Siltronic AG

XETRA:WAF

Earnings Call Transcript 2024-Q1

[Operator]

Hello, everyone, and welcome to the presentation of Siltronic's Q1 results for the financial year 2024. Please note that this call is being recorded and streamed on Siltronic's website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent with this. At this time, I would like to turn the conference over to Verena Stutze, Head of Investor Relations and Communications of Siltronic. Please go ahead.

[Verena Stutze, executive]

Thank you, Sandra. Welcome, everybody, to our Q1 2024 results presentation. This call will also be webcast live on siltronic.com, A replay of the call will be available on our website shortly after the end of the call. Our CEO, Michael Heckmeier; and our CFO, Claudia Schmitt, will give you an overview of our financials, the current market development and our guidance. After the presentation, we will be happy to take your questions.

Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q1 2024 reporting are available on our website. I now turn the call over to Michael for his remarks.

[Michael Heckmeier, executive]

Thank you, Verena, and a warm welcome also from my side. As usual, let me start with the key messages of today's call. The first quarter of 2024 was without any major surprises and continued to be characterized by weak demand for wafers due to the high inventory levels at our customers. As you probably saw in our top announcement last week, this negative sentiment will remain with us for most of 2024. Accordingly, I would call it a year of transition.

Our industry and the future growth will be driven by mega trends such as generative AI, digitalization and electromobility. And therefore, we confirm our ambition to increase our group sales to more than EUR 2.2 billion and our EBITDA margin to a figure in the high 30s by 2028.

Let me give you a quick glance on our Q1 figures, which will be presented in detail by Claudia in a minute. As already indicated, the first 3 months did not bring major surprises. Sales were slightly below the previous quarter, but the EBITDA margin decreased from 25.5% to what I consider a respectable 26.4%, thanks to a positive tailwind from the nonoperating FX result. We achieved this with stable market shares and prices. Although we have passed the peak of our investments in 2023, the CapEx primarily required for the ramp of [ FabNext ] as expected to continued negative net cash flow. Claudia will now give you a deep dive into our financial performance before I report back with updates on the market development and the outlook. Claudia, please.

[Claudia Schmitt, executive]

Thank you, Michael. A warm welcome also from my side. Let's jump directly into the analysis of our results. As Michael highlighted, the first quarter progressed largely as expected with no big surprises, and we have been managing the weak demand with resilience. Our sales totaled EUR 344 million, a decrease of 3.7% quarter-on-quarter. The small decline is due to some shifts in product mix and a slight negative FX impact. It's important to note that product mix shifts are typical quarterly fluctuations. Both the wafer [ area ] sold and the product prices remained largely stable sequentially.

In the first quarter, our EBITDA was robust with EUR 91 million, with an EBITDA margin of 26.4%, marking a slight increase quarter-on-quarter. The small decline in sales was counterbalanced by a favorable FX result of EUR 5 million in Q1, which arose partly due to hedging and partly due to valuations in the light of a strengthening U.S. dollar. Looking into the next quarter, please do not expect a similar positive hedging result. As we have already stated for this year compared to '23, while we do forecast a positive impact from reduced energy and material costs, we expect this to be offset by a lower hedging result and increasing labor tariffs.

The EBIT came in at EUR 36 million and was in line with Q4. Our financial results saw a modest decline to minus EUR 3 million. The tax rate for Q1 stood at 16%, an increase from the 7% rate in Q4. The lower tax rate in Q4 was mainly related to deferred taxes. Taking all these factors into account, we concluded Q1 with a net income of EUR 28 million.

Now let's look at our balance sheet. Total assets summed up to roughly EUR 4.6 billion by the end of March. The changes compared to Q4 are mainly driven by 2 factors. On the one hand, our investments increased the fixed assets by EUR 153 million. Consequently, our cash and securities have decreased to less than EUR 400 million by the end of March. On the other hand, you may recall that our working capital ratio at the end of '23 was at an all-time low. [ We ] recorded very favorable DSO and the CapEx-related search and trade payables. However, as already announced in the last call, we now saw a reversal of this. The DSO increased in general, and we've received customer payments just after the reporting date.

Furthermore, the spillover from the trade tables from Q4 was significantly reduced in Q1. The equity ratio remains resilient and is at a very healthy level of 46%. Financial liabilities in Q1 increased quarter-on-quarter, as we have drawn the first EUR 50 million of our syndicated loan. Therefore, loans amounted to a total of roughly EUR 850 million at the end of March. Customer prepayments were slightly above EUR 600 million, with EUR 27 million received and EUR 6 million refunded.

In Q1, our CapEx totaled EUR 173 million, which is roughly EUR 200 million below Q4. Reflecting our increased focus on CapEx management, we have revised our full year CapEx guidance downward from less than EUR 600 million to slightly below EUR 550 million as compared to our March application. Most of this CapEx is allocated to our new fab.

Let's dive deeper into our debt situation, as illustrated in the bridge. End of '23, Siltronic was carrying net financial debt of EUR 356 million. Our operating cash flow in Q1 was impacted by an increase in trade receivables and therefore came in at EUR 62 million. As previously mentioned, our DSO were in general higher, and we've received payments from customers just after the reporting date. Consequently, our operating cash flow was noticeably lower than the high CapEx payments we saw in Q1, also due to the CapEx liabilities overhang from the previous year. In Q1, we've recorded an investment grant of EUR 32 million, which had a positive effect on our cash flow. In total, our net financial debt amounted to EUR 501 million.

You already know this financing picture. Therefore, only a brief update from my side. The first portion of the Syn loan, EUR 50 million, was drawn in Q1. As already announced, we will undertake refinancing this year and are currently evaluating our options. In this context, we currently have no plans for a capital increase. With this, I hand back to Michael.

[Michael Heckmeier, executive]

Thank you, Claudia. Ladies and gentlemen, when looking at this slide, let's begin with the good news. The end markets are anticipated to grow. Our March projections for market growth were slightly lower from 7% to 8% to approximately 5% due to some new data points, especially for the industrial and automotive segment. Servers driven by AI, especially generative AI, will see the largest growth this year. From the end markets, the growth would perfectly fit to our 4% to 5% CAGR assumption.

However, the still elevated inventories at our customers are being reduced slower than expected. As a result, we anticipate a higher negative inventory impact. This inventory situation overshadows the positive trend from the end markets and results in an overall negative wafer demand in the mid- to high-single-digit percentage range. Therefore, we expect the inventories to last for several more quarters, further delaying the turnaround in our industry.

Let's take a closer look at our market assessment for the 3 wafer segments and our most important market channels. Whilst memory inventory is decreasing slowly, we already see the first positive impact from 1 of the big megatrends driving our industry, artificial intelligence. The strongest growth we see in servers used for AI applications is driven by high-end DRAM chips used for high-bandwidth memory. The inventories for HBM appear improving compared to other DRAM and NAND, which are still pretty elevated and only decreasing slowly.

When it comes to logic, the inventory levels show a mixed picture at different customers. Regrettably, we observed similar trends when the inventory levels are only improving slowly. And unfortunately, power inventories further increased, based on the latest data points. Please be aware that this is a combination of our own models and market data based on several data points and that segment dynamics are influenced by individual customer patterns. The overall picture can deviate significantly due to different inventory types and also our customer needs.

When looking at the more positive news flow from certain chip manufacturers, this announcements appear to be more priced than volume-driven. And you know for us, volume is the decisive factor. As you may have noted from our ad hoc announcement last week, we observed further significant volume postponements from customers, particularly for the second half of 2024. Overall, the demand situation has not improved in the past few weeks. And as already mentioned, we anticipate 2024 to be a transition year.

Looking beyond 2024, we expect a dynamic upward trend for [ over ] wafer demand, in particular for 300- and 200-millimeter wafers. I'm sure you are familiar with this chart. As you know, for 300-millimeter, we anticipate a strong CAGR of 6%. For 200-millimeter, we expect a small growth, and for diameters up to 150 millimeters, a continued decline. Today will be the last time we report on the small diameters market since a few weeks ago, we announced that we will phase out the SD wafer production during 2025.

As communicated for us, SD wafers are approaching the end of their life cycle. The significant decline in volumes we saw in 2023 and early '24 triggered our decision to discontinue the production of polished and epitaxial small diameter wafers. The process is set to be completed in the course of 2025 and will not have a substantial negative effect on our results this year. Going forward, we will further increase our focus on the growth drivers power and leading edge also fueled by 300-millimeter wafers. And this is supported by [ FabNext ] in Singapore. So we are very pleased with the development of [ FabNext ]. The transition of the project to the local team is completed, and the capacity ramp is on schedule.

Let's now turn to the guidance for the financial year 2024, which had to be adjusted due to the still challenging demand situation driven by high customer inventories. Due to the ongoing weakness in demand reaching into the second half of the year, we now expect 2024 sales to be roughly 10% below 2023. This is mostly volume driven, but we also see both a small FX and price effect. We expect our EBITDA margin to be in the range of 21% to 25%. Depreciation is projected to be below EUR 300 million, a significant increase from the previous year's EUR 203 million. However, this new guidance is considerably lower due to the later start of [ FabNext ] depreciation in Q4.

As indicated, CapEx will be significantly reduced compared to the record high of more than EUR 1.3 billion in 2023. We expect it to reach an amount of slightly below EUR 550 million, which is roughly EUR 50 million lower than our guidance in March. This reduction is driven by our high focus on CapEx management. Due to the steep decline in CapEx, we will see a pronounced improvement in net cash flow, although it will still remain significantly negative.

I would like to conclude this presentation confirming our midterm ambition for 2028. We expect a substantial sales growth to more than EUR 2.2 billion and an improvement of the EBITDA margin to the high 30s by 2028. Thank you very much for your attention. With this, we close our presentation, and Claudia and I will be happy to take your questions. Sandra, please open the Q&A.

[Operator]

[Operator Instructions] Our first question comes from Daniel Schafei from Citi.

[Daniel Schafei, analyst]

So I have a couple of questions. The first 1 being -- so now that given we have seen the push outs in the second half, can we still expect that the first half in terms of sales will be still the low point, especially in 2Q? Or might it be even 3Q and 4Q now? And also, now that you've seen those pushouts and adjusted the guidance accordingly, is this guidance now already conservative enough? Or is there potential for more pushouts to come?

[Michael Heckmeier, executive]

Thank you, Daniel. I will take these 2 questions. With regards to more details about quarterly phasing, we would refrain now to give a great amount of more of this. As you know, we gave full year guidance, our Q1 results, and then you can do some math, and we don't expect any significant pickup during the year. So I think that's maybe enough for your further quarterly modeling here.

With regards to your second question, do we expect more push-outs. Currently, we built all what we know into the guidance. We have some downside potential in margin there in the guidance. But I also have to say the environment is a very dynamic one. But we know -- what we know is included, and we don't have a clear view on more to come. But what we know by today is embedded in this guidance.

[Daniel Schafei, analyst]

Okay. I understand. And just maybe a follow-up, a quick one on pricing. What price reductions do you guys see for 200 millimeters and 300 millimeters, respectively, currently in the spots and LTA markets?

[Michael Heckmeier, executive]

Yes. We said clearly, for the time being, pricing is stable. That was the Q1 numbers. Going forward, we will see and we do see some price effects. And as we indicated earlier, it's a kind of mixed bag. Let me start with the lowest one, the small diameters experiencing significant price pressure, which, at the end, was 1 of the reasons for us to discontinue that business, right?

In the second, 200 millimeters, we would say it's a mixed bag. So some more high-tech areas are pretty stable and unchanged, and some others are also experienced pricing pressure. 300-millimeter is mainly covered by LTAs, of course, no change in that statement. And we see a good adherence to LTA contracts. But also on the spot side there, we do see increasing price discussions. Overall, it's not significant, but that's maybe the overall situation we can explain.

[Daniel Schafei, analyst]

Perfect.

[Operator]

The next question comes from Harry Blaiklock from UBS.

[Harry Blaiklock, analyst]

I've got kind of a follow-up to that pricing question. I just wondered kind of what gives you confidence that pricing will stay at that slightly negative effects that you're guiding for? And you won't see any further pressure beyond that?

[Michael Heckmeier, executive]

Yes. So I think the good news is the LTA coverage, and it's holding. But we early on already said, the longer this, let's say, demand weakness is hanging on, the more we will also see pricing effects kicking in. So for the time being, we're quite comfortable. As I said, Q1, we can confidently report a stable price situation. We see this discussion is increasing, but we also don't have any hint for total gear change in this space of discussions.

[Harry Blaiklock, analyst]

Got it. And then I mean based on your comments around LTAs, I guess you haven't had any customers coming to you kind of asking for flexibility on pricing?

[Michael Heckmeier, executive]

Sorry, I didn't get this acoustically. In the LTAs, we had what?

[Harry Blaiklock, analyst]

Have you had any customers coming to you and asking for any flexibility, kind of around pricing?

[Michael Heckmeier, executive]

So the LTAs are including some price margins, right, as we discussed. This goes to single-digit ups and downs, and there are discussions in this framework currently.

[Harry Blaiklock, analyst]

Got it. Very useful. And then I think in the past, you said that you -- for this year, you don't have any major LTAs expiring. Is that the same going into 2025 as well?

[Michael Heckmeier, executive]

So no major LTA is expiring. And particularly the, let's say, important ones covering our [ FabNext ], as we said, run times until '28 or 2030 in year. So nothing major changing there.

[Operator]

The next question comes from Constantin Hesse from Jefferies.

[Constantin Hesse, analyst]

The first one, Michael, I know that you guys typically don't comment on competition. But given the dynamics, I'm very surprised about the different outlook that you guys are giving relative to [ Shin-Etsu ]. [ Shin-Etsu ] clearly stated last week that they saw the bottom in Q1 and that every quarter from now on, they're seeing a recovery. So I'm trying to understand because typically, you should you, Shin-Etsu, some co, there might be some timing differences, but typically, you do move in tandem. So what -- is there something fundamentally happening here? Are you losing market share for some reason? Or is it simply a timing situation as to maybe you're supplying more wafers compared to Shin-Etsu? And as a result, they're basically catching up a bit? What's the dynamic here? What's -- why are they saying something completely different to you, in that sense? That's my first question.

[Michael Heckmeier, executive]

Thank you, Constantin. I mean, we don't comment resize on individual competitor statements, yes. But what I can say is the following. And I repeat what I said already. Q1 data very clearly indicate no change in market share, yes. So that means for the time being and particularly through all those shifts happening last week. And of course, there's some phasing effects, et cetera, but we don't have any indication that our market share changes for the time being.

Now going forward, I mean, we need to check quarter-by-quarter as we do anyway. And there could well be that different wafer suppliers have different customer mix, different product mix. And then it depends, of course, for example, in the memory space, some of the customers did pull the [ break ] earlier [ out of later ]. And then some wafer suppliers have different exposure to different customers. And dependent on individual pickup times of the business, this could lead for such mix effects. We don't have any indication for a structural or fundamental change happening at all. So what we see is a stable situation and then some phasing and potential mix effects here and there, but that's what I can comment here. And when we read the very details of different announcements, it's not so different when you study then [ word by word ] than what we are saying.

[Constantin Hesse, analyst]

Yes. I was just a bit surprised that they're seeing an improvement following Q1, and you are. So just some food for thought. Then on the price, I understand that the change in the guidance, I assume that's not primarily driven by continued weakness in spot. And you just said something interesting there. My understanding was that there was no compromise on price in the LTAs, 0 compromise across you, across [ SUMCO ] or Shin-Etsu. Now you're saying that the LTAs actually do have price ranges which can be negotiated in the single digits, and you're basically having these discussions now. So concerning the LTAs, do you compromise on price here? So are there discussions ongoing to potentially see price declines in LTAs?

[Michael Heckmeier, executive]

Thank you, Constantin. What I said about LTA pricing and the margins in the contracts is nothing new. We said that already last year, and it's part of the contracts. And those discussions are happening, let's say, on a 6 months and on a yearly basis. I don't see -- just to be clear, I don't see a significant change there. There is nothing new. The more price discussions starting in the spot part of it there. But the LTA pricing is happening as committed in the contract and there is no change.

[Constantin Hesse, analyst]

Okay. Okay. So no compromise on price on the LTA side?

[Michael Heckmeier, executive]

So as contracted, as I said, some contracts have margins, those are discussions. But no change compared to contracted pricing.

[Constantin Hesse, analyst]

Okay. Understood. And then lastly is on the production exit of the smaller diameter size in '25. You mentioned that there will not be a big impact in '24. Could I please understand what the impact is in '25? What is the current exposure do you still have? I believe in previous conversations, I think it was something around 10% to 15% of volumes at market level anyways, and you always said that you were relatively similar to the market. So what kind of -- could we actually see up to a 10% volume impact next year, driven by the fact that you're exiting the SD market?

[Michael Heckmeier, executive]

Yes, thank you, Constantin. So the reason why we don't see any foresee no major impact for this year is that customer reactions were fairly relaxed. So we [ got ] customers that we are cutting orders immediately. On the outside, we didn't also see an indication to harvest some very early upside because, of course, we were hoping some customers to kind of last order race. So both did not happen, and that's the basis for the statement that the '24 will not widely be impacted, yes.

In '25, we will continuously ramp down. The revenue is single digit, mid-single-digit in our overall sales pattern. And from a margin side, we also said it will be slightly supportive in EBITDA margin as the SD margin, of course, was and is below average of our group margin. So these are the 2 effects. Revenue, slightly down single digit on the overall portfolio, and margins slightly up.

[Constantin Hesse, analyst]

Okay. So the revenue for SD is only mid-single-digit? Million?

[Michael Heckmeier, executive]

Yes.

[Constantin Hesse, analyst]

Okay. Interesting.

[Operator]

Next question comes from Gustav Froberg from Berenberg.

[Gustav Froberg, analyst]

I just have 1 just on balance sheet and funding. Could you run me through how you look at your balance sheet as of today, given the recent cut to guidance? Do you see any need to top up with equity? Or are you happy to fund with debt? And what are some of the assumptions and sorts that underlie the thinking around your funding and your balance sheet, please?

[Claudia Schmitt, executive]

I will take your question regarding balance sheet. As we mentioned, the equity share of 46% is -- we are pretty comfortable with this. And we expect it to stay roughly in that range going further. Of course, we have drawn now the first part of our Syn loan. And as such, our loan amount will go up during the year until end of this year. And those are the major changes that we see in our balance sheet for this year.

[Gustav Froberg, analyst]

Okay. Do you have any comments on covenants or anything of the like with the debt that you have and maybe the debt that you will take on, whether or not you see any need for equity at all in the business?

[Claudia Schmitt, executive]

As we stated, we do not plan a capital increase this year. So you see that we still feel very comfortable regarding our financial covenants.

[Gustav Froberg, analyst]

And final question on the same topic. Is there scope for you to take out more debt beyond what you have already talked about in terms of the syndicated loan, et cetera?

[Claudia Schmitt, executive]

Yes. We announced that we will start a refinancing round this year, and this will take -- yes, during this year, we are evaluating our options. And depending on the instruments that we choose and general conditions, we will decide on how much we will take there, how much additional refinancing.

[Gustav Froberg, analyst]

Thanks.

[Operator]

The next question comes from Florian Treisch from Kepler Cheuvreux.

[Florian Treisch, analyst]

Two questions. One is around the [ inventory ] correction you are now facing. So the first question is a bit in Q1, was the impact still rising relative to Q4? Or do you expect it to really come down now quarter-by-quarter? And more in general, on inventory correction, what is really your visibility? As I think we have 2 major shifts in more pronounced inventory headwinds in the last 5 months. So clearly, is it just hoping to have a right number? Or do you really get decent information from your key clients? And the second part is around your reiteration of the ambition for '28. As we have now heard SD will go out, which will be an impact, the whole recovery is delayed by excess inventory. So is it implicitly meaning you're more confident than ever? Or is it just offering enough room for [ Arrow ] to still get to this ambition?

[Michael Heckmeier, executive]

Thank you, Florian. With regards to inventories, I mean, you're right, there is a more general discussion picture and data point when we talk about memory, logic and power and the trend here. We kind of analyze with the same or similar data than you do. This is pretty much from the MI side and institutes what is published.

And then, of course, in addition, we have the insight into our customers. So here, we can say, if we take memory as an example, yes, inventories are going down, but much slower than we anticipated. So this is, let's say, a very persistent topic, and some of our customers are still very elevated. That's a fact and has to do with their business situation. We have some of them start reporting, let's say, growth, and let's say, very positive dynamics. But then when you look into more details, it's more on the high-value HBM and other side, which for them is more price than volume driven. So it means they can drive the P&L, but it's not by volume -- happening, but it's more on the price side there.

So that's not helping us a lot, but it's still good for our customers, for the overall industry dynamics. So we have a very clear picture. Some of those inventories still elevated going down, but it's hanging on for a longer time than everybody did foresee. Coming to your second question around our 2028 ambition. I mean, we have no doubt here that the drivers of the industry are unchanged. And even I would say, with gen AI, there's even more midterm potential for the industry in total, yes. So a bad year or 2 bad years do not change our overall belief and, let's say, ambition. And of course, we do the math, and we are still confident that we can do the '28 numbers.

[Operator]

The next question comes from Martin Jungfleisch from BNP Paribas.

[Martin Jungfleisch, analyst]

I have 2 questions, please. [ FabNext ], first of all on the ramp speed. I understood initially it was like 100,000 wafers per month final annualized output by year-end. Has this changed? And also, what do you hear or see from competitors that are also expanding? Do you see a somewhat still rational behavior? So do you also adjust output speed according to market demand? Or is there any signs of them trying to gain market share?

And the second question is really on the ramp cost. In your previous release, you were expecting a 300 basis point margin hit from ramp cost. Now with the [ fab ] ramp delayed, what would be the impact this year? And also, what this mean that the majority of this 300 basis points impact would be now pushed to next year? Thank you.

[Michael Heckmeier, executive]

Good. So let me start maybe with a more outside perspective on [ FabNext ]. Then Claudia will give you some details about the ramp cost and depreciation. And then I come back with your second question about competitors' behavior. So [ FabNext ], overall, our ramp plan is in place, and there is no change. And this is, I think, very good news. The project has been handed over from the internal project organization to the local organization, which is always a very important milestone for such a, let's say, massive construction project. And things are happening on plan and on schedule there.

With regards to customer qualifications, we see some of them sliding into Q4. And that is also, of course, related to the overall market environment, but not a change for our overall ramp situation and ramp capacity. Now that's more the high-level statement, and maybe Claudia, can then discuss with more the ramp cost situation and this depreciation impact.

[Claudia Schmitt, executive]

Yes. I will take over for this part. To be very clear, the ramp costs are still there cash-wise. So there are ramp costs. But until we start to -- the depreciation of [ FabNext ], they are capitalized. So they show up in the assets. And starting Q4, they will show up in the P&L. So they are still there, but in our results only from Q4.

[Operator]

The next question comes from Robert Sanders from Deutsche Bank.

[Michael Heckmeier, executive]

There was 1 from Martin around competitors, whether there's a change in competitors ramping their capacity. And Martin, I would also stay to my old statements. We see some of them also delaying ramping slower for some of them, which are, let's say, more in the shell phase. Still, we don't have very detailed insights, yes. But overall, this high-level statement of rational behavior, when it comes to capacity add and extensions is unchangeably true.

[Martin Jungfleisch, analyst]

Good to hear. Thank you.

[Operator]

Mr. Sanders, your line is now open. Please go ahead.

[Robert Sanders, analyst]

I guess given that you're delaying [ FabNext ], the ramp of it, I was just wondering when you now thought that line would reach kind of cost parity with the existing Singapore line? Second question would just be around the SD impact. Did you say it's mid-single-digit percentage of sales in 2024? Is that right, as opposed to mid-single-digit millions, just to double check? And then the last question, would you -- can you comment around the impact of currency? Because obviously, the yen has been very weak, which could give your Japanese competitors an advantage and perhaps a desire to be more aggressive on price?

[Michael Heckmeier, executive]

So let me take the first one. [ FabNext ], when it's low teen ramp and to a certain extent, we have no doubt that it will very attractive and will contribute with EBITDA margins above 50%. So now your question is, of course, when will that happen? And our honest answer is we don't know here because it really will completely depend on market pickup and further ramp opportunities with our customers. So it now would be really misleading to give you any date in the current situation. Once market is picking up and we see volume developments coming in, then we would be again in position to be more precise on that, what we call cost parity or accretive margin contributions from [ FabNext ]. And to be honest, I didn't get -- the second one, but I think it was around SD. Is it mid-single-digit of our overall sales. And I can reconfirm the answer, yes, it's mid-single-digit.

[Robert Sanders, analyst]

Single-digit percentage. Correct?

[Michael Heckmeier, executive]

Yes.

[Robert Sanders, analyst]

Yes. Yes, that's it. It was a 1 million wafer per month line in Burghausen, right, but I assume you've scaled that down already. I was just actually interested. Is that -- when is that going to be -- basically, when are you going to be completely shut down? Is it the end of '25?

[Michael Heckmeier, executive]

It will depend on final customer dependence and let's say, order patterns coming in. But in the course of '25, we will be discontinuing that business.

[Robert Sanders, analyst]

Got it. I actually just have 1 other last question just on the debt side. So how much of your EUR 900-odd million of debt is actually being refinanced this year? And what is your cost of debt now that your leverage is heading above 2x? Is it above 6% or below?

[Claudia Schmitt, executive]

As already mentioned just a second ago, we have not fixed the amount that we will refinance this year. We will see. It will heavily depend on the instrument that we will choose in the end. But we will let you know as soon as we know. And to your question regarding FX, I think it's still open regarding the Japanese yen. Yes, of course, our Japanese customers may have a benefit of the development. But of course, we won't comment on that. Our Japanese gen share in sales is pretty low. So it's not nice to see that development, but it's okay for us.

[Operator]

The next question comes from Juergen Wagner from Stifel.

[Jürgen Wagner, analyst]

Looking at Page 11 on your handout. Which market segments would you regard yourself as being significantly overexposed? And then you talked about rational behavior on a high level. What would be your view on longer-term pricing once this inventory correction is over and all the new wafer fabs have to ramp up in volumes in, let's say, '26 or so?

[Michael Heckmeier, executive]

Thank you, Juergen. In terms of our market exposure, there is basically no change. I mean we are almost equally represented in the 3 segments, memory, logic and power. And of course, we have a slight overexposure in memory. But the recent developments or shifts did not change our overall, let's say, market situation and exposure to those segments. What is driving one? What is surprising once inventories are mailed down? The honest answer, we don't know. I mean, we eagerly wait for that time to happen. We would still be then in a position where around 2/3 of our 300-millimeter businesses in LTAs, yes, with the margins and price corridors I described there. And then we would assume, of course, if demand is picking up very quickly that there will be upside spot opportunities again. But it's a bit speculative when you're still, let's say, in the middle of this rally and wait for the up together. But that would be my more high-level statements to your question.

[Jürgen Wagner, analyst]

And your long-term targets there, basically based on the assumption that you will have 2/3 in LTAs, right?

[Michael Heckmeier, executive]

The long-term target is, of course, unchanged and the assumption is, of course, kicking in of the [ FabNext ] benefits here. We have the fully automated, let's say, very low cost base, which then would provide this above average and eventually above 50% EBITDA margin contributes to the group. That's the main value driver, together with our strategy, focusing on high value, leading edge and power.

[Operator]

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Michael Heckmeier for closing remarks.

[Michael Heckmeier, executive]

So thank you very much. But I hand only back to Verena.

[Verena Stutze, executive]

Thank you, Michael. This concludes our Q&A session. Thank you for joining us today. Our next Investor Relations highlight will be the AGM on May 13, and the speeches of this AGM will also be streamed on our IR webpage. For our Q2 figures, this will be released on July 25. Stay healthy, and let's talk again soon. Bye.

[Operator]

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.