Tokyo Electron ((JP:8035)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call of Tokyo Electron highlighted a robust financial performance, buoyed by growth in AI-related investments and DRAM sales, alongside record-high financial estimates for fiscal 2025. However, the company acknowledged certain challenges, including significant cash outflows and potential declines in the Chinese market.
Strong Financial Performance in Q3
The third quarter of the fiscal year was marked by impressive financial achievements for Tokyo Electron. Net sales soared to ¥654.5 billion, reflecting a 15.5% increase from the previous quarter. This was accompanied by a significant rise in gross profit to ¥311.7 billion, a 19.9% increase, with an improved gross profit margin of 47.6%. Operating income saw a remarkable increase of 34.7%, reaching ¥199.6 billion.
Growth in DRAM and AI-Related Investments
Tokyo Electron experienced increased sales to DRAM customers, with its proportion rising by 9 percentage points from the prior quarter. The company also noted substantial growth driven by AI-related investments, with a surge in inquiries for advanced logic and DRAM for HBM applications.
Capital Expenditure and R&D Investment
In Q3, Tokyo Electron focused its capital expenditures, amounting to ¥50.2 billion, on evaluation tools for development. The company plans to allocate ¥254 billion for R&D expenses and ¥170 billion for capital expenditures in the fiscal year 2025.
Record High Financial Estimates for FY2025
The company has set ambitious financial estimates for fiscal 2025, projecting net sales to reach ¥2.400 trillion, a 31% increase year-over-year. Tokyo Electron anticipates record highs in net sales, gross profit, operating income, and earnings per share (EPS).
New Production Building for Increased Efficiency
Tokyo Electron announced plans for a new production building at its Miyagi location, which will leverage automation to quadruple labor productivity and reduce production lead time by a factor of three.
Cash Flow Challenges
The earnings call highlighted cash flow challenges, with a ¥15.0 billion cash outflow from operating activities due to a temporary increase in notes and accounts receivable and interim tax payments. Free cash outflow was reported at ¥64.1 billion.
Decline in Cash and Cash Equivalents
The company’s cash and cash equivalents saw a sharp decrease of ¥230.0 billion from the previous quarter, largely due to dividend payments, share repurchases, and tax payments.
Challenges in the Chinese Market
Tokyo Electron noted fluctuations in its sales proportion in China, with expectations of a 10% to 20% decline in the non-memory sector due to reduced investments by emerging Chinese chipmakers.
Forward-Looking Guidance
During the earnings call, Tokyo Electron reiterated its fiscal 2025 full-year net sales estimate of ¥2.400 trillion, marking a 31% growth year-over-year. The company also projected a dividend per share of ¥571, underscoring its confidence in sustained financial strength and growth.
In conclusion, Tokyo Electron’s earnings call painted a picture of robust financial health and strategic growth, driven by advancements in AI and DRAM investments. Despite facing cash flow challenges and uncertainties in the Chinese market, the company’s record-high financial estimates for fiscal 2025 highlight its optimistic outlook for the future.
