Sumco Corporation ((SUOPY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Sumco Corporation presented a mixed sentiment, reflecting both positive developments and significant challenges. While the company showcased strong performance in certain segments and an improvement in cash flow trends, it also faces forecasted losses, structural changes in the market, and geopolitical uncertainties. High inventory levels and increased depreciation contribute to a cautious outlook.
Strong Q2 Sales Performance
Sumco Corporation reported Q2 sales of JPY102.9 billion, slightly ahead of their plan, with an operating profit of JPY1.5 billion, surpassing the forecasted breakeven point. This indicates a robust performance in the second quarter, providing a glimmer of optimism amidst broader challenges.
AI-Driven Growth in Logic Segment
The company is witnessing high growth levels in AI-related segments, particularly in the logic segment at design rules of 7-nanometer or lower. Servers for data centers are expanding at an annual rate of around 16%, highlighting the potential for future growth driven by technological advancements.
CapEx Reduction and Near Completion of Investments
Sumco’s capital expenditures (CapEx) for the first half of the year were JPY51.9 billion, significantly reduced from JPY124.7 billion last year. This reduction reflects the near completion of their greenfield investment program, indicating a strategic shift in their investment approach.
Improvement in Cash Flow Trend
The company is experiencing an improvement in cash flow trends, with expectations of achieving positive free cash flow by the end of the year as CapEx declines. This is a promising sign for the company’s financial health moving forward.
Forecasted Losses in Q3
Despite the positive trends, Sumco projects an operating loss of JPY3.5 billion, ordinary losses of JPY6 billion, and losses attributable to owners of the parent of JPY5.5 billion for Q3. These forecasted losses underscore the challenges the company faces in the near term.
Structural Decline in 200-Millimeter Wafer Demand
The demand for 200-millimeter wafers is declining due to a shift towards local production in China and a transition to 300-millimeter wafers. This structural change in the market is a critical factor in the company’s strategic adjustments.
High Customer Inventory Levels
Customer wafer inventory levels remain high, which is delaying recovery despite slight improvements in input levels. This situation poses a challenge for the company as it seeks to balance supply and demand.
Impact of Increased Depreciation
Depreciation is expected to rise, contributing significantly to the forecasted decline in operating profit. This increase in depreciation is a key factor in the company’s financial projections.
Potential Impact of US Tariffs
Uncertainty surrounding potential 100% US tariffs on semiconductors could impact sales, with the US accounting for 7.5% of total sales. This geopolitical risk is a significant concern for the company as it navigates the global market.
Forward-Looking Guidance
In the Q2 2025 earnings call, Sumco provided guidance with several key metrics. Sales for Q2 were reported at JPY102.9 billion, slightly exceeding expectations, while operating profit stood at JPY1.5 billion, outperforming the breakeven forecast. For Q3, the company forecasts sales to remain largely unchanged at JPY101 billion, with anticipated losses due to increased depreciation and currency impacts. An interim dividend of JPY10 per share was announced, with the fiscal year-end dividend level yet to be determined. The company is also making strategic adjustments, including closing the Miyazaki plant and reallocating resources to 300-millimeter operations.
In summary, Sumco Corporation’s earnings call highlighted a blend of positive achievements and looming challenges. While strong sales performance and AI-driven growth offer promise, the company must navigate forecasted losses, market shifts, and geopolitical uncertainties. The strategic adjustments and forward-looking guidance provided by Sumco will be crucial in steering the company through these turbulent times.