Atotech Reports Unaudited Q4 and Full-Year 2021 Results

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Atotech, a leading specialty chemicals technology company and a market leader in advanced electroplating solutions, reported unaudited financial results for the fourth quarter and full year ended December 31, 2021. Chemistry organic revenue growth, a key performance indicator for the Company, increased 11% compared to the full year of 2020. Chemistry organic revenue growth reflects chemistry revenue growth excluding the impact of foreign exchange translation (FX) and palladium pass-through (palladium).

Management Commentary 

Geoff Wild, Atotech’s Chief Executive Officer, said, “Thanks to the tremendous efforts of our teams across Atotech, we had a strong close to 2021, delivering a fourth quarter that was ahead of guidance on all measures. As expected, fourth quarter growth rates normalized compared to the previous quarters of 2021 due to the higher comparison base in the fourth quarter of 2020.

“Over the course of 2021, Atotech experienced strong demand for its advanced electronics chemistry and equipment solutions,” continued Mr. Wild. “Underlying factors driving this demand include pandemic-related demand for computers and servers, 5G proliferation in the smartphone space, and the recovery of the automotive industry. In our GMF segment, the impact of chip shortages on the automotive industry was partially offset by stronger demand from other industrial production, including construction, sanitary, and heavy machinery. The introduction of our sustainability-related products, such as Covertron, DynaSmart, and Fumalock, has also been a highlight this year.”

Fourth-quarter 2021 Results

Total revenue was $387 million for the fourth quarter of 2021, an increase of 6% over the prior-year period. Total organic revenue, which reflects total revenue excluding the impact of FX and palladium, increased 7%. These results were supported by organic growth in chemistry revenue of 2%, impacted by lower-than-expected automotive market growth rates.

Adjusted EBITDA was $118 million for the fourth quarter of 2021, an 11% increase over the prior-year period, reflecting chemistry organic volume growth and a strong equipment business with many deliveries before year-end.

Diluted earnings per share was $0.15 for the fourth quarter ended December 31, 2021, and Adjusted EPS was $1.33.

Adjusted EBITDA margin was 30% for the fourth quarter of 2021, up 100 basis points over the prior-year period. The increase reflects a strong chemistry product mix, positive scale effects, and a successful start of the Company’s price-increase initiatives to offset inflationary conditions.

Fourth-quarter 2021 Segment Highlights

Electronics: Revenue for the fourth quarter of 2021 in the Company’s Electronics segment was $254 million, an increase of 9% over the prior-year period. Total organic revenue grew 11%, consisting of 6% chemistry organic growth and a 32% increase in equipment organic revenue. End-market demand for computing applications and high-end smartphones continued to gain momentum, but the overall slowdown in the Automobile sector for Electronics was also noticeable. As in prior quarters for 2021, the global build-out of production capacity for high-end applications translated into strong demand for our equipment.

Adjusted EBITDA for our Electronics segment was $86 million for the fourth quarter of 2021, a 22% increase over the prior-year period, primarily driven by chemistry volume growth. Adjusted EBITDA margin was 34%, at prior-year level, driven by a strong chemistry product mix and successful equipment projects.

General Metal Finishing: Revenue for the fourth quarter of 2021 in our GMF segment was $133 million, a decrease of 0.3% over the prior-year period. Total organic GMF revenue increased 1%, consisting of a 3% decline in chemistry organic revenue and 146% growth in organic revenue for equipment. The decline in chemistry organic revenue was primarily due to a high comparison base in Q4 2020 after a strong recovery from the pandemic-depressed markets at the end of 2020, and continued impact of the chip shortage to automotive production worldwide.

Adjusted EBITDA for the Company’s GMF segment was $32 million, a 12% decline compared to the prior-year quarter, primarily reflecting a high comparison base.

MKS Transaction

Atotech is disclosing its fourth quarter and full-year 2021 financial results on a preliminary, unaudited basis as the Company on July 1, 2021 announced that it had entered into a definitive agreement with MKS Instruments, Inc. (“MKS”), a global provider of technologies that enable advanced processes and improve productivity. Under the agreement, MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share (the “MKS Transaction”). The MKS Transaction is to be effected by means of a scheme of arrangement under Article 125 of the Companies (Jersey) Law 1991 (as amended).

The MKS Transaction has been unanimously approved by the MKS and Atotech boards of directors, and each of the resolutions put to the Company’s shareholders at the court meeting and the general meeting convened in connection with the MKS Transaction, which were each held on November 3, 2021, were passed by the requisite majority of votes.

Atotech previously announced that it has agreed to extend the date for completing MKS Instruments, Inc.’s (“MKS”) pending acquisition of Atotech to September 30, 2022 from March 31, 2022. The extension is intended to allow additional time for receipt of regulatory approval from China’s State Administration for Market Regulation (“SAMR”). In addition to receiving approval from SAMR, the acquisition, which is to be effected by means of a scheme of arrangement under the laws of the Bailiwick of Jersey, is subject to obtaining the required sanction by the Royal Court of Jersey and the satisfaction of customary closing conditions.

Update Regarding Geopolitical Events and Palladium Sourcing 

Atotech noted that its direct exposure to Ukraine and Russia is immaterial to operations and financial results, and is expected to be immaterial on a combined company basis as well. The Group does not source palladium directly from Russia or Ukraine, and the majority of its palladium is from South Africa and recycling sources. Additionally, the Group is continuing to pass the cost of palladium on to customers in order to mitigate the impact of price volatility on the Group’s results from operations.