HALF-YEAR RESULTS FOR FY 2015-2016

• Strong growth and improved profitability in Electronics
• Group current operating income in positive territory
• Group net result affected by losses from the shut down of the solar activities and net financial expenses
• Improved cash position
• Management actively working on strengthening the balance sheet

Bernin, France, November 18, 2015 - Soitec (Euronext Paris), a world leader in generating and manufacturing revolutionary semiconductor materials, today announced its audited (limited half-year review) consolidated results for the first six months of its 2015-2016 financial year.

"In the first half of FY 2015-2016, we achieved our sales growth targets in our core Electronics business together with a major improvement in its profitability. As a result, Soitec recorded current operating income in positive territory", said Paul Boudre, Chairman and Chief Executive Officer of Soitec.
 "Momentum in 200mm diameter wafer sales to the mobile and automotive markets remains strong. This growth is more than making up for the decline in 300mm diameter wafers for PC and gaming applications. For the third quarter of FY 2015-2016, we are reiterating our objective of sequential growth in Electronics sales of 5% at constant exchange rates. In addition, we are actively pursuing the shut down of the Solar activities and continuing to assess various strategic options for the Lighting and Equipment activities. Although we have improved our gross cash position in the first half, our equity remains at a low level. We continue to explore different scenarios to strengthen our balance sheet", he added.

For the first half of FY 2015-2016, Soitec reported consolidated sales of 110.9 million Euros, a rise of 56.6% on the first six months of the previous financial year^[1], representing growth of 30% at constant exchange rates.

Since Soitec halted most of its activities in the solar energy sector during the first half, the corresponding results are now recognized under discontinued operations below the operating income line.

The Electronics business segment now contributes 98% of consolidated sales. The increase in Electronics sales lifted the first-half gross margin to 24.0% (up from 4.9% in H1 FY 2014-2015).

A steep increase in subsidies recognized in the first half led to a 32.4% decline in net R&D expenses. Continuing cost reduction efforts resulted in a 4.0% decline in selling, general and administrative expenses. Current operating income totaled 3.0 million Euros, compared with a loss of 25.3 million in the first half of FY 2014-2015.

After 5.3 million Euros in non-recurring net operating expenses principally attributable to costs arising from the reorganization of Soitec's business portfolio, the operating loss stood at 2.3 million Euros, compared with a loss of 26.8 million Euros in H1 FY 2014-2015.

The Group recorded net financial expense of 15.9 million Euros, compared with a charge of 7.4 million Euros in H1 FY 2014-2015. While interest expenses remained stable at 9.0 million Euros, the deposit related to the bond issue of the Touwsrivier solar power plant in South Africa has been subject to an additional provision of 5 million Euros, in order to take account of the liquidation present value of this loan on the South African market. Furthermore, Soitec recorded a net foreign exchange loss (loss of 2.0 million Euros caused by fluctuations in the US dollar), compared with a net foreign exchange gain in H1 FY 2014-2015 (1.6 million Euros).

The net loss from discontinued operations came to 23.9 million Euros. This exclusively derived from the impact of the fluctuation in the exchange rates. Indeed, the 23.6 million Euros in provisions for restructuring costs booked in March 2015 accounts covered the net operating expenses.

Taking all these factors into account, Soitec recorded a net loss of 42.5 million Euros in the first half of the current financial year, compared with a net loss of 82.4 million euros in H1 FY 2014-2015.

Consolidated income statement

Analysis by business segment

Electronics

The Electronics segment now includes all the income and expenses attributable to the Group's corporate functions.

In the first six months of FY 2015-2016, Electronics sales rose by 58.1% to 108.9 million Euros from 68.8 million Euros in H1 FY 2014-2015. At constant exchange rates, they grew by 31.2%. This top-line growth in the Electronics segment was driven primarily by higher sales of 200mm wafers (up 71.1%), as Soitec reaped the benefit of brisk demand for radiofrequency and power electronics applications in the mobile and automotive markets. Sales of 300mm wafers recorded weaker growth (24.5%) as certain products for PC and gaming markets were discontinued.

Gross profit increased from 3.5 million Euros (5.1% of sales) in the first half of FY 2014-2015 to 27.1 million Euros (24.9% of sales) in the first half of FY 2015-2016 with the Bernin I plant (200mm wafers) running at capacity, and despite the low level of capacity utilization at the Bernin II facility (300mm wafers).

Net R&D expenses declined significantly to 8.0 million Euros or 7.4% of sales, from 17.8% in the first half of the previous financial year since higher amounts of subsidies were recognized. While sales and marketing expenses remained stable, general and administrative expenses were reduced by 9.1% through savings measures. All in all, selling, general and administrative expenses came to 11.1 million Euros or 10.2% of sales, down from 17.4% in the first half of the previous financial year. The Electronics segment's current operating income totaled 7.9 million Euros, compared with a loss of 20.7 million Euros in the first half of FY 2014-2015. Its operating income totaled 2.6 million Euros.

Results for the Electronics segment

Other

The Other segment houses the Lighting and Equipment (Altatech) activities.

In the first half of FY 2015-2016, the Other segment's sales came to 2.0 million Euros, stable compared with
H1 FY 2014-2015. Both Lighting and Equipment (Altatech) sales remained weak. The segment's gross loss came to
0.4 million Euros, compared with gross profit of 0.4 million Euros in H1 FY 2014-2015.

Given the 2.5 million Euros in net research and development expenses and 2.0 million Euros in selling, general and administrative expenses, another operating loss of 4.9 million Euros was recorded, compared with a loss of 4.7 million Euros in H1 FY 2014-2015.

Results for the Other segment

Discontinued operations

The shut down of the solar activities continued, leading to a significant reduction in the workforce, lower expenditure and asset disposals. Given the progress made on shutting down the activities, the segment's results were recognized under discontinued operations. Soitec has indicated that the sale of the assets related to the Touwsrivier solar power plant in South Africa is not expected to go ahead until the end of FY 2015-2016. As a consequence and regarding likely times for completion of their disposal, the assets related to this power plant have been reclassified to financial assets within the scope of the continuing operations.

Cash generation

In the first half of 2015-2016, net cash generated by operating activities came to 1.1 million Euros. This broke down into 7.0 million Euros generated by continuing operations, offset by the 5.9 million euros used by the solar activities. To recap, net cash generated by operating activities came to 24.6 million Euros in the first half of FY 2014-2015 since the Group received 60.0 million Euros in payments related to the Touwsrivier solar power plant in South Africa.

The 3.9 million Euros in net cash used by investing activities related to continuing operations was thus covered by net cash generated by operating activities. In addition, the Group recorded 28.7 million Euros in proceeds from the sale of assets related to discontinued operations (sale of the San Diego building and two solar power plants). All in all, the net cash generated by investing activities and asset disposals totaled 24.8 million Euros in the first half of
FY 2015-2016.

Soitec arranged 65.4 million Euros in new financing during the first half of FY 2015-2016. This consisted of a loan of 30 million Euros from Shin Etsu Handotai (SEH), a major wafer supplier and longstanding shareholder in the company, a loan of 15 million Euros from Bpifrance Participations, another shareholder, a loan of 9 million Euros from the CEA, Soitec's technology partner, and an 11 million finance lease.

During the period, Soitec repaid 19.7 million Euros in borrowings and paid 4.7 million Euros in interest (including 3.5 million Euros related to the 2018 OCEANE bond). Discontinued operations accounted for a total of 22.8 million Euros (including 16.0 million Euros related to the San Diego building) in repayments of borrowings.

Statement of cash flows

Balance sheet

The Group's cash and cash equivalents improved during the first half of FY 2015-2016 to reach 71.1 million Euros at September 30, 2015, up from 22.9 million Euros at March 31, 2015. The main factor underpinning this improvement was the financing arranged with its partners and/or shareholders Shin Etsu Handotai (SEH), Bpifrance Participations, the CEA and Realta Leasing. Soitec's debt increased from 173.0 millions Euros at March 31, 2015 to 217.3 million Euros at September 30, 2015. Its net debt remained almost unchanged compared with its March 31, 2015 level. It stood at 146.2 million Euros at September 30, 2015. Over the same period, Soitec's equity declined from 50.0 million Euros to 22.8 million Euros.

Outlook

For the third quarter of FY 2015-2016, Soitec is reiterating that it expects Electronics sales to grow by 5%
(at constant exchange rates compared with the second quarter of FY 2015-2016). The mobile and automotive markets continue to drive 200mm wafer sales, which accounted for 77% of Electronics sales in H1 FY 2015-2016. Boosted by the demand for semiconductors for radiofrequency (RF) and power applications, the order book for the 200mm wafer plant is now almost full for the 2016 calendar year. In addition, Soitec will benefit from the additional production capacity of its partner in China, since Simgui's 200mm wafer plant is set to ramp up over coming quarters.

To harness the strong growth potential for consumer electronics, automotive and industrial applications, Soitec continues to deliver its 300mm fully depleted silicon-on-insulator (FD-SOI) wafers to foundry customers for qualification purposes and for the start of production at fabless customers. The first FD-SOI-based circuits are due to enter production in early 2016. Significant progress has been made in the FD-SOI ecosystem, as illustrated by the launch in July of GlobalFoundries' new 22FDX FD-SOI technology platform and the new products now expected to be launched in 2016. Soitec is also delighted that the major importance of FD-SOI technology for European competitiveness in cutting-edge nanoelectronics and in the solutions used for a wide array of mobile and automotive applications was recognized at the recent Franco-German digital conference on October 27.

While proceeding with implementation of its strategy in the Electronics segment, Soitec continues to evaluate its strategic options for the Lighting and Equipment activities. Furthermore, given the size of its debt and its inadequate equity base, Soitec is exploring various possible scenarios to strengthen its balance sheet.

Agenda

Soitec's half-year management report will be made available on its website in the coming days.
Its third-quarter FY 2015-2016 sales are due to be published after the market closes on January 18, 2016.

About Soitec

Soitec (Euronext, Paris) is a world leader in designing and manufacturing high performance semiconductor materials. The company uses its unique technologies to serve the electronics and energy markets. With 3,600 patents worldwide, Soitec's strategy is based on disruptive innovation to respond to its customers' needs for high performance, energy efficiency and cost competitiveness. Soitec has manufacturing facilities, R&D centers and offices in Europe, US and Asia. For more information, please visit www.soitec.com. 

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Consolidated financial statements for the six months ended September 30, 2015

Consolidated income statement

Balance sheet

Statement of cash flows