Q3 SIGNIFICANTLY AFFECTED BY CUSTOMER COMPLAINT

“We believe we are now at the final stage of the technical investigations of the customer complaint and have started the commercial processing of the matter with the customer and the third-party contractor. The case had a significant, adverse impact on our financial results for the quarter, both in terms of revenue and costs. Despite this, the underlying business was characterised by an improvement in production efficiency.” Kalle Hvidt Nielsen, CEO

| Source: Cemat A/S Cemat A/S

Announcement no. 16/2014
Company reg. (CVR) no.: 24 93 28 18
25 November 2014

 

TOPSIL SEMICONDUCTOR MATERIALS A/S
Interim report, Q3 2014,
three months ended 30 September 2014          

Highlights of the quarter

  • The technical investigation of the customer complaint is now believed to be in its final stage. Topsil has received a provisional claim for compensation from the customer and has raised a claim against the third-party contractor. As a consequence of the complaint, Q3 results were adversely affected at the level of DKK 5 million, which is expected to be compensated for in the course of Q4, and which is consequently not expected to impact the full-year results.
  • There are still defects in some of the replacement wafers delivered and, as a result, the deliveries have been suspended. Topsil believes to have identified the source of the defect at the third-party contractor. The customer's provisional claim for compensation does not include the defect in the replacement wafers, and the outlook for the full year does not include any costs in that respect.
  • Topsil’s revenue was DKK 65.8 million in Q3 2014 against DKK 79.4 million in the year-earlier period. Q3 2014 revenue includes new sales of DKK 4.7 million to the customer involved in the complaint case.
  • EBITDA was a loss of DKK 3.8 million in Q3 2014 against a profit of DKK 4.0 million in Q3 2013. The contribution ratio was 46.2% in Q3, representing a year-on-year increase of 3.8 percentage points. The results include costs for the provisional claim for compensation, costs related to production at two production facilities in Denmark and costs related to a change of the sales management.
  • Cash flows from operating activities were an outflow of DKK 2.1 million in Q3 2014 against an inflow of DKK 20.9 million in the year-earlier period. Working capital stood at DKK 131.1 million at 30 September 2014, representing a reduction of DKK 10.9 million compared to 30 September 2013. The cash flows for investing activities were DKK 3.6 million. 
  • Michael Lisby Jensen joined Topsil as new Sales Director on 1 September 2014 and has started up activities to strengthen Topsil’s sales efforts.
  • The next version of 150 mm float zone silicon wafers based on the 200 mm technology was approved by the first customer. The products support a more efficient production process at the customer as well as at Topsil. 
  • Production at the former production facility stopped in October, and the facility is currently being vacated. Final return of the leased property is expected to take place at the end of the year.

Outlook for 2013

Topsil’s guidance is specified to the lower end of the previously forecast range of revenue at the level of DKK 270-290 million and EBITDA in the range of DKK 0-10 million. Following the customer complaint issue, the updated guidance for revenue and EBITDA for the full year is subject to significantly greater uncertainty than would normally be the case just as the issue of compensation has not yet been clarified with the customer and the third-party contractor.

         Please direct any questions regarding this announcement to the Company's CEO and CFO through Ms. Christina Fris Bjørling, Communications Manager, tel.: +45 2152 1011, cfb@topsil.com.
         
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Attachments

16-14_Q3_2014_UK.pdf