority share capital outstanding Appointment of Board Members Removed Binding Nomination procedures Shareholders able to block appointment by simple majority of votes cast Shareholders able to appoint own candidates by simple majority of share capital outstanding n/a Removal of Board Members 2/3 majority of votes cast + simple majority of share capital outstanding Removal of Board Members Simple majority of share capital outstanding _ Removal of Board Members still requires majority of share capital outstanding Boards believe that effective control of ASMI (e.g. appointment and removal of Board Members by shareholders) requires the majority of share capital outstanding 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

8 Review of Company Strategy ASMI strategy can be broken down into three main goals over the coming years Drive front-end profitability Maintain and extend market leadership and superior margins in back-end operations Current synergies between front-end and back-end Develop the roadmap to benefit from front-end and back-end convergence Future synergies between front-end and back-end The Supervisory and Management Boards have considered if the above stated strategy and hence long term shareholder value would benefit from an immediate change to the current corporate structure 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

9 Achievements over the Last 5 Years Strategy over last five years has benefited the Company Increasing market shares Leading edge product portfolio New leading edge customers High quality organisation with world wide footprint Strong revenue growth Strong focus on patent strategy and portfolio (ASMI #2 according to IEEE) This has been facilitated by the ASMPT dividend stream Although a strong platform has been created over the last five years, profitability is not yet in line with peers Recent quarters show we are now beginning to reap the rewards of the investment over the past 5 years Top priority is to maximise value from current portfolio and organisation FE and BE synergies will support process 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

10 ASM PT Link Critical to Front-End Profitability Concrete current synergies Drive Front-End Profitability Improve cost structure by moving operations to low cost countries Maintain market share gains to drive revenue growth Bring product lines in development either to profitability or reduce focus Synergies with ASM PT ASM PT undisputed cost leader due to operational excellence in Asian geography Local knowledge and previous experience invaluable in Asian economies Transfer of management / engineering resources to aid in establishing new manufacturing facilities Percentage of front-end sales to Asian (ex-japan) IC manufacturers has grown from 27% in 2000 to 37% in 2005 Local knowledge again invaluable in reaching these customers by non- Asian companies 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

11 Concrete Synergies Move manufacturing location to Singapore No need for cumbersome Joint-Ventures Ability to draw on the expertise of a proven market leader Actions 2003 Strategy decided to move manufacturing over time to low cost countries Decision to commence with VDF operations to be followed by Epitaxy 2004 Existing building purchased in Singapore Equipment, suppliers, subcontractors, etc., sourced First full machine delivered by end of 2004 ASM PT Synergies Patrick Lam, CEO of ASM PT, appointed as project leader in execution of vision Road shows in Asian countries looking for best geographic location (HK, Singapore, Malaysia, China) 7 out of 9 management team members transferred from ASM PT Numerous engineering staff transferred from ASM PT Led suppliers / subcontractors negotiations Results By end of 2006, most VDF generics will be produced in Singapore By end of 2006, most 200mm EPI generics will be produced in Singapore 30% relevant cost savings in manufacturing Expected 2006 gross margin improvement of 1.5% pts Expected 2007 gross margin improvement of 4.0% pts 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

12 Front-End Improvement on Track Current synergies with back-end are a big part of the story Targets Laid out at AGM 2006 Positive EBITDA Focus on margin and working capital improvements 2007 Positive operating cash flow, independent from ASM PT dividend Positive net earnings Update YTD EBITDA positive, full year double digit EBITDA Front-end gross margin improved every quarter in 2006 Working capital improved by 10 days in 2006 On track, management confident to reiterate guidance 2009 Operating margins in line with front-end peer universe On track, management confident to reiterate guidance 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

13 Front-End Trading at Discount Opportunity for shareholder value creation by bringing frontend profitability in line with peers Peer Multiples ASMI Implied FE Discount 2006E 2007E 2006E 2007E 2006E 2007E EV / Sales 1.9x 1.7x 0.21x 0.21x (89%) (88%) EV / EBITDA 10.5x 9.2x 7.19x 4.19x (32%) (55%) Source: FactSet, based on I/B/E/S Consensus, as of 27 October Front-end peers include Applied Materials Inc., KLA Tencor Inc., Lam Research Corp., Novellus Systems Inc., Axcelis Technologies Inc., Mattson Technology Inc., Veeco Instruments Inc., and Asyst Technologies Inc. ASMI front-end financials based on brokers consensus (CIBC, Merrill Lynch, SNS, Van Lanschot) ASM Proprietary Information FY rd Quarter Results and EGM 27 November

14 Is the Current Structure Optimal? For current priorities, yes, longer term to be revisited Current operational synergies for the front-end only possible due to the strong historical link and shareholdings in ASM PT Arms length contracts between related parties able to get most of these synergies for the front-end No evidence found of dis-synergies outweighing synergies due to current structure Operational performance being successfully addressed with the help of this structure, not in spite of it Future technological convergence between front-end and backend may cause us to reconsider current structure in favour of closer cooperation but it is not currently required nor is currently value optimizing for ASMI shareholders 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

15 Long Term Vision Coming into Focus Trend towards 3D-packaging keeps gaining momentum Wafer Level Packaging Evidence of Progress since AGM are driving the need for product miniaturization. To meet this requirement, many device manufacturers are investigating 3-D interconnect technology to stack die or wafers. (Semiconductor International, Sep. 06) Creation of the EMC-3D consortium for the development of cost-effective 3D Thru-Silicon-Via interconnect. (Oct. 06) ICOS Vision Systems and IMEC have agreed to work together in the field of inspection and metrology for 3D packaging, including Wafer Level Packaging. (Jul. 06) ASM Proprietary Information FY rd Quarter Results and EGM 27 November

16 Next Steps ASMI's strategy is under constant review by Management and Board We have welcomed the opportunity to discuss our strategy and corporate structure with our shareholders Our immediate priority and focus is front-end profitability inter alia through leveraging of front-end/back-end synergies Further debate and analysis of our corporate structure will divert management from its primary front-end operational focus It also creates undesirable side-effects such as uncertainty within ASMI's number one resource, its staff Our results show that our efforts are paying off, but complete management focus is necessary to deliver on our commitment and to follow through We will monitor and report to shareholders on progress 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

17 Focussing on Shareholder Value Creation A shareholder has put a non-binding vote on the EGM calendar to consider a split-up of the Company The Management and Supervisory Boards are focused on shareholder value creation and have reviewed in depth their strategy over the past months We have come to the conclusion that a structural change at this time is not beneficial A strong support by shareholders during the EGM will support us in focussing on creating that shareholder value 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

18 Wafer Processing Front-End FY rd Quarter Results and EGM 27 November ASM Proprietary Information

19 ASMI Front-End Global Operations USA Europe Asia Business Units Epitaxy Products TP Products CP Products US office and manufacturing facilities Phoenix, Arizona and Fremont, California Business Units Vertical Furnaces RTP Products HQ, Europe office and manufacturing facilities Bilthoven and Almere, Netherlands Major Research Centers in Belgium and Finland Business Unit PECVD Products Asia office and manufacturing facilities Tama & Nagaoka, Japan Major Market & Service Units in Taiwan, China, Korea,Singapore Research center Korea (Genitech) 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

20 Front End Of Line: FEOL Historical strength of ASM International LPCVD Oxydation Diffusion Epi deposition ALCVD Wafer Processing Segmentation Back End Of Line: BEOL Historically ASM International has been active in InterMetal Dielectrics New developments: Low K deposition PEALD (Diff. barrier and Cu seed) 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

21 Front-End Technology Drivers Semiconductors becoming smaller, better performing, faster switching and lower power consumption: Line widths < 100 nm, Ultra thin films, New materials ASMI s solutions: - Established products PECVD Superior Low-k chemistry Nano Carbon Polymer Epitaxy SiGe Epi Deposition New Technology Strained Silicon Vertical furnace Silcore chemistry TiN deposition Batch ALCVD - New products Atomic Layer Deposition High-k Gate Dielectrics High-k Capacitor Dielectrics Cu Diffusion Barrier/Seed Layer RTP New Technical Approach: Levitor 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

22 ASM s strategy in S.E. Asia Customer wins in Taiwan TSMC Nanya Promos Winbond Inotera Conclusion: All major players are in the ASM customer base Approach in Korea Samsung Hynix Unique enabling technology: NCP hardmask GapFill Low-k process China to follow 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

23 Achievement in Taiwan M Taking off, and aiming toward 250M Billing M Booking M Bookings are in excess of 100 M now 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

24 Korea: focus on Memory Players Rapid growth in Capex spending for Memory lead by Korea Cap Ex (M$) Logic Memory Flash DRAM 5000 Strategy: Support Memory players with new versatile technology Example 1 : NCP hardmask (nano carbon polymer) Example 2: GapFill Low-k process (Proven ASM technology) 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

25 Move to Asia Facilitated by Link to ASMPT Manufacturing generic subassemblies and components to replace outsourcing in US and Europe Benefit from lower labour rates (60-70%) Benefit from skilled labour in flexible market Benefit from lower local prices for materials and components Gross Margin improvement by ~1.5% in 2006, ~4% in 2007 and more to be expected 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

26 Wafer Assembly & Encapsulation Back-End FY rd Quarter Results and EGM 27 November ASM Proprietary Information

27 ASMI Back-End Global Operations USA Europe Asia Sales and Service Unit US office San Jose, California Sales and Service Unit European office Bilthoven, Netherlands Business Unit all Back-end products HQ, office and manufacturing facilities Hong Kong Major Manufacturing facilities in Singapore, Shenzhen (PRC), and Malaysia 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

28 Product Strategy ASMI supplies equipment to the Back-end of the semiconductor manufacturing industry ASMI s tools are used to assemble chips into its final package Back-end processes Wire bonding Die Bonding Moulding Trim & Form Flip Chip,BGA bonding ASMI s tools Die bonder Wire bonder Flip Chip Moulding Trim & Form & Test Handler 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

29 Business Drivers Technology Drivers: Size of packages Finer pitch ball bonding capability Advanced technologies Flip Chip, Chip Scale Packages, Ball Grid Array (BGA), Stacked Die, System in Package (SiP), Wafer Level Packaging (WLP) Cost Driver: Cost of Ownership Low cost solutions Automation Integration of assembly and packaging steps 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

30 Operations CHINA PARTS & SUBASSEMBLIES PARTS & SUBASSEMBLIES HONG KONG CUSTOMERS MALAYSIA PARTS & SUBASSEMBLIES SINGAPORE 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

31 Financial Overview FY rd Quarter Results and EGM 27 November ASM Proprietary Information

32 Net Sales (Front-end and Back-end) 1000 Euro millions Front-end Back-end 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

33 Sales Breakdown FY 2005 Sales by Product line Geographical Sales 15% 50% 50% 57% 20% 8% Front-end Equipment Back-end Equipment Europe North and South America Japan SE Asia 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

34 Consolidated Earnings (Before FE restructuring) Euro millions Earnings from operations * * Net earnings ** * before one-time charges ** before FE restructuring charges 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

35 Consolidated Statement of Operations by Segment Euro millions FY 2004 FY 2005 H Front-end Sales Back-end Sales Consolidated Net Sales Front-end EBIT (16.2) (37.1) * (3.2) ** Back-end EBIT Consolidated EBIT Net Earnings Front-end (29.4) (47.2) * (9.9) ** Net Earnings Back-end Minority interest in subs. (45.6) (43.6) (30.5) Consolidated Net earnings * Excluding restructuring charges: effect on EBIT 43,2 and on net earnings 43,8 ** Excluding restructuring charges of 5, ASM Proprietary Information FY rd Quarter Results and EGM 27 November

36 Consolidated Statement of Operations per Quarter Euro millions Q Q Q Net Sales Gross Profit SGA (26.6) (30.6) (29.6) R&D (23.7) (21.9) (22.1) other (0.4) (0.8) (0.4) Earnings from Op. (EBIT) Net earnings (after minority interest) (6.3) Diluted Net Earnings per share (0.12) ASM Proprietary Information FY rd Quarter Results and EGM 27 November

37 Consolidated Cash Flow Statements (Summary) Euro millions FY 2004 FY 2005 Q Net Cash from Operations Net Cash from/for Investments (67.7) (45.6) (8.2) Net Cash before Financing Net Cash from/for Financing 63.2 (109.7) (23.1) Net Change in Cash 63.8 (83.6) 0.3 Ending Cash Balance CAPEX ( net of Sale PPE ) Ending Working Capital WC in days sales ASM Proprietary Information FY rd Quarter Results and EGM 27 November

38 Cash Overview Euro millions Dec 2003 Dec 2004 Dec 2005 Sep 2006 Cash and Cash Equivalents available to Back-end available to Front-end ST Debt ( incl. Current LT Debt ) LT Bank Debt / Convertible Subord. Bonds ASM Proprietary Information FY rd Quarter Results and EGM 27 November

39 Backlog Euro millions BE FE Total Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q Q New orders : 184,5 million, down 28% from last quarter. 51% of Q3 equipment orders booked in FE were for 300mm Q Book-to-Bill : 0,86 (Book-to-Bill in Q was 1,18 and in Q was 1,09) Ending Backlog : 251,7 million (with roughly 40% in Back-end and 60% in Front-end) 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

40 Outlook as per October 30, 2006 Front-end sales in second half of 2006 expected to be comparable to the first half 2006 sales level. Front-end EBITDA 2006 (net of restructuring charges) expected to be double digit M. Back-end expected to show another solid performance in Q ASM Proprietary Information FY rd Quarter Results and EGM 27 November

41 FY rd Quarter Results and EGM 27 November 2006 Back-up sheets (7) following 2006 ASM Proprietary Information

42 CONSOLIDATED STATEMENT FY Restructuring effect- Euro millions (except per share) FY 2005 FY 2005 FY 2005 excl restructuring restructuring charges incl restructuring Net Sales Gross Profit % % % Total Operating Expenses % % % Earnings from Operations % % % Minority interest in subs. (43.6) (43.6) Net earnings % % (40.2) (5.5%) Net earnings per share (0.76) 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

43 CONSOLIDATED STATEMENT OF OPERATIONS -BY YEAR- Euro millions (except per share) FY 2003 * FY 2004 FY 2005*** Net Sales Gross Profit % % % Total Operating Expenses % % % Earnings from Operations % % % Minority interest in subs. (24.6) (45.6) (43.6) Net earnings (25.6) ** (4.4%) % % Net earnings per share (0.52) * Excluding 6.5 million Euro restructuring charges ** Restated *** Before FE restructuring charge 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

44 CONSOLIDATED STATEMENT OF OPERATIONS - BY SEGMENT - Euro millions FY 2003 FY 2004 FY 2005 Front end Sales Back end Sales Consolidated Net Sales Front-end EBIT (38.8) 1) (13.5%) (16.2) (4.6%) (37.1) 3) (10.3%) Back-end EBIT % % % Consolidated EBIT % % % Net Earnings Front-end (55.5) 1) (19.4%) (29.4) (8.3%) (47.2) 3) (13.1%) Net Earnings Back-end % % % Minority interest in subs. (23.6) (45.6) (43.6) Consolidated Net earnings (25.6) 2) (4.4%) % % 1) Excluding restructuring charges 2) Restated for accounting treatment NuTool acquisition 3) Excluding FE restructuring charges 2005 ASM Proprietary Information FY rd Quarter Results and EGM 27 November

45 CONSOLIDATED STATEMENT OF OPERATIONS PER QUARTER Euro millions Q Q Q Net Sales Gross Profit % % % SGA (26.6) (15.2%) (30.6) (13.0%) (29.6) (13.9%) R&D (23.7) (13.6%) (21.9) (9.3%) (22.1) (10.4%) amort purch techn, oth intang asset (0.4) (0.2%) (0.8) (0.3%) (0.4) (0.2%) Earnings from Op. (EBIT) % % % Net interest and finan. exp. (2.1) (2.6) (1.6) Income taxes (3.1) (3.6) (2.8) Minority Interest (12.5) (16.4) (13.4) Net earnings (6.3) (3.6%) % % Diluted Net Earnings per share (0.12) ASM Proprietary Information FY rd Quarter Results and EGM 27 November

46 CONSOLIDATED BALANCE SHEET Euro millions Dec 2003 Dec 2004 Dec 2005 Cash and Cash Equivalents 155 ¹ 219 ¹ 135 ¹ Other Current Assets Property, Plant & Equipment Goodwill Other Assets Total Assets ST Debt ( incl. Current LT Debt ) Other Current Liabilities LT Bank Debt / Convertible Subord. Bonds Other Long Term Liabilities 2 1 Total Liabilities Minority Interest in Subsidiary Shareholders Equity Total Equity & Liabilities ¹) of which cash availability for Front-end ASM Proprietary Information FY rd Quarter Results and EGM 27 November

47 CONSOLIDATED CASH FLOW STATEMENTS (Summary) Euro millions FY 2003 FY 2004 FY 2005 Net Earnings (incl. Minority interest) (7.5) Depreciation & Amortization Impairment of Goodwill and PPE 36.4 Changes in Working Capital 16.7 (43.6) (25.3) Other (3.2) Net Cash from Operations ( A ) CAPEX ( net of Sale PPE ) (27.1) (53.4) (43.8) Financial Assets (3.8) (14.3) (1.8) Net Cash from Investments ( B ) (30.9) (67.7) (45.6) Net Cash before Financing ( C = A + B ) Ending Working Capital ASM Proprietary Information FY rd Quarter Results and EGM 27 November

48 CONSOLIDATED CASH FLOW STATEMENTS (Summary) Euro millions FY 2003 FY 2004 FY 2005 Net Cash before Financing ( C ) ( previous slide ) Short Term Bank debt (1.3) (0.5) (2.4) Proceeds from LT Debt and Convertibles Repayment of LT Debt and Convertibles (3.6) (17.2) (89.6) Dividends to Minority (20.4) (34.4) (31.7) Other Net Cash from Financing ( D ) (109.7) Exchange Rate Effects ( E ) (16.8) (6.7) 20.9 Net Change in Cash ( = C + D + E ) (83.7) Ending Cash Balances Of which Front end Bookvalue convertible due November ASM Proprietary Information FY rd Quarter Results and EGM 27 November