SFA's Q3 Standalone Operating Margin Hits 13.8%... Growth Hopes Rise as Semiconductor Orders Expand

SFA continued to improve its profitability on a standalone basis in the third quarter of this year. Expectations for earnings growth next year are also rising as high-value orders, particularly for semiconductor equipment, expand.

According to the quarterly report released on November 12, SFA recorded standalone revenue of KRW 192.3 billion and operating profit of KRW 26.6 billion in the third quarter. Its operating margin continued to rise, reaching 13.8%, up from 11.5% in the first quarter and 12.8% in the second quarter.

The improvement in gross margin was also notable. Third-quarter gross profit rose to KRW 41.8 billion from KRW 36.3 billion in the same period last year, while the gross margin reached 21.7%. This was a 3.2 percentage-point increase from 18.5% a year earlier and the highest level since 2022. The quarterly improvement continued from 18.8% in the first quarter to 21.4% in the second quarter.

An SFA official explained, "Efforts to expand high-value products based on artificial intelligence (AI) robotics technology and strengthen cost competitiveness are bearing fruit in the form of an improved gross margin, which can be considered a fundamental indicator of profitability."

The company said that its shift toward a profitability-focused business structure is reflected in its earnings indicators and that high-value orders, centered on semiconductors, are also growing rapidly. It expects profitability to improve further through revenue growth and the spreading of fixed costs if the share of high-value orders expands from the fourth quarter onward and orders secured this year begin converting into revenue in earnest.

The order portfolio is also being reshaped around semiconductors. Cumulative orders this year, including those secured by overseas subsidiaries, totaled KRW 643.5 billion, comprising KRW 507.9 billion in the first half and KRW 135.6 billion in the third quarter. In particular, orders from the semiconductor industry amounted to KRW 77.2 billion in the third quarter, accounting for 56.9% of the total. This was a substantial increase from the 13.6% share of semiconductor orders in the first half.

A company official said, "The share of semiconductor industry orders, which accounted for just 13.6% of total orders in the first half, rose to 56.9% in the third quarter," adding, "The company's order portfolio is expanding rapidly alongside the increase in orders from the semiconductor industry."

The reported third-quarter order total excludes orders for which purchase orders (POs) had not yet been received. The company said it had secured large orders from customers in areas including outsourced semiconductor assembly and test (OSAT) and the semiconductor packaging value chain, and that the actual volume of confirmed orders, including these, was substantially higher than the reported order total of KRW 135.6 billion.

Accordingly, the company maintained its annual order target of KRW 1.3 trillion, representing 77% growth from the previous year. A company official said, "Achieving the annual order target remains within reach, supported by rapid growth in the semiconductor industry and solid order momentum in distribution and general manufacturing."

Third-quarter consolidated revenue rose 9.2% year over year to KRW 430.2 billion. Operating profit was KRW 22.1 billion, close to the average quarterly figure of KRW 22.2 billion for the first half.

The company also expects its subsidiaries' earnings to improve. SFA Semicon is expected to see better results as its new production line begins operating in earnest. SFA Nexel cited a recovery in demand in the electric vehicle market, particularly in Europe, and the possibility of renewed discussions on tax credits related to U.S. clean-energy policies as growth drivers. The company expects consolidated earnings to improve significantly going forward as growth in its semiconductor business coincides with better results at its subsidiaries.

This content was produced with the assistance of AI translation services.