Q1 2025 VAT Group AG Trading Statement Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Meihan Yang - Goldman Sachs - Analyst : So I have two questions. First of all, have you seen any potential prebuy effects given there are potential sector tariffs on semiconductors upcoming according to your customer interactions? And I'll ask the second one.

Question: Meihan Yang - Goldman Sachs - Analyst : Understood. And second question is on the advanced industrial rebound that you mentioned. How sensitive is the rebound assumptions that you're having now to the macro development?

Question: Didier Scemama - BofA Global Research - Analyst : I've got a couple. First, if you could give us an update on your business with the Chinese semi-cap vendors. Have you seen any changes in behavior, any pull in, any pushouts of any sorts? And if you could give us a quantification of the revenues coming from Chinese semi caps? And I've got a follow-up.

Question: Didier Scemama - BofA Global Research - Analyst : Very clear.

Question: Didier Scemama - BofA Global Research - Analyst : So to come back to tariff on the second question. So there are tariffs on Malaysia and in Switzerland, which are quite punchy. I think you've been giving us earlier your exposure to shipments to the US of about 20%. Is that from Switzerland? Or is it from Malaysia? Or is that like an average that we should use as a sort of bogey for the business?

Question: Joern Iffert - UBS - Analyst : The first one would be, please, on the order trends with high bandwidth memory capacity additions being in full swing. My question is, is this not something which is already supporting your order intake quite materially already today and there's just some weakness in some other legacy CapEx materializing right now. This would be the first question, please.

Question: Joern Iffert - UBS - Analyst : And then maybe a second question is a kind of follow-up. I mean, when I step back three, four months ago, I mean, everybody was expecting some semi wafer equipment CapEx recovery or acceleration to call it this way already, it was not happening. Now the world is likely looking for more challenging macro picture versus two, three months ago. So when you listen into your customers also at (inaudible), I mean, what do you hear? What is the trigger point actually, which really gives you confidence that we have end market growth happening over the next one or two years on semi wafer equipment CapEx and not just maintaining in practice that these $95 billion or $100 billion in run rate?

Question: Sandeep Deshpande - JPMorgan - Analyst : Two questions, if I may. I mean, in terms of the order intake in the first quarter, I mean, you've seen this weakening of the orders. I mean, is this because, I mean, what is happening macroeconomically? Or is it something else that you saw during the quarter, which is making it happen? Also your revenue in the first quarter was at the bottom end of the guidance. Normally, I mean, you guys are pretty good in achieving what you have guided at the midpoint. So can you just give any indications of what -- how it played out in the first quarter? And I have a quick follow-up.

Question: Sandeep Deshpande - JPMorgan - Analyst : And my follow-up question would be on one which was asked earlier, which was on the China percentage of your revenues in semiconductors. I mean this 30%-odd revenue that you're getting from China, I mean, the semi-cap companies in China do not have that sort of market share in the global semiconductor equipment market. So maybe how do you understand that share you have in revenue coming from the Chinese semiconductor equipment suppliers given this dynamic?

Question: Nabeel Aziz - Redburn Atlantic - Analyst : I had two questions, if I may. Firstly, just on gate-all-around. So how is the supply chain looking in the gate-all-around ramp? And for a ramp in the third quarter, fourth quarter, when do you expect to see orders pick up?

Question: Nabeel Aziz - Redburn Atlantic - Analyst : Okay, great. And then I guess on my follow-up was just another one on China. So ASML yesterday commented that China demand held up better than expected. I was wondering how you see overall China WFE spending this year, whether you feel like it's trending better than expected and whether you expect it to be relatively stable this year for small down this year?

Question: Michael Inauen - Znrcher Kantonalbank - Analyst : Just two questions, first on the order intake Q1. How has it evolved actually month over month? Has it actually just basically stopped like a shock that we could have anticipated with the President of the US just bringing up this tariff discussion to a new extreme level. So has it been okay at the start of the year and then basically dropped, I would say, a couple of weeks ago? That would be my first question. And the second question would be, I mean, the discussion is obviously still ongoing on tariffs. There is a 90-day pause, but between the US and China, it's still escalating, I would say. So what are your assumptions for VAT for a good outcome of these? And what would be actually a bad outcome for you going forward? So how should we look at these basically options that we have on the table here? This would be my two questions.

Question: Craig Abbott - Kepler Cheuvreux - Analyst : Yes. I just wanted to -- on the full-year conference call, you indicated that you felt quite comfortable with consensus top line growth for this year of around 20%. And if I look at the midpoint of the Q2 sales outlook and I add that to the Q1 sales, it suggests nearly half of this has already been achieved in H1. And you said from the beginning and also on the conference call that you expect Q2 to be stronger with the ramp starting to pick up pace. And I just wondered, given all the uncertainties that we've been talking about in the call, how comfortable you still feel that you suggested earlier in your comment that it was still sort of trending in line with consensus. If you could just elaborate a bit on that. And also just as a final question on that, I guess, though it would nevertheless be fair to say visibility on this has maybe declined a bit. And then just one really quick follow-up.

Question: Craig Abbott - Kepler Cheuvreux - Analyst : Well, that was going to be my follow-up was to what extent maybe the recent FX volatility has led to this wide guidance range on the sales for Q2. I appreciate you said you would give us more of an update with the half year numbers, but that is the case, right? You sort of --

Question: Martin Jungfleisch - BNP Paribas Exane - Analyst : I have two questions, please. The first one is on inventories. You mentioned that slightly higher-than-expected customer inventories in semi also contributed to slightly lower orders and sales in the first quarter. Could you point out any specific customer group that has seen elevated inventories? And would you expect this headwind to sustain in the second quarter on orders and sales as well? That's the first question.

Question: Martin Jungfleisch - BNP Paribas Exane - Analyst : Okay. And the second question is on adjacencies. Just if you could disclose the rough revenues and orders generated with adjacencies in the first quarter? And if you could call out any specific applications or customer groups that are currently driving sales and orders for that?

Question: Michael Foeth - Vontobel - Analyst : Just one question left for me, and I would like to come back on the tariffs. You say that you expect no material impact, but still you have these 20% sales into the US. So I was just wondering how we should read that comment? Do you expect basically no tariffs? Or do you expect exemptions? Or do you expect to pass the tariffs on? Or how should we understand the comment that there is no impact from tariffs on VAT?

Question: Michael Foeth - Vontobel - Analyst : Okay. I think that goes in the same direction as what ASML, I think, also alluded to.

Question: Nejc Lavric - Octavian AG - Analyst : The first one would be on the book-to-bill. If we look at it, it's probably the lowest since 1.5 years. What do you expect for the coming quarters? I mean you have this historically heightened backlog, almost 40% of your sales. Could this go back to maybe 20% that we've seen pre-COVID? So maybe a bit more reserved order intake, but still strong sales as maybe your guidance implies at least on the upper end? That would be my first question.

Question: Nejc Lavric - Octavian AG - Analyst : Okay. And maybe in light of this, I mean, you have a CapEx guidance for CHF90 million to CHF100 million. You have capacity of CHF1.5 billion. Maybe in the light of all these tariffs, I mean, are you maybe reconsidering some of these investments or maybe just your cost base? Maybe some thoughts on that.

Question: Nejc Lavric - Octavian AG - Analyst : If I may, I mean, can we understand that maybe a part of it will be going to China? I mean if I speak maybe to some other companies, I heard that maybe China wants to have more manufacturing locally. I mean you're now in Malaysia. I mean, is there any direction -- any movement in that direction or part of that CapEx going there?

Question: Jnrgen Wagner - Stifel - Analyst : If we look at a potentially weaker macro, let's say, later in '25, how resilient would your service business be? And then you mentioned lead times are very short. Can you give us a number?

Question: Jnrgen Wagner - Stifel - Analyst : On the resilience of your service.

Question: Nigel van Putten - Morgan Stanley - Analyst : Just starting with a clarification. Last quarter, you said you're comfortable with consensus and explicitly said, which is looking for 20%. So when you're saying you're still comfortable with consensus today, to what number are you alluding to? I think you said before you're annualizing the second quarter, the first half will get you to consensus that implies 16% to 17% growth. Is that correct, or I'm missing something here?

Question: Nigel van Putten - Morgan Stanley - Analyst : So which number? Sorry, but can you just make that really clear.

Question: Nigel van Putten - Morgan Stanley - Analyst : No, of course. Now I'll tell you, I mean, the consensus for the fourth quarter, I mean, consensus since moved. And you've also provided an average compiled consent as a median. We have Bloomberg visible of the consensus. So it would just be helpful to just get the number because confusing.

Question: Nigel van Putten - Morgan Stanley - Analyst : 11.40 back then, you're still comfortable. Okay. So when I -- that would imply sort of growth in the second half. And you've mentioned FX, right? I mean, perhaps can you remind us sort of what the percentage is of sort of US dollar in your sales mix typically?

Question: Nigel van Putten - Morgan Stanley - Analyst : 65%, right, yes. And against the Swiss franc, we're talking to almost a double-digit headwind as of sort of current levels. So that's quite steep. So is there anything that's sort of offsetting that in terms of you're still being comfortable with sort of the 20% growth into the full year?

Question: Nigel van Putten - Morgan Stanley - Analyst : Yes, but strengthening into the second half. So I'm just asking specifically to the second half seems to imply then that growth from the first half, even though the macro situation, et cetera, is tricky. And given you tend to have quite short lead times, I'm just asking, is there anything that gives you confidence that the second half would indeed sort of grow both organically and even offset the FX sort of headwind that's going to strengthen in the second half.

Question: Nigel van Putten - Morgan Stanley - Analyst : Yes. So sorry to press the point, but I think this is indeed very consistent with what you said last quarter. But since then, we've seen the macro environment worsening. We've seen FX worsening. So I'm saying you seem to have to fill a gap here. And I'm just curious if there's anything specific you can point out that gives you the confidence.

Question: Nigel van Putten - Morgan Stanley - Analyst : Got it. And then so you said even on -- so you're using the year to date for your internal budgeting, I get that now. But then looking at sort of margins considering sort of the mismatch between 65% in dollars and not producing elsewhere, should we take that into account for gross margin EBITDA forecast? Is there anything you can provide some rough color on in terms of the materiality of maybe not tariffs, but the FX on EBITDA margins?

Question: Nigel van Putten - Morgan Stanley - Analyst : Okay. And then maybe lastly, on sort of '26 view. I think you've mentioned sort of a change in the structure of the industry towards sort of moving from plateau to plateau. Is that what you're sort of implying for '26, we should grow off the current plateau. So I guess, no more cycles, but growing from at least a stable level and potentially see growth from? Is that the best way to interpret that commentary?

Question: Martin Marandon-Carlhian - ODDO BHF - Analyst : The first one is on ALD. Could you give us maybe a bit more color on how ALD valve sales were ramping up in Q1? And in the sequential decrease of orders in Q1 versus Q4, did ALD valves orders have decreased as well? And I have a quick follow-up.

Question: Martin Marandon-Carlhian - ODDO BHF - Analyst : No, I'm talking about the valves specifically for ALD applications.

Question: Martin Marandon-Carlhian - ODDO BHF - Analyst : Okay. And maybe for my follow-up on China. On a broader view, what do you expect from China in 2025 and 2026 compared to maybe three months ago? Because obviously, inventories to COGS ratio seems quite high at Chinese equipment manufacturers and you have more tariff uncertainty. But I was wondering if actually this geopolitical uncertainty could accelerate the decoupling of US and China economies and actually makes you more confident on the China business going forward?