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Atotech Limited, a leading specialty chemicals technology company and a market leader in advanced electroplating solutions, has reported its financial results for the fourth quarter and full year 2020 and provided guidance for full year 2021. Total organic chemistry revenue growth, a key performance indicator for the company, increased 5% over the fourth quarter of 2019. Organic chemistry revenue growth reflects chemistry revenue growth excluding the impact of foreign exchange translation (FX) and palladium pass-through (palladium).
Geoff Wild, Atotech’s Chief Executive Officer, said, “We are very pleased with our fourth quarter performance. We leveraged the continued strength of our Electronics end-markets, as well as the ongoing recovery in global automotive markets, to deliver strong organic growth. In particular, demand for our comprehensive solutions addressing the technical requirements related to the 5G smartphone replacement cycle, including next-generation semiconductor packaging, was robust. Other areas of strength include 5G infrastructure, automotive electrification, and growing demand for sustainable solutions in surface-finishing applications.”
“These secular trends not only provided a constructive backdrop in the fourth quarter, but also present a multi-year opportunity to grow our business, expand share, and deliver strong returns to our shareholders.”
“Throughout 2020, we continued to invest in our business and made decisions in the long-term best interests of our customers, while carefully managing costs.”
“We completed a new chemistry manufacturing facility in China, invested in multiple digitalization initiatives, including IoT solutions, and maintained our highly trained customer-facing workforce. As we enter this high-growth period in our industry, we believe these decisions have positioned Atotech to take advantage of the many market opportunities in front of us.”
Fourth Quarter 2020 Results
Reported total revenue was $365 million for the fourth quarter, an increase of 18% over the prior year period. Organic revenue for both chemistry and equipment, which reflects total revenue excluding the impact of FX and palladium, increased 9%. FX was a 4% tailwind and palladium increased total revenue by 5% in the quarter. These strong quarterly results were driven by organic chemistry revenue growth of 5%, reflecting increases in both the Electronics (EL) and General Metal Finishing (GMF) segments.
Adjusted EBITDA was $106 million for the fourth quarter, a 5% increase over the prior year period, reflecting strong organic chemistry volume growth, stable pricing, and the benefits of cost containment actions, partially offset by compensation accruals taken in the fourth quarter.
Adjusted EBITDA margin was 29.1% in the fourth quarter of 2020, which reflects the impact of palladium pass-through, the product mix of chemistry versus equipment, as well as the impact of compensation accruals. Excluding these items, adjusted EBITDA margin was largely in-line with the fourth quarter of 2019.
Strong cash flow generation enabled the company to repay $80 million of its outstanding Holdco notes in the fourth quarter of 2020 and thereby reduce its net leverage to 5.1x full year adjusted EBITDA at year end, and before the proceeds from the company’s IPO, which closed in early February. Pro forma for the application of proceeds from the company’s IPO, net leverage is 3.9x full year adjusted EBITDA at year end.
Fourth Quarter 2020 Segment Highlights
Electronics: Revenue for the fourth quarter in our Electronics segment of $232 million increased 25% over the prior year period. Total organic Electronics revenue increased 14%, consisting of 7% organic chemistry growth and a 56% increase in organic equipment revenue. Palladium and FX were each a 5% tailwind in the quarter.
The organic Electronics revenue increase was driven by strong demand for the company’s leading IC substrates and advanced semiconductor packaging solutions. This demand is being driven by secular trends in 5G infrastructure and smartphone growth, as well as growth in leading-edge consumer electronics, including wearables. These trends are also driving strong demand for our equipment, as our customers actively upgrade to next-generation packaging standards and increase production capacity.
Adjusted EBITDA for our Electronics segment was $70 million in the fourth quarter, an increase of 9% over the prior year period, primarily reflecting strong chemistry volume growth.
General Metal Finishing: Revenue for the fourth quarter in our GMF segment of $133 million increased 7% over the prior year period. Total organic GMF revenue increased 2%, consisting of 3% organic chemistry revenue growth, partially offset by a decline in organic equipment revenue. Palladium and FX added 3% and 2% to revenue in the quarter, respectively.
Organic chemistry revenue growth was primarily driven by the continued global automotive market recovery and solid demand in other industrial end-markets.
Adjusted EBITDA for our GMF segment was $36 million, essentially flat with last year.
Initial Public Offering
Subsequent to year end 2020, the company closed its initial public offering of 29,268,000 shares of common stock at $17.00 per share on February 8, 2021. The gross proceeds to Atotech from the offering were approximately $498 million, before deducting the underwriting discount and offering expenses, and were used to further repay indebtedness and to pay underwriting discounts and offering expenses.
Full Year 2021 Guidance
Regarding the company’s 2021 outlook, Peter Frauenknecht, Atotech’s Chief Financial Officer said, “We expect full year 2021 total organic revenue growth to be in the range of 10% to 12%, including full year organic chemistry revenue growth in the range of 8% to 9%, which excludes the impact of FX and palladium pass-through. This strong outlook is driven by constructive end-markets in both our Electronics and GMF segments. We expect to leverage this organic growth and deliver full year 2021 adjusted EBITDA in the range of $405 million to $425 million, which represents an increase of 14% over 2020, at the mid-point.”
Atotech is a leading specialty chemicals technology company and a market leader in advanced electroplating solutions. Atotech delivers chemistry, equipment, software, and services for innovative technology applications through an integrated systems-and-solutions approach. Atotech solutions are used in a wide variety of end-markets, including smartphones and other consumer electronics, communications infrastructure, and computing, as well as in numerous industrial and consumer applications such as automotive, heavy machinery, and household appliances.
Atotech, headquartered in Berlin, Germany, is a team of 4,000 experts in over 40 countries generating annual revenues of $1.2 billion (2020). Atotech has manufacturing operations across Europe, the Americas, and Asia. With its well-established innovative strength and industry-leading global TechCenter network, Atotech delivers pioneering solutions combined with unparalleled on-site support for over 9,000 customers worldwide. For more information about Atotech, please visit us at atotech.com.