ASML Outlook Beats Expectations, Sees Growth Despite Virus

(Bloomberg) -- ASML Holding NV, a crucial supplier to Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co, beat analysts expectations for the third quarter and insisted 2020 will be a “growth year.”

The Dutch company, which produces extreme ultraviolet lithography equipment, expects revenue in the period to be 3.6 billion euros ($4.1 billion) to 3.8 billion euros, with a gross margin of 47% to 48%, it said in a statement on Wednesday. Analysts expected sales of 3.42 billion euros and a gross margin of 48.1%.

Key Takeaways

• “Our operational capabilities are largely back to normal now, but we will remain vigilant as Covid-19 is not yet behind us,” said Chief Executive Officer Peter Wennink. He added 2020 expectations are largely unchanged relative to the view at the start of the year, highlighting it will be a growth year in terms of sales and profitability.
• Second-quarter revenue came in at 3.3 billion euros, a growth of over 35% compared to the first quarter, with net bookings of 1.1 billion euros, including 461 million euros of EUV systems. Gross margin was 48.2%.
• The deferred revenue of four EUV systems that shipped in the first half of the year will be recognized after site acceptance, expected in the second half of the year, ASML said.
• “The first half we had some supply issues because of lockdowns, absenteeism around the world,” Wennink said in a video interview. “But actually, the second half of the quarter came back to normal. Actually we’re in pretty good shape.”
• “Everyone is shifting from the real world to the digital world -which boosts demand for chips- and it seems that negative effects of a recession are absorbed,” said InsingerGilissen Bankiers analyst Jos Versteeg by phone. “Normally it would be much worse with ASML ahead of a recession, and the order book would shrink.”

Market Response

• Shares of ASML were down 0.2% at 10:20 a.m. at 342.65 euros, after falling as much as 1.5%. The shares have surged 30% so far this year.
• “ASML’s order book was quite soft,” said Kempen & Co. analyst Nigel van Putten. ASML furthermore doesn’t yet guide on EUV sales for 2021, and it will postpone its buyback in favor of higher capex and an increase in working capital, he added.

Know More

• ASML holds a de facto monopoly equipment needed to make next-generation chips without which customers like Intel Corp., Samsung and TSMC would find it difficult to continue to make their products faster, cheaper and more power efficient.
• An important player in the global technology supply chain, ASML itself relies on 5,000 suppliers, 790 of which provide materials and equipment that are used directly to produce their systems.
• ASML kept its outlook to recognize sales for 35 EUV systems this year and is still building out capacity for 45 to 50 systems next year.

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