VAT Group

² Quarter-on-Quarter; ³ Year-on-Year

Q1 growth led by Semiconductors, Global Service and Advanced Industrials

The global semiconductor sector, VAT’s largest end market, continued to grow in the first quarter of 2022. Driven by the persisting global shortage of semiconductor chips, coupled with further technology advances, semiconductor manufacturers invested heavily in new fabrication equipment as well as in increasing the productivity of their existing production facilities. Industrial markets, such as coatings and automotive, also continued to grow, especially in Asia. Demand in the display market remained mixed while the solar business benefitted from strong demand for advanced photovoltaic (PV) technologies.

As a result, Group orders in the first quarter were 22% higher year-on-year to reach CHF 294 million, leading to a book-to-bill ratio of 1.1x. On a sequential quarter-to-quarter basis, orders declined as expected, reflecting strong Q4 2021 orders as customers built up inventory in anticipation of supply bottlenecks. VAT’s order backlog at the end of the first quarter was CHF 487 million, up 152% compared with the end of March 2021.

Net sales in the first quarter of 2022 grew to CHF 263 million, an increase of 37% compared with the same period in 2021 and slightly above the company’s guidance issued with the fourth quarter and full-year 2021 results on March 3, 2022. Foreign exchange movements, especially the US dollar versus the Swiss franc, had no significant impact on first-quarter net sales compared with the same quarter in 2021.

Segment Review

¹ Quarter-on-Quarter ² Year-on-Year

Valves reported orders of CHF 241 million, up 20% year-on-year, and net sales of CHF 214 million, an increase of 37% compared with the same period in 2021.

The growth was mainly driven by higher demand in the Semiconductor business unit, where orders increased 31% to CHF 184 million, and net sales amounted to CHF 163 million, up 45% compared with the first quarter of 2021. End-users continue to invest in new technologies to manufacture the next generation of chips, while at the same time increasing capacity for existing chip designs in order to satisfy the fast-growing demand for both logic/foundry and memory chips.

Highlights in the quarter for Semiconductors included the expansion of its customer base in Asia and the first specification win in motion components used in a deposition application. This specification win, in which VAT designs a new product together with the customer, reflects VAT’s strategy to expand into profitable adjacent businesses that build on its lead in the core vacuum valve segment and builds the foundation for future growth. In addition, the scope of production at the company’s Malaysia plant was further expanded with the release of a high-volume pendulum control system.

Orders in the Display & Solar business – VAT’s smallest business unit – declined by 29% year-on-year, mainly reflecting the project nature of this business, which results in order fluctuations. Sales, on the other hand, increased by 37% as VAT executed some of the orders received in 2021. In the display business, demand was predominantly for valves used in the production of mini-LEDs that serve as the light source for premium LCD displays. The OLED business remained muted. In the solar sector, demand was driven mainly by PERC but we experienced encouraging growth in shipments to high-efficiency heterojunction based technology (HJT).

The Advanced Industrials business unit continued to grow with orders up about 8% and sales up about 7% respectively year-on-year. This was fueled by continued demand for crystal pulling and high-end industrial coating applications, especially in Asia. The business also saw increased demand for e-beam (electron beam) technologies used in areas such as medical device sterilization, scientific instruments and other industrial applications, as well as for equipment used in 3D metal printing and Lithium-ion batteries for electric vehicles.

¹ Quarter-on-Quarter ² Year-on-Year

The Global Service segment reported orders of CHF 53 million in the first quarter, an increase of 33% compared with the same quarter in 2021, while net sales were up 35% to CHF 49 million. Year-on-year growth is driven by the large investments by major IDMs which in turn is driving the subfab business of Global Service. This coupled along with record level of fab utilization in both semiconductor and solar segments is driving strong sales in spare valves, spare parts, valve repair, and consumables. In addition, the strong partnerships with the OEMs in driving their support of the IDMs with service agreements has been very successful.

Outlook – 2022 expected to be another year of strong growth

VAT expects growth to continue in both its Valves and Global Services segments in 2022 as it taps the significant opportunities offered by a growing market, its leading market and technology positions and the successful execution of its proven strategy for profitable growth.

In the Valves segment, the company forecasts further growth in investments in the semiconductor manufacturing equipment market as the industry addresses both the global chip shortage and the roll out of new chip technologies. Based on orders for delivery in 2022, VAT expects display sales to grow compared with 2021. Further growth is also expected in the solar PV market. Forecasts for vacuum-related equipment sales in industrial markets point to continued growth, especially in molecular diagnostics related to the COVID pandemic, as well as the industrial coatings, automotive and tooling businesses.

VAT expects the market for its Global Service segment to grow further in 2022 as semiconductor manufacturers continue to invest in both new capacity and in upgrading their existing vacuum equipment assets. The high capacity utilization rates drive strong demand for all VAT service products especially in the legacy sector where chip shortages are forecast to continue throughout 2022.

On this basis, VAT expects net sales in 2022 to be substantially higher than in 2021. VAT also plans to continue to build its flexible global footprint and strengthen its natural hedge against foreign exchange impacts by further ramping up its production facility in Malaysia, increasing sourcing from best-cost countries, gaining greater economies of scale in global supply chains and driving further operational excellence measures. At the same time, VAT remains dedicated to technology innovation. Investments in research, development and productivity improvements will therefore remain at the heart of VAT’s strategy in 2022.

Furthermore, the company expects its EBITDA to increase substantially and the EBITDA margin to be higher as well, driven by higher volumes and better cost absorption as well as the ongoing focus on costs, offsetting the cost inflation seen in raw materials, logistics and energy costs. Because of expected higher sales, EBITDA, and EBITDA margin, VAT also expects 2022 net income to increase significantly compared with 2021.

The stronger operational performance is expected to again drive substantially higher free cash flow in 2022, despite the investments in Malaysia, the innovation center in Switzerland and ongoing production improvements in VAT’s production hub in Switzerland. For 2022, capex is expected to be CHF 65 – 70 million.

Guidance for Q2 2022

VAT’s manufacturing plants are ready to support customer demand. However, global supply chain issues or renewed COVID clusters especially in China could negatively impact customer shipments and thus may negatively impact VAT’s Q2 results. Considering current uncertainties, VAT expects Q2 2022 net sales¹ of CHF 260 – 280 million.

¹ At constant foreign exchange rates