Sumco Corporation’s Earnings Call: Stability Amid Challenges

Sumco Corporation ((SUOPY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Sumco Corporation’s recent earnings call painted a picture of cautious optimism, with stable sales performance and interim dividend guidance being overshadowed by projected declines in profitability. The company is facing increased depreciation expenses and challenges from Forex and tariffs, leading to a cautious outlook.

Q1 Operating Profit Exceeds Forecast

Sumco Corporation reported that its Q1 fiscal 2025 operating and ordinary profits exceeded forecasts. This positive outcome was primarily due to delays in incurring depreciation expenses, providing a temporary boost to the company’s financial performance.

Stable Sales Performance

The company’s Q1 sales were largely in line with forecasts, indicating a stable revenue stream. This stability is a positive sign amidst the various challenges the company faces, suggesting resilience in its core business operations.

Positive Forex Impact in Q1

A favorable Forex impact of ¥1.6 billion contributed to the company’s operating profit in Q1. This positive effect helped offset some of the cost increases, providing a cushion against other financial pressures.

Guidance for Interim Dividend

Sumco Corporation has guided for an interim dividend of ¥10. This decision takes into account the company’s EBITDA and available cash, reflecting a commitment to returning value to shareholders despite financial headwinds.

Projected Decline in Profitability

Looking ahead to Q2 2025, the company projects a breakeven at the operating profit level, with an ordinary profit loss of ¥1 billion and a net profit loss of ¥2 billion. This anticipated decline in profitability is a significant concern for stakeholders.

Increased Depreciation Expenses

The company expects a projected increase in depreciation expenses of ¥4.3 billion quarter-on-quarter, which will negatively impact profitability. This increase is a key factor in the company’s cautious outlook.

Forex and Cost Challenges

Sumco Corporation anticipates a negative quarter-on-quarter impact of ¥2.7 billion from Forex, coupled with rising costs related to materials and labor. These challenges are expected to further strain the company’s financial performance.

Weakness in 200 mm and 300 mm Wafer Demand

There is ongoing weakness in demand for 200 mm wafers, with 300 mm wafers also experiencing a decline quarter-on-quarter in Q1. AI remains the only strong driver for 300 mm wafer demand, highlighting a need for strategic adjustments.

High Inventory Levels

Customer wafer inventory levels have been rising, particularly for NAND memory and legacy logic applications. This trend poses a risk of oversupply, which could pressure prices and margins.

Tariff Uncertainty

The impact of U.S. tariffs on silicon wafers remains uncertain, with potential secondary economic impacts. This uncertainty adds another layer of complexity to the company’s strategic planning.

Forward-Looking Guidance

Sumco Corporation’s forward-looking guidance remains cautious. The company expects flat sales quarter-on-quarter but anticipates challenges in profitability due to increased depreciation and a stronger Yen. Despite these hurdles, the company plans to focus on cost management and improving production capabilities, particularly in the transition to 300 mm wafers driven by AI demand.

In conclusion, Sumco Corporation’s earnings call reflects a mix of stability and caution. While sales remain stable, the company faces significant challenges in maintaining profitability due to increased costs and external economic factors. Stakeholders will be watching closely as the company navigates these headwinds, with a focus on strategic adjustments and cost management.