UMC Reports First Quarter 2015 Results

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Apr 29, 2015 - purpose MCU, SIM/smartcard and Internet of Things (IoT) IC designs. The proliferation ..... Phases 5&
Contacts: Bowen Huang / David Wong UMC, Investor Relations + 886-2-2658-9168, ext. 16900 [email protected] [email protected]

UMC Reports First Quarter 2015 Results 28nm contribution reaches 9% of sales; total shipments in 2Q expected to remain firm

First Quarter 2015 Overview1:  Revenue: NT$37.65 billion (US$1.20 billion)  Gross margin: 24.3%; operating margin: 10.9%  Foundry revenue from advanced nodes: 9% from 28nm, 24% from 40nm  Foundry capacity utilization rate: 93%  Net income attributable to the stockholders of the parent: NT$3.98 billion (US$127 million)  Earnings per share: NT$0.32; earnings per ADS: US$0.051 Taipei, Taiwan, ROC – April 29, 2015 – United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) (“UMC” or “The Company”), a leading global semiconductor foundry, today announced its consolidated operating results for the first quarter of 2015. Revenue was NT$37.65 billion, with gross margin at 24.3% and operating margin at 10.9%. Net income attributable to the stockholders of the parent was NT$3.98 billion, with earnings per ordinary share of NT$0.32. Mr. Po-Wen Yen, CEO of UMC, said “In the first quarter of 2015, our foundry revenue grew to NT$36.00 billion. Overall capacity utilization remained at 93%, bringing wafer shipments to 1.48 million 8-inch equivalent wafers. While 8” fabs continued to run at full capacity, 12” fabs recorded higher wafer shipments during 1Q15. Revenue contribution from 28nm and 40nm increased to 9% and 24% respectively, reflecting strong wafer demand for our leading edge technologies that helped enhance blended wafer ASP. For 2Q15, we anticipate wafer shipments to remain at similar levels as 1Q15, despite end-market uncertainties and customer inventory adjustments. We will pay close attention to market developments and adapt to any 1

Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with TIFRSs recognized by Financial Supervisory Commission in the ROC, which is different from IFRSs issued by the International Accounting Standards Board. They represent comparisons among the three-month period ending Mar 31, 2015, the three-month period ending Dec 31, 2014, and the equivalent three-month period that ended Mar 31, 2014. For all 1Q15 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Mar 31, 2015 exchange rate of NT$ 31.30 per U.S. Dollar. Page 1 of 13

UMC 1Q15

possible changes that may unfold. While progress continues on advanced logic, we have also qualified 55nm low power embedded flash IP from SST and Faraday to target auto, general purpose MCU, SIM/smartcard and Internet of Things (IoT) IC designs. The proliferation of connected devices will help UMC to realize more growth opportunities as these products will adopt our comprehensive logic/mixed-mode and specialty technologies.” CEO Yen continued, “With regards to UMC’s global expansion progress, in March we held a groundbreaking ceremony in Xiamen, China to kick-off the construction of our new 12” fab project. When the building structure is completed, we expect the fab cleanroom to be ready for equipment move-in by 2Q 2016, with initial production scheduled for late 2016. For our flagship 12” Tainan fab, we recently held a public earth day event to promote environmental awareness to the community. As Taiwan experiences the worst drought in 10 years, UMC has committed to adopt more stringent measures on water & energy conservation and step up our efforts on waste reduction. With UMC’s effective conservation infrastructure in place, our fabs’ water recycling efficiency has reached up to 88%, saving more than 20 million tons of water in 2014. We have set higher goals to further reduce resource use by an additional 10% over current levels by 2020. In addition, UMC’s Board of Directors proposed a dividend payout of NT$0.55 per share for fiscal 2014, which strikes a balance between business expansion and return on shareholder equity. We believe our commitment to manufacturing excellence with a focus on global expansion will secure UMC’s long-term returns and enhance profitability to ensure shareholder value.”

Page 2 of 13

UMC 1Q15

Summary of Operating Results Operating Results (Amount: NT$ million)

Net Operating Revenues Gross Profit Operating Expenses Net Other Operating Income and Expenses

4Q14

QoQ % change

1Q14

YoY % change

31,694

18.8

37,650

37,235

1.1

9,155

10,186

(10.1)

5,901

55.1

(4,914)

(5,672)

(13.4)

(5,016)

(2.0)

(142)

18

-

56

-

4,099

4,532

(9.6)

941

335.6

255

843

(69.8)

351

(27.4)

3,980

4,563

(12.8)

1,180

237.3

(NT$ per share)

0.32

0.36

0.09

(US$ per ADS)

0.051

0.058

0.014

Operating Income Net Non-Operating Income and Expenses Net Income Attributable to Stockholders of the Parent EPS

1Q15

During 1Q15, wafer shipments increased 3.5% sequentially, which led to foundry revenue of NT$36.00 billion. New Business segment recorded NT$1.67 billion in sales, leading to consolidated revenue of NT$37.65 billion, up 1.1% from 4Q14. Net income from the foundry segment reached NT$4.03 billion, while New Business segment posted a net loss of NT$0.34 billion. From a consolidated basis, gross profit was NT$9.16 billion, or 24.3% of revenue, while operating income reached NT$4.10 billion or 10.9% of revenue. Net income attributable to the stockholders of the parent was NT$3.98 billion, compared to NT$4.56 billion in 4Q14. Earnings per ordinary share for the quarter were NT$0.32. Earnings per ADS were US$0.051. The basic weighted average number of outstanding shares in 1Q15 was 12,526,260,458, compared with 12,509,658,059 shares in 4Q14 and 12,479,924,736 shares in 1Q14. The diluted weighted average number of outstanding shares was 12,660,046,525 in 1Q15, compared with 12,620,712,149 shares in 4Q14 and 13,157,984,032 shares in 1Q14. The fully diluted share count on March 31, 2015 was approximately 12,778,967,000. On March 31, 2015, UMC held 195 million treasury shares acquired from the 15th share buy-back programs.

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UMC 1Q15

Detailed Financials Section Foundry revenue grew to NT$36.00 COGS & Expenses billion and New Business segment (Amount: NT$ million) recorded NT$1.67 billion, resulting in Net Operating a consolidated revenue of Revenues NT$37.65 billion. Depreciation COGS Depreciation increased 7.3% QoQ to NT$9.12 Other Mfg. Costs billion, primarily from new 28nm tools Gross Profit deployed for capacity expansion. Other manufacturing costs were up Gross Margin (%) Operating Expenses 4.5% QoQ to NT$19.38 billion, mainly G&A from higher wafer shipments in 1Q15. Sales & Marketing Operating expenses declined 13.4% R&D sequentially to NT$4.91 billion, mostly Net Other Operating from the decrease in R&D expenses Income & Expenses as costs related to 28nm programs in Operating Income production were transferred to COGS. Net operating income was NT$4.10 billion.

Net non-operating income in 1Q15 was NT$255 million. Gain on disposal of investments was NT$190 million, while the volatility in currency markets led to an exchange loss of NT$77 million.

QoQ % change

4Q14

37,650 37,235 (28,495) (27,049)

YoY % change

1Q14

1.1 5.3

31,694 (25,793)

18.8 10.5

7.3

(8,145)

11.9

(9,115)

(8,495)

(19,380)

(18,554)

4.5

(17,648)

9.8

9,155 10,186 24.3% 27.4% (4,914) (5,672)

(10.1)

5,901 18.6% (5,016)

55.1

(848)

12.4

(13.4) (5.9)

(2.0)

(953)

(1,013)

(1,045)

(1,124)

(7.0)

(833)

25.5

(2,916)

(3,535)

(17.5)

(3,335)

(12.6)

(142)

18

-

56

-

4,099

4,532

941

335.6

4Q14

1Q14

(9.6)

Non-Operating Income and Expenses (Amount: NT$ million)

Non-Operating Income and Expenses

1Q15 255

843

Net Interest Income and Expenses

(27)

(12)

(23)

Net Investment Gain and Loss

126

(37)

(110)

Gain and Loss on Disposal of Investment

190

639

367

Exchange Gain and Loss

(77)

201

22

43

52

95

Other Gain and Loss

Page 4 of 13

1Q15

UMC 1Q15

351

Cash inflow from operations was Cash Flow Summary NT$16.87 billion. 1Q15 capital expenditures totaled NT$14.89 billion, (Amount: NT$ million) including NT$14.85 billion for the foundry segment, resulting in a free cash inflow of Cash Flow from Operating Activities Net income before tax NT$1.98 billion. Cash inflow from financing Depreciation & Amortization was NT$8.16 billion, mainly due to the Gain on disposal of investments acquisition of United Semiconductor Impairment loss on non-financial (Xiamen) leading to the increase in other assets financial liabilities of NT$6.11 billion Exchange loss (gain) on financial and bank loans of NT$1.72 billion. assets and liabilities Total cash inflow in 1Q15 was NT$7.42 Changes in working capital billion. Over the next 12 months, Income tax paid the company expects to repay NT$3.64 Other billion in bank loans. Cash Flow from Investing Activities Capital expenditures

For the 3-Month For the 3-Month Period Ended Period Ended Mar. 31, 2015 Dec. 31, 2014

16,870

18,836

4,354

5,375

10,748

10,663

(190)

(639)

226

-

(13)

255

2,315 (366)

2,941 (60)

(204)

301

(16,498)

(16,790)

(14,893)

(16,208)

(1,897)

(1,774)

Acquisition of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets

209

1,112

415

-

Acquisition of subsidiaries (net of cash acquired) Proceeds from disposal of non-current assets held for sale

642 (344)

Changes in other assets-others

(517)

51

Other

(113)

311

8,155

429

Cash Flow from Financing Activities Bank loans

1,716 -

Redemption of bonds Increase in other financial liabilities Other

Effect of Exchange Rate Net Cash Flow Disposal Group included in Non-Current Assets Held for Sale Total Cash Flow

Page 5 of 13

-

Acquisition of intangible assets

(282)

4,107 (3,831)

6,108 331

153

(776)

993

7,751

3,468

(331)

(511)

7,420

UMC 1Q15

2,957

Cash and cash equivalents increased to NT$53.63 billion, mainly due to the cash from operating activities, capital expenditures, and acquisition of United Semiconductor (Xiamen). The days of inventory decreased one day to 49 days.

Current Assets (Amount: NT$ billion)

Cash and Cash Equivalents Notes & Accounts Receivable Days Sales Outstanding

Inventories, net Days of Inventory

Total Current Assets

Current liabilities decreased to NT$44.44 billion, largely reflecting the decrease in payable on equipment. Debt to equity ratio increased to 40%.

4Q14 45.70 22.37

1Q14 53.92 18.89

52

54

51

15.64

15.24

14.42

49

50

50

101.03

96.86

96.75

Liabilities (Amount: NT$ billion)

Total Current Liabilities

1Q15 44.44

4Q14 1Q14 48.11 49.24

Notes & Accounts Payable

6.38

6.17

7.15

Short-Term Credit / Bonds

10.85

10.03

24.42

7.41

10.48

4.82

Payable on Equipment Other

Long-Term Credit / Bonds Long-Term Investment Liabilities Total Liabilities Debt to Equity

Page 6 of 13

1Q15 53.63 20.62

19.80

21.43

12.85

34.89 6.03 91.80 40%

33.40 88.24 39%

27.66 83.85 39%

UMC 1Q15

Analysis of Revenue2 for Foundry Segment Revenue contribution from North America increased to 47% in 1Q15, partly due to higher communication demand from North American customers.

Revenue Breakdown by Region Region

1Q15

4Q14

3Q14

2Q14

1Q14

North America

47%

45%

45%

43%

45%

Asia Pacific

40%

42%

44%

46%

45%

Europe

7%

8%

6%

5%

7%

Japan

6%

5%

5%

6%

3%

Revenue Breakdown by Geometry

28nm production ramp contributed 9% of 1Q15 revenue, benefiting from the strong demand from wireless devices, while 40nm business represented 24%.

Geometry

4Q14

3Q14

2Q14 1Q14

9%

7%

3%

1%

0%

28nm