Thank you for standing by. Welcome, and thank you for joining the AT&S conference call on the results for the first quarter 2024/2025. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press nine and star on your telephone keypad. That's nine and the star key on your telephone. If any participant has difficulty hearing the conference, please press zero and the hash key for operator assistance. I would now like to turn the conference over to Mr. Philipp Gebhardt. Please go ahead.
Sorry, I was muted. Thank you, Alexander. Good morning or afternoon, ladies and gentlemen. Welcome to the AT&S Q1 2024/25 conference call. With us today are Andreas Gerstenmayer, CEO, and Petra Preining, CFO. Mr. Gerstenmayer will start with a brief overview of the key developments as well as a market update. Afterwards, Ms. Preining will comment on the financial figures and our guidance. As Alexander mentioned, the presentation will be followed by a Q&A session. Now, I would like to hand over to Mr. Gerstenmayer. The floor is yours.
Thank you very much, Mr. Gebhardt, and also a warm welcome from my side, or good morning, good afternoon, wherever you join us today. So let's jump into the presentation on slide two. What was the key developments of our first quarter? What we are still facing is a quite challenging total market environment. We continue to see high price pressure, and we expect some improvement in certain markets for the fiscal year's second half. We have already communicated a couple of months ago that we intensively have speeded up our efficiency programs, where we also have had to include some EBITDA adjustments now as a kind of one-timers. The good message is our factories, our big projects, to ramp the plants in Kulim and Leoben are very nicely on track still.
For Ansan, Ms. Preining will touch on that a little bit later. The negotiations to sell the plant are well on the way, and what we also nicely can confirm that is the guidance for the fiscal year 2024, 2025, and the midterm guidance, 2026, 2027. This is also underpinned by having some positive outlook for the seasonal effect. Like, you know, in some of our industries, we have seasonal volatility, seasonal fluctuations, and we are just in front of the peak season of some of these industries. Now, jumping into the market environment we are in. In the PCB area, we have two parts. On the one hand side, the, we call it CCC, Communication, Consumer, Computing market.
You also can see here from the left-hand graph that 2023 was really a challenging year by a market decline of about 14%. Expectation of the analyst, market analyst, is that, we will see a kind of recovery of 8%, and midterm, there should be an average CAGR of 4, 4%. What is the, the main messages behind there? Still, we have, as I said in the beginning already, we've seen in fiscal quarter one, significant price pressure continuing, into this fiscal year. As said, we have to, or we can expect the seasonal effects, so some markets, like the communications and consumer markets, are now taking up, for the peak season in the second and third quarter, mainly.
And we have a long-term outlook, which is supported by the highly pushed or highly peaked AI markets that will show positive impact for the coming period of time. On the other hand side, we have the automotive, industrial, medical, and aerospace market. Here you can see long- term, the market mainly will be driven by automotive application. This is mainly caused by electrification and digitalization in the automotive industry, but currently, we still see weak development, especially in the same in automotive and industrial, due to market and technology uncertainty. For automotive, we expect at least 2 quarters time to recover, and in the industrial business, the expectation is that it will take a little longer. Moving on, on slide 4, we talk about the substrate and market perspective.
On the left-hand side, the focus topic of AT&S, the server market. You have seen, or we have communicated last year already, a significant, in some cases, also surprising decline of around about 17%. There is 7% recovery expected, and midterm, a CAGR of 8%. What was the main underlying story here? For the server market, we see a kind of architecture change from, in the past, CPU-dominated business or applications to more GPU-dominated applications and systems, which is driven by the underlying AI computing power requirements. Still this is a lot of ups and downs there in the market.
A lot of uncertainty and elevated inventories is visible, so we need to see, or we need to expect, certain volatility for the coming months and potentially one or two quarters to come. On the long run, as I said, we expect a more diversified customer base, which is mainly driven by the clear trend to custom silicon. What does it mean? Custom silicon is driven by, for example, big hyperscalers that are entering now into the supply chain, generally are creating their own ecosystem, sometimes on the component level, sometimes on the full system level. And this provides for us the opportunity to diversify the customer portfolio further and grow with these new customers where we see ourselves nicely positioned already.
On the right side, notebook shipments, there, the recovery somehow has started. We see some uptake in the volumes and the demand, which also brought some loading benefits to AT&S and the locations. It will not be the peak demand in future, but we see a modest growth for the quarters to come. And also there, I'm sure some of you have read the media news, a lot of OEMs are now trying to push new products into the market by integrating AI capabilities into the client computing systems and devices. Value-wise, on slide 5, you can see that, yeah, due to the downturn in the server market in 2023, there was definitely a significant drop in the volume of the market.
We expect a slight recovery in the year 2024 by 5%. As said, still the server part is weak. On the other hand side, long term, this is the trend we always have been communicating, that we see volume-driven growth kicking in again in the subsequent years. Whatever I can tell about this slide? Yeah, I think this is mainly the key messages we wanted to transfer to you today. Sure, once Kulim and Leoben is started, there will be additional opportunities to grow further due to additional capacities and good collaboration with customers. Moving on to slide 6, a brief snapshot about the underlying business drivers for our printed circuit boards.
Here, what we can see in the PCB area, that we have a nicely developed customer portfolio. Our focus is now to intensifying and deepen the relationship with mainly existing customers, as we are already covering a wide range of applications. There are new applications coming up, like optical transceivers, power embedding, and AI infrastructure. But main focus is deepen and utilizing more the existing well-developed customer relationships, widening the exposure to the customers, and the one or the other, add new customers to our portfolio, which should show a CAGR of 6% in that area for the future. Moving on to the next slide, a slightly different picture we have in the IC substrate area, where we clearly focus on continuing diversifying the customer portfolio.
The applications is nicely set, and we just need to utilize them because the main technologies are, and capabilities are there. The one or the other new technology will come and kick in, which we are preparing. But on the other hand side, as I said already, diversifying our customer base will bring more robustness to the company, but also helping us to grow the business further and utilizing our prepared capacities. Brief overview about the current situation of the two large projects. The Leoben R&D center and production space, as I said already, well on track to start production in Q1 2025. We will very soon ship products, first samples to important customers to get qualified. All the other things are well in place.
We have 320 employees on site, and we are more or less, yeah, moving closer to the ready to go. Similar picture in Kulim, start of production Q1 2025 as well. We have achieved all the necessary regulatory approvals now, and we have also most of the equipment already installed and either already qualified or under qualification. First samples have been shipped out already, and the labor force is around about 1,450 people. So nicely on track, and we are preparing to kick off the volume production. How do our customers see us? Voice of customers. You can see here from some customers that allowed us to, to name them and they are significant also for us, like, testimonials.
We have a clear, positive feedback in the PCB area, and we also see it in the market position. We are now among the top 10 players globally in the PCB area as a whole. And we are now in, for the seventh subsequent year, a number two position in the high-end HDI sector. I think this shows also that from the one hand side, the market position, but also the reputation of the company in the PCB area is very nicely developed, and customers like to collaborate with us, which is important for the future development. As I said, deepen our relationships and getting more business in. A similar situation we have created in the IC substrates business. We have seen, or I have showed before, the decline of the market.
If you do the math, you can see that the decline in IC substrate business in AT&S was significantly lower than the entire market decline. That also should show that our relationship with the customer, our market position, is nicely developed. And once the market is recovering, we will, or we expect to, benefit from the recovery also, at least on the same level. Last but not least, where are we with our cost savings and efficiency programs? The picture you know already. We are progressing well. We have now achieved around about 63% of the entire saving. We also have said already that, the focus with the new fiscal year has shifted more to real sustainable savings.
Last year was predominantly focused on reshaping the capacities according to the reduced market environment, but now it's really base work to make more efficient processes, structures, and the plants and our suppliers contribute to the savings gains that need to be achieved. So we are quite optimistic that with the given progress and the given speed we have established, we will achieve the savings potentials we have set ourselves. And also what we already communicated, we extended the program also into the year 2025, 2026, to take care and ensure that also some of the longer-lasting projects will be safely implemented and will show contribution to improve our cost position and subsequently also our cash flow generation and profitability. So this is it more or less from my side. I will now hand over to Ms. Preining to run you through the numbers, and then later we are available for your questions.
Thank you very much, Mr. Gerstenmayer , and a warm welcome also from my side. Jumping into the figures, Q1 2024/ 2025 results. Revenue a little shy of EUR 350 million, with a corresponding EBITDA of EUR 65 million. The net profit hence turned to negative EUR 34 million. Important to note on that slide and on those data is that the heavy headwinds on the EBITDA when it comes to start-up and restructuring costs in respect to garden leave. So for this particular quarter, we had to record a EUR 32 million adjustment. Adjustment, which will not appear forward-looking. So once the big CapEx programs are ramped, this will be no longer the case.
So currently, we see higher costs, but still, due to the ramp, lacking the revenue, so it looks, currently distorted. Nevertheless, on the bottom of the slide, you see the, quarterly development. We usually, as you do know, in AT&S, have a, weaker Q1, followed by stronger Q2 and Q3 numbers. This is also what we expect for, for this year to come. On, on a very positive note, our EBITDA adjusted margin is on a very strong, 28%. That's a testament of the restructuring or the cost efficiency programs we set, and cost, optimization program, we have, currently at start, that, pays nicely off.
Over the page, how do we look, on, on the group level, like-for-like Q1 2023/24 to Q1 2024/25? Building on what Mr. Gerstenmayer has already said, we currently see in the market very high price pressure that might also remain for a couple more quarters. The BU side of the business, BU electronic solutions, here we have managed to compensate to cancel out the price pressure by positive product mix and volume effect. On the microelectronic side, the price pressure was canceled out by way higher volume. So the trend that we have been able to report, the very positive trend on the volume, that we are the go-to address for our tier customers continues. So we see a lot higher volume, but we also do see continuous price pressure. With no surprise, price pressure is translated into margins.
However, as Mr. Gerstenmayer has already explained the cost efficiency programs very nicely pay off 28% compared to 26% in Q1 2023, 2024 on an EBITDA adjusted margin. BU slide, firstly, to start with electronic solutions, we see also here the quarterly development, Q1 to Q1, so year-on-year, a rather flattish development, -2%. As stated, price pressure, as it is, evident in the industry, but a positive mix volume effect. On the quarterly development to Q4 2023, 2024, versus Q1 2024/ 2025, we are burdened by the current situation in automotive and industrial environment, mainly in Europe and in Americas.
The margin remains year-on-year flattish, though the high price pressure, as stated already, cost efficiency programs work against it, against the high price pressure and Q on Q, so Q4 versus Q1, we clearly could have benefited from a better mix. Over the page to the microelectronics business unit. The quarterly development Q4 to Q1 shows a positive picture, + 11%. Mr. Gerstenmayer has already come to that and mentioned it. We see the server business picking up slower than expected, but it picks up to compared to Q4, which was heavily burdened by more client business. We see a positive strength. Year-on-year, - 6%, is unfortunately driven by price pressure.
But again, as stated, if you do remember, the overall pressure in the substrate market is way stronger than what we still have to recall or have to record, but our high volume work against it. What we also have to report on a positive note, we have one-timers in the amount of totaling EUR 10 million, which is a combination of grants, the positive and negative items. So we have grants and subsidies, but on the other side, garden leave, higher startup costs, but also foreign exchange effects due to the sell-off of assets.
Over the page, a very important slide for me, and I guess also from your side, the financial position of AT&S, still very strong at EUR 1.12 billion cash, cash equivalents and unused credit lines. That amount is clearly designed to ramp our two big CapEx programs. A company like ours usually would not have such high cash and cash equivalents. So here, we will see this cash position to be depleted, but on purpose, as we do ramp those two sites. On page 17, the maturity of outstanding debt instruments. I think I need to explain here the developments. We had recorded the transfer of equipment, which led to a decrease of financial debt.
To give a bit more insight, as this might come as a surprise, this equipment was initially purchased for one customer, but not yet put into operation. It was fully paid by this particular customer in the last financial year. It was contractually agreed that this equipment would have no further use for AT&S, and therefore it was recognized as financial liability. The transfer risk contractually was set to the first of April 2024. Hence, it happened in this quarter one, 2024. That transfer is in general cash neutral, but it reduces, of course, both the asset as well as the liability side on the balance sheet. The contractual transfer, however, has a positive effect from gain of the disposal of assets in the amount of roughly EUR 9 million.
So this is something which you might have seen in our data, and I think it doesn't come naturally, so I felt I have to explain it a bit. Similarly to the reports in the past and the information we have shared, we have roughly one-third of that instrument on fixed interest rates, and our current financing cost on average for Q1 is 4.9%. One slide I feel or I felt it's important to be added: How do we guarantee the financial stability of AT&S? And it basically goes back to three pillars.
We have, on one side, the self-financing power, which will come way stronger, of course, starting next year, when we are no longer burdened by high startup costs and also high CapEx. Secondly, the middle part, a very diverse debt financing structure. You know that, it's loans and with guarantees from government and subnational organizations, as well as promissory notes, bank loans, leasing financing. Very, very important, no covenant due to financial ratios. We have, of course, margin step-ups, which cause higher financing costs. And lastly, of course, as we are listed companies, starting with the bottom, there is always the opportunity, though we have now focused on the sell side opportunity to raise capital from the market.
Currently, we are focusing, or evaluating to be better, that sell side opportunity, in Ansan, Korea. Over the page, a slide we are generally, very proud of. Firstly, we were very proud of to, report the single digits, working cap, net working capital ratios to revenues. Now, we are even more proud of that we can keep it on a single digit level. I told you already in the last two quarters that I still expect that it will increase again to low double-digit numbers, but for the time being, we are very proud that we have been able to keep it single digits.
One topic I want to draw your attention on, on that slide already, due to the seasonally always very strong second quarter of the financial year, so the quarter we're currently in, we have built up inventories, which you will also see as, which will also impact the lower operating cash flow on 30th of June, 2024. Jumping right into it, in principle, nailing it, what jumps to the eye, clearly, the delta of EUR 229 million cash from operating activities in Q1 2023/2024 versus the current one of EUR 14 million. Now, here we have to split or to give you more explanation, and I have to do it on a split way.
Firstly, the Q1 2023/24 was impacted or we drove from the management side high focus on working capital optimization. The effects and the very good achievement we have reached is part of the EUR 229 million we were very proud to present in Q1 2023/24. This is, of course, a one-time, and now it keep, it's on us to keep that level. For this particular quarter, you can see that only in the inventory part we had to increase the stock by roughly EUR 25 million to cater for the higher second quarter of this year. So, the 14 million is not the rest assured, the run rate forward looking. We have here several impacts.
The more sustainable run rate is to give you an insight for Q2, what do I expect on operating cash flows for Q2 will be on steady state. S ale of Ansan, not taking into consideration of rather EUR 70 million. The other thing that strikes the eye is a lower investing cash flow. That's very clear. We had two very, very strong years when it comes to investments. We have also guided EUR 500 million, which is partially half of what we had before for this fiscal year. Therefore, also the cash flow is significantly lower. The rest, I think, is as a consequence of what I've already told you. The balance sheet, firstly, might also come as a surprise.
I have already jumped the gun on a couple of slides before, -1% in total assets. That is supported or driven by the sale of that equipment I have mentioned already. What is the transfer, to be very precise? We have an equity ratio, which is pretty much on the same level as per the year-end 2024, so March 31st, 2024, and we closed at 20.2%. And we have a net debt to EBITDA ratio of 4.7. Closing my presentation with the guidances for this year and for the midterm period.
We confirm the guidance for this year on the revenue side to be approx EUR 1.7-EUR 1.8 billion, with an adjusted EBITDA margin of 25%-27%, and adjusted start-up effects, as well as one-time costs for the efficiency and cost optimization program, including garden leave, in the amount of EUR 88 million. As you do recall, it was EUR 80 million before. Net investment CapEx, I've already told you, EUR 500 million for this year. Midterm guidance unchanged, EUR 3.1 billion for the year 2026/ 2027, and an EBITDA no longer adjusted, but EBITDA margin of 27%-32%.
The ROCE, with the ramp of a production, will be expected to again be above 12%, and the leverage will be expected to again be below 3x. The equity ratio, as I've already told you, in Q4, is now expected to be at 20%. This all refers to the current company structure, including the plants in Ansan, Korea, to be part of the AT&S footprint. That is too true for the midterm guidance as well as for this year's guidance. And with this, I've come to an end. Hand back to Philipp, and then to the Q&A session.
Thank you, Mr. Gerstenmayer . Thank you, Ms. Preining. We will now start the Q&A. You know the procedure. In order to give everyone the opportunity to raise questions, we would like to ask you to limit yourselves to two questions. Once we are through, and if there are still questions and still time, we will start another round. Now, I would like to hand over to Alexander to handle the session.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, please press nine and the star key again. Please press now nine and the star key to state your question. And the first question comes from Daniel Lion from Erste Group. Please go ahead.
Yeah, good morning. Thanks for letting me on. C an you build a bridge from the adjusted EBITDA margin in the fourth quarter of 28% to your guided adjusted EBITDA margin of 25%-27% for full year? And also, then towards the midterm guidance of 27%-32%, when we actually have an off-season quarter, rather bad sales mix, which should everything gradually improve. So what are the reasons, or how can this, how do you expect this bridge to look like? Just to get an understanding of what you factor in. Is it caution? Is it other effects that we need to bear in mind that still have a negative impact on profitability in the coming quarters? So, yeah, maybe just so this is my first one.
It was a very technical and long question. I tried to answer it in a very simple manner. If then there is more detail requested, maybe we need to take it offline. In principle, what we do see and what you also read from the news, we currently face high price pressure. So this is clearly the effect that we will see in that current fiscal year. With new technologies, of course, the price pressure will then be reduced as new products come on stream.
For the midterm guidance, in general, this is with the diversification we have involved, and Kulim at the start, and you partially, where we are allowed to talk about, you know, the customer that we are very happy to cater for and very proud to have them on board. This diversification definitely helps to ease the price pressure. So, with the price pressure right now, the diversification later on, the start-up costs, which will be reduced or gone, in principle, that all plays in into a higher EBITDA margins. For the midterm guidance, we are no longer adjusted, we are on the EBITDA margin, so that all should help. The detailed bridge, it's very difficult to show now over the phone, but I hope that helps already.
Okay. I guess we really need to discuss it in detail, but I'll turn to the second question, which is definitely shorter. H ow the terms regarding the step-up for your financing costs? Would this already be reduced upon a potential sale of the medical business, or is this only related to full year figures?
And Mr. Lion, you're doing very smart to get me to a price tag. Because you could also calculate, what we would, envision. But of course, the leverage would be positively impacted by a potential sale of Ansan. And we would, assume, without jumping the gun, that, the step-ups would be reduced. So the burden of the step-up on the interest rate would be reduced. Please allow me to be vague, because, if I tell you now to with extent, I would, disclose our expectation on the purchase price.
No, that's fine. Perfectly clear. Thank you very much.
The next question comes from Jürgen Wagner, from Stifel. Please go ahead.
Yeah, good afternoon. Thank you. On the competitive price pressure that you have been highlighting, is this purely cyclical, or do you see new entrants in the markets that you serve? And, yeah, you talked about the volatility in server. How is your share in server substrates currently evolving? Thank you.
Okay, I take this first question. Price pressure mainly is coming from the two things. The one is the mix impact. As I said before, typically, client business is the more, the business that shows more price pressure, more competitive situation than the server business. And as I stated, the client segment is recovering, and server business still shows challenges. On the other hand side, due to the significant downturn in capacity utilization, competition is eager to get at least volume and loading, and this is the second main impacting factor. Really new entrants in the global market, we don't see. How is our server share evolving?
I think, as I said before already, we did not decline so much in volumes like the market and the competition has been doing. And we are extending our customer base, mainly in the area of server applications. You know, client computing is mainly served from two market participants on the component side, while the server business has a wider range, especially when it now comes to this customized silicon.
Okay, thank you.
The next question comes from Gustav Froberg from Berenberg. Please go ahead.
Good afternoon, everyone. Thank you for taking mine as well. Just two for me. First, a follow-up on pricing. I mean, you're talking about seeing the price pressure now, and thank you for explaining where that's coming from. But just with a view on your midterm targets, because they were obviously set quite a while ago, and haven't changed all too much. Have you factored in any continuation of pricing pressure coming from competition as you move towards that midterm target? Or is this something where you feel will not be an impact for the midterm? And then second question, I was hoping you could help on cash flows. Can you give us an update on the timing of the repayment of your contract liabilities and, and what you are expecting in terms of free cash flow for the next one or two years? Thank you.
Thank you very much for the very good question. I have to object a little bit. We have recently had to reduce the midterm guidance by EUR 400 million, which is a lot, still in our world. So, thanks for taking or mentioning that this is only slightly. So that definitely takes care of the price pressure, which we currently see. On the second part of the question, the cash flow, I've done something what we usually do not do. I have given you a guidance for the next quarter. The assets at steady state roughly EUR 70 million.
However, forward looking, that will definitely improve A, by higher EBITDA margin, and B, less of start-up cost and also the diversification we have already mentioned. Please accept that we cannot disclose the contract details on duration, pattern and so forth, because we are fortunately, unfortunately, however you want to see it, very limited, or actually, we are not allowed to disclose any of those contract details by t he driver is our customer. So very sorry for that. We'd be happy to disclose, but we're not allowed.
Okay, thank you.
Okay, since we didn't receive any further questions, if you would like to state another question, please press nine and the star key on your keypad. The next question comes from Patrick Steiner, from Kepler Cheuvreux. Please go ahead.
Good afternoon, Patrick Steiner here. Just one question left from my side. Basically, I've looked at your midterm EBITDA margin guidance, and I think this is unchanged since 2021, roughly. Correct me if I'm wrong. And since then, we have seen under capacities, pricing pressure, and so on. But what's really interesting to me is the Japanese yen has performed quite poorly since then, which should actually be quite good for your Japanese competitors here. Should have an effect on pricing going forward as well. How does this affect your midterm margin guidance, I mean, compared to the guidance which you basically brought up in 2020? Or was it back then just very conservative, or how should we think about this?
Okay. Not giving you the price tag on the, how conservative it was. But, and it actually builds up on the question I've answered before. So we had to reduce the midterm guidance to EUR 400 million top line. But, we also have, since the midterm guidance has been issued or the margin profile has actually been issued, we have put some significant cost optimization plans at start, which will have a run rate into the midterm guided year, obviously. So, there is. There's a lot ongoing. Indeed, it's a competitive environment, but we are ready and prepared to face that competition. And hence, yeah, we see this depression in the top line.
We had to reduce it from EUR 35 billion-EUR 31 billion. But on the same side, we have also added quite some comprehensive programs to face that price pressure that is currently in the market. Whether it comes from the capacity situation or the foreign exchange side. In the end of the day, we have to be prepared to defeat or basically be prepared for the price pressure that comes our way.
Okay, thank you. Maybe, maybe one more question. Can you, can you give us a bit more information on these margin grids or the step ups you mentioned in your debt financing contracts? When would be, like, the next step up, or how does it break?
We are already at the peak. So, from now it goes only down, which is good news.
Okay, good to hear. Thank you very much.
The next question comes from Teresa Schinwald, from Raiffeisen Bank International. Please go ahead.
Hi, good afternoon. Thank you. Could you add some color to the quite long time recovery outlook for industrial demand? I remember 2-3 quarters for automotive and longer for industrial. What is dragging on this part of the industry? This would be my first one, and maybe I've missed it, but can you give us a really general take also on the medical market for the moment?
Okay, let's get started with the industry market. I think you need to see how these markets are basically working. First of all, the industrial market is always the late comer if a downturn or an upside is, or a recovery is entering the market environment. Why is it like that? Because typically, this is related to production equipment and all these kind of things. So first of all, things go south in all the other industries, they stop their investment programs, and then the industry with a certain backlog will show effect. The same is true in the recovery.
Everyone waits until the capacity utilization is improving and cashflow is recovering to restart buying new equipment and installing new or putting in new investment into the industrial environment. I think this is basically the reason why it takes longer. It starts later, and it takes longer to recover. And for sure, it's all the global economies and what is also impacting the mood in the industry. May I ask back? I did not get the full question about the medical market. Can you please repeat that?
Yeah, thank you. So for the medical market, I don't remember a comment, so maybe I've missed it. Is it going on as usual? Any up or a downturn at the moment?
No, I would say it's more flattish, probably slightly growing. It depends also on the applications you're looking at. So it's not, as we always stated in the past, there is different areas where you have equipment that is located in the hospitals. On the other hand side, you have the patient-related devices that are showing a completely different dynamics. What we see over the last couple of years, that the devices that are more related to therapy and patients' treatment is more dynamic, more showing upsides than the stationary equipment in the hospitals.
Very good. Thank you.
The next question comes from George Brown, from DB. Please go ahead.
Yeah, good afternoon, guys. Thanks for taking my questions. I have two, if I may. Just firstly, on your CapEx guidance, you're expecting roughly EUR 500 million this year. But for your CapEx requirements to decline beyond fiscal year 2025, can you give us an idea on how your CapEx progresses beyond this year? And I guess, more specifically, do you expect CapEx to decline by more or less than 10% next year? And I guess the same for fiscal year 2027. And then secondly, when do you think pricing in end markets, like server substrates, will start to improve? I guess the reason I'm asking is that we saw fairly encouraging signs from AMD recently on its traditional server CPU business, with strong growth expected in the second half. So should we expect pricing to follow a similar trend? Thanks, guys.
Thank you very much for the question. So the EUR 500 million CapEx for this year, this is what we guide. We, you will then also ask the question whether this is an equal pattern, no, very likely not. So we'll very likely have a higher spending in Q2 and Q3. But then, forward-looking, as you do know, the guidance of 2026/ 2027 does not take into consideration the second plant in Kulim. So it will very much depend on, as of when we will decide to ramp and hence buy purchase equipment for this building. So it's to be seen. And we will inform the market as at a later stage. But you can, even though you take a ramp into consideration, the CapEx spend will be at that level or roughly, including a ramp of that additional facility. So, if you ignore that, it would be significantly lower than what we have this year.
Okay, taking over the second question about the pricing. As I said in the, in my presentation, we have two factors to consider when we talk about pricing. The one is capacity utilization, the second one is mix. When expecting starting the recovery of especially the server market in the second half of the fiscal year, then the mix effect of better prices should kick in with the recovery. For the volume-related and capacity utilized related improvement, probably this takes a bit longer. This will reach into the next year, most likely, but this is how we see the dynamics coming up.
Perfect. Thanks, guys.
We have a follow-up question from Gustav Froberg. Please go ahead.
Yes. Hi, thank you. One last one from me on funding and financing. I'm wondering if, because after your AGM, you've approved both the potential issuance of converts and of a big capital increase, despite ruling both of these things out late last year. It sounds routine to me, so that's all good. But my question is: Do you think that the sale of the plant in Ansan will be sufficient to top up your balance sheet o r do you feel like, given you have also added these resolutions to your AGM and passed them, that you do also need some additional financing on top? Thank you.
So I think there's actually two questions in that. So firstly, AT&S, up until the ramp is completed, and we see the proceeds, and also you see it from the maturity pattern, there is an ongoing refinancing, which needs to be taken care of. This was always the case, and this will be the case forward looking. If your question goes towards the equity ratio, you have to allow that, in case I would have had anything like this in mind, I cannot tell you, because then it would be another ad hoc, which I would have to tell the market as well. So of course, as we're a listed company, and this is an approval we always had in place, we have renewed that approval, which was given by the shareholders. So that's something we always had, and we also have now for the next five years. In case the management decides to go ahead with such an initiative, we definitely would tell you, or not only you, but also the entire capital market.
Okay, thank you.
The last question is also a follow-up, and it comes from Daniel Lion. Please go ahead.
Ah, yeah, thanks. So a final question. Can you provide us a little bit more insight into the cost-cutting volumes? How much of temporary savings is related to the second plant in Kulim? How much maybe to your existing capacities? Can you shed more light, a little bit more light on what's in there?
So first of all, what we clearly communicated is, that both new plants are not so much about cost saving. It's more about, yeah, we call it cost avoidance, to ramp the factories at the same time period with lower cost. So this is mainly the part where we try to reduce, on the one-hand side, CapEx spending and ramp costs. The real savings we are looking at is the sustainable savings, and this was also communicated, that last year it was more volume adjustments, so kind of right sizing according to the reduced market volumes. And with this fiscal year, it's more or less mainly sustainable savings, where we really dig into the details and dig into the structures and improve on a sustainable level.
Okay, and how is this coming back in the end with increasing capacity utilization?
Yeah, as said, typically, sustainable savings are not volume related, so this is the part that is, a nd having in mind what we communicated so far, we had this 50% of the savings last year, and the other 50%, will be now executed this year. So at least 50% of the entire savings, more or less, will be sustainable, and the rest is a mixture of sustainable and volume-driven a djustments.
Okay, okay, thanks. Thank you.
Okay, as there are no further questions, we will conclude today's conference call. Thank you for your participation and questions. If you have any further questions, please feel free to contact our IR team, Johannes Mattner, and me anytime. Thanks again, and goodbye.