Q3 2019 VAT Group AG Corporate Sales Call Transcript

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

Question: Sebastian Kuenne - RBC Capital Markets, LLC, Research Division - Analyst : I have a question regarding Malaysia. So it looks like the current run rate is about CHF 110 million this spring of output for the year. How much of that building is currently filled with machinery and people? I mean, how much spare capacity do you have there? And the second question is also on Malaysia. I remember the previous management saying, we want more local sourcing there to save cost and to have less air shipments to Malaysia and to the clients there. And what do you currently see as the potential cost savings opportunity there, both in terms of materials and also in terms of personnel costs? And then my last question would be on OLED. I didn't quite get the numbers that you mentioned. So 60% of your flat panel display valves go into OLED. Is that what you said? Or was that another...

Question: Sebastian Kuenne - RBC Capital Markets, LLC, Research Division - Analyst : And this is 10.5G OLED? Or is that...

Question: Peter Testa - One Investments S.A.G.L. - Analyst : As you noted, there has been some substantial comments out of TSMC in terms of CapEx around 5G, and there's been some other comments from other players around significant business in China. I was wondering if you had seen any participation in those large orders in Q3 or expect in your Q4 comments?

Question: Peter Testa - One Investments S.A.G.L. - Analyst : Okay. And then if you look at the NAND segment, as you mentioned, there's empty shelves and a number of them are running on, say, below full capacity of existing filled shelves. Can you give some sense as to your discussions with your customers and maybe the memory end customers as to how they're thinking about reengaging with CapEx? What sort of levels do they need to get that utilization back up to a NAND fabs before they need to start thinking about putting in more capacity in filling the empty shelves?

Question: Peter Testa - One Investments S.A.G.L. - Analyst : Right. Okay. And then just one financial question, please. On your view on EBITDA guidance, given that the sales are going to be up H2 over H2, do you think the EBITDA margin will be up H2 over H2?

Question: Marta Kinga Bruska - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Taking the questions, most of them were actually already answered, but maybe just going into the Global Services, you mentioned some delays in order there. I would like to ask how big are typically those orders? And if we should anticipate stronger revenue growth in the fourth quarter? And perhaps as well on the -- on your guidance for the fourth quarter, is it -- what would have to happen in order for you to even exceed that guidance?

Question: Marta Kinga Bruska - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. And may I just follow-up on the pricing recovery in the non-memory part of the semi. Was that what you mentioned that you're seeing in the market in Q4?

Question: Marta Kinga Bruska - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes, with the customers. So in your market comments, you mentioned some pricing recovery in the fourth quarter already. Was it related to the non-memory part of the semiconductors?

Question: Marta Kinga Bruska - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And you didn't see yet an improvement in the memory pricing -- in the memory part of the market yet? Or -- I got a little bit confused. Or do you already see some improvements there as well?

Question: Nigel Van Putten - Kempen & Co. N.V., Research Division - Analyst : I was dropped from the call so I might have missed some questions on Display. Just a quick then. How is that looking half-on-half in terms of revenue?

Question: Nigel Van Putten - Kempen & Co. N.V., Research Division - Analyst : Yes, I mean, presumably it's down versus second half 2018, but just trying to get my bearings on sort of the progression throughout the year.

Question: Nigel Van Putten - Kempen & Co. N.V., Research Division - Analyst : And would that still be consistent with sort of the market being down 1/3 in 2019?

Question: Nigel Van Putten - Kempen & Co. N.V., Research Division - Analyst : Got it. I did miss that. And then maybe a question on your overall customer mix. How is that evolving? I think LAM Research was flagging some share gains overnight. I guess they all do. Do you see any shifts in your sort of core customer base in 2019 and also your expectation next year?

Question: Sebastian Kuenne - RBC Capital Markets, LLC, Research Division - Analyst : A few follow-ups. One is on the EUV machinery itself, I mean, you may not have a large revenue share with EUV directly, but is it fair to assume that you have a 100% market share for these machines in the highest vacuum segment? And then on the pricing of the valves themselves. Is there any change in the pricing environment for you guys? Are there new contracts or negotiations coming up where you see price pressure? And then valves modules, that was a big segment or big story in the past where you said that you can basically squeeze out competitors by offering entire modules, for example, to the etching machinery. What's the current revenue share of those modules? And is there any margin dilution from the product mix?

Question: Sebastian Kuenne - RBC Capital Markets, LLC, Research Division - Analyst : But as a product itself, if you had -- if you do your cost calculations, it's probably a bit more not commoditized, but putting a frame around 5 valves, probably less margin than the valves themselves? Would that be a fair assumption?

Question: Sebastian Kuenne - RBC Capital Markets, LLC, Research Division - Analyst : Just final very quick question. Are you aware of any exits from the market from your competitors? Is there -- because I remember, there was some, I think, butterfly valve maker who dropped out of the market, who doesn't offer their products anymore. Did you observe any other smaller exits from the -- especially from the semiconductor side of the valves market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2019 / NTS, VACN.S - Q3 2019 VAT Group AG Corporate Sales Call