UMC Reports Fourth Quarter 2014 Results

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Jan 28, 2015 - additional manufacturing solutions to fulfill new product specs, strengthening our position in the .... 4
Contacts: Bowen Huang / David Wong UMC, Investor Relations + 886-2-2658-9168, ext. 16900 [email protected] [email protected]

UMC Reports Fourth Quarter 2014 Results Full-year 2014 foundry revenue up 10%, operating profit increased 74% YoY Fourth Quarter 2014 Overview1:  Revenue: NT$37.24 billion (US$1.18 billion)  Gross margin: 27.4%; operating margin: 12.2%  Foundry revenue from advanced nodes: 7% from 28nm, 21% from 40nm  Foundry capacity utilization rate: 93%  Net income attributable to the stockholders of the parent: NT$4.56 billion (US$144 million)  Earnings per share: NT$0.36; earnings per ADS: US$0.057 Taipei, Taiwan, ROC – January 28, 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 fourth quarter of 2014. Fourth quarter consolidated revenue was NT$37.24 billion, a 5.7% quarterly increase from NT$35.21 billion in 3Q14 and a 21.2% annual increase from NT$30.72 billion in 4Q13. 4Q14 consolidated gross margin was 27.4%, with operating margin at 12.2%. Net income attributable to the stockholders of the parent was NT$4.56 billion, with earnings per ordinary share of NT$0.36. For 2014, full year revenue was NT$140.01 billion, with NT$10.08 billion in operating income, NT$12.14 billion net income attributable to the stockholders of the parent and NT$0.97 earnings per share. Mr. Po-Wen Yen, CEO of UMC, said “In the fourth quarter, foundry revenue grew 3.7% sequentially to NT$34.74 billion. This figure includes a one-time 40nm licensing fee from Fujitsu, lifting gross and operating margins to 30.2% and 14.6%, respectively. Overall capacity utilization rate remained at 93%, bringing shipments to 1.43 million 8-inch equivalent wafers. Our 28nm 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 Dec 31, 2014, the three-month period ending Sep 30, 2014, and the equivalent three-month period that ended Dec 31, 2013. For all 4Q14 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Dec 31, 2014 exchange rate of NT$ 31.62 per U.S. Dollar. Page 1 of 13

UMC 4Q14

technologies represented 7% of our foundry revenue in 4Q14. Shipments from our 28nm gate-last, High-K Metal Gate process exceeded that of 28nm poly-SiON wafers. Excluding the Fujitsu 40nm licensing fee, UMC’s 2014 foundry operating profit grew 74% from the previous year. This rise in profitability was mainly driven by double-digit percentage growth in wafer shipments and partly due to the rapid production ramp of 28nm, which accounted for 3% of total 2014 revenue. Our collaborative technology efforts with our partners will enable UMC to deliver additional manufacturing solutions to fulfill new product specs, strengthening our position in the IC supply chain to take advantage of the continued momentum in market demand.” CEO Yen continued, “The Taiwan government authorities recently approved UMC’s application to invest in a 12” joint venture fab in Xiamen, China. This investment will create opportunities for UMC to benefit from China’s enormous chip requirements by bringing us closer to the Chinese semiconductor supply chain. The cooperation highlights UMC’s differentiated approach of global expansion, proven through Singapore’s Fab12i and SuZhou’s Fab8N successfully achieving economy of scale while mitigating customer risks via geographic diversification. While we expand production sites worldwide, we are also focusing on continuous organic growth by deploying additional capacity at our Tainan site. As such, we will budget 2015 CAPEX for approximately US$1.8 billion. Our 2015 CAPEX illustrates our strong commitment to meet customers’ requirements and gain additional market share through efficient execution and strategic alliances. UMC’s global expansion efforts, driven by manufacturing excellence, will strengthen customer services with increased operating scale to enhance corporate financial earnings and deliver long-term returns to our shareholders.”

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UMC 4Q14

Summary of Operating Results Operating Results QoQ % change

4Q13

YoY % change

(Amount: NT$ million)

4Q14

3Q14

Net Operating Revenues

37,235

35,214

5.7

30,719

21.2

Gross Profit

10,186

7,559

34.8

5,557

83.3

Operating Expenses

(5,672)

(5,270)

7.6

(5,317)

6.7

(602)

-

(46)

-

Net Other Operating Income and Expenses

4,532

1,687

168.6

194

2,236.1

843

1,305

(35.4)

889

(5.2)

4,563

2,916

56.5

749

509.2

(NT$ per share)

0.36

0.23

0.06

(US$ per ADS)

0.057

0.036

0.009

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

18

In 4Q14, foundry business grew 3.7% sequentially to NT$34.74 billion, including a one-time Fujitsu 40nm licensing fee, while New Business segment posted revenue of NT$2.52 billion, leading to consolidated revenue of NT$37.24 billion, up 5.7% from 3Q14. On a consolidated base, gross profit increased 34.8% to NT$10.19 billion, or 27.4% of revenue. Operating income grew 168.6% sequentially to NT$4.53 billion, or 12.2% of revenue. Net income attributable to the stockholders of the parent in 4Q14 was NT$4.56 billion, up 56.5% compared to NT$2.92 billion in 3Q14. Earnings per ordinary share for the quarter were NT$0.36. Earnings per ADS were US$0.057. The basic weighted average number of outstanding shares in 4Q14 was 12,509,658,059, compared with 12,500,808,739 shares in 3Q14 and 12,476,082,332 shares in 4Q13. The diluted weighted average number of outstanding shares was 12,620,712,149 in 4Q14, compared with 12,582,502,645 shares in 3Q14 and 13,243,379,446 shares in 4Q13. The fully diluted share count on December 31, 2014 was approximately 12,779,034,000. On December 31, 2014, UMC held 195 million treasury shares acquired from the 15th share buy-back programs.

Page 3 of 13

UMC 4Q14

Detailed Financials Section Foundry revenue increased 3.7% from COGS & Expenses 4Q14 to NT$34.74 billion, which (Amount: NT$ million) 4Q14 included a Fujitsu 40nm licensing fee, Net Operating 37,235 while New Business posted NT$2.52 Revenues COGS (27,049) billion, which led to total revenue of Depreciation (8,495) NT$37.24 billion. Operating expenses Other Mfg. Costs (18,554) increased 7.6% to NT$5.67 billion, Gross Profit 10,186 partly due to a 17.5% rise in sales Gross Margin (%) 27.4% and marketing that included higher IP Operating Expenses (5,672) and mask expenses. Research G&A (1,013) and development expenses Sales & Marketing (1,124) increased 1.9% to NT$3.54 billion or R&D (3,535) 9.5% of operating revenues. Net Net Other Operating 18 operating income was NT$4.53 billion. Income & Expenses Operating Income

Net non-operating income in 4Q14 was NT$843 million. Gain on disposal of investments was NT$639 million, including a NT$528 million gain from the disposal of Montage shares.

35,214 (27,655)

YoY % change

4Q13

5.7 30,719 (2.2) (25,162)

21.2 7.5

(8,483)

0.1

(7,939)

(19,172)

(3.2)

(17,223)

7.0 7.7

83.3

22.6

7,559 21.5% (5,270)

34.8 7.6

5,557 18.1% (5,317)

(845)

19.9

(826)

(957)

17.5

(906)

24.1

(3,468)

1.9

(3,585)

(1.4)

-

(602) 1,687

(46)

168.6

6.7

-

194

2,236.1

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

Non-Operating Income and Expenses

4Q14 843

3Q14 1,305

4Q13 889

Net Interest Income and Expenses

(12)

Net Investment Gain and Loss

(37)

487

(394)

Gain and Loss on Disposal of Investment

639

580

985

Exchange Gain and Loss

201

114

114

52

132

237

Other Gain and Loss

Page 4 of 13

4,532

QoQ % change

3Q14

UMC 4Q14

(8)

(53)

Cash inflow from operations was NT$18.84 Cash Flow Summary billion. In 4Q14, CAPEX spending was NT$16.21 billion, including NT$16.08 (Amount: NT$ million) billion from the foundry segment, resulting in free cash inflow of NT$2.63 billion. Cash Cash Flow from Operating Activities Net Income before tax inflow from financing was NT$429 million, Depreciation & Amortization mainly due to the increased bank loan of Gain on disposal of investments NT$4.11 billion with a bond redemption of Impairment loss on non-financial assets NT$3.83 billion. Total cash inflow in 4Q14 Exchange loss on financial assets was NT$2.96 billion. Over the next 12 and liabilities months, the company expects to repay Changes in Working Capital NT$3.77 billion in bank loans. Other Cash Flow from Investing Activities Capital Expenditures Acquisition of available-for-sale financial assets Acquisition of financial assets measured at cost Proceeds from disposal of available-for-sale financial assets Acquisition of intangible assets Other

Redemption of Bonds Cash Dividends and Cash paid from additional paid-in capital 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

18,836

12,039

5,375

2,992

10,663

10,195

(639)

(580)

-

597

255

130

2,941

(1,488)

241

193

(16,790)

(12,684)

(16,208)

(12,867)

(1,774)

(52)

258

(283)

1,112

568

(282)

(268)

104

Cash Flow from Financing Activities Bank Loans

For the 3-Month For the 3-Month Period Ended Period Ended Dec. 31, 2014 Sep. 30, 2014

218

429

(6,659)

4,107

(627)

(3,831) 153

993 3,468 (511) 2,957

UMC 4Q14

(6,253) 221

414 (6,890) (6,890)

Cash and cash equivalents increased to NT$45.70 billion, mainly from the increase in free cash flow and cash inflow from financing activities. The days of inventory increased 4 days to 50 days due to an increase in WIP for 1Q15 shipments.

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 increased to NT$48.11 billion. A merger between Motech & TOPCELL announced on Dec. 26, 2014 resulted in the reclassification of TOPCELL liabilities into other liabilities, amounting to NT$5.59 billion, attributing to the category's increase to NT$21.42 billion in 4Q14. Debt to equity ratio remained at 39%.

Page 6 of 13

4Q14 45.70 22.37

3Q14 42.74 21.93

4Q13 50.83 16.82

54

56

53

15.24

14.31

13.99

50

46

51

96.86

91.80

88.80

Liabilities (Amount: NT$ billion)

Total Current Liabilities

4Q14 48.11

3Q14 4Q13 45.44 48.20

Notes & Accounts Payable

6.17

6.75

7.41

Short-Term Credit / Bonds

10.03

15.26

21.19

Payable on Equipment

10.48

10.40

6.70

Other

21.43

13.03

12.90

33.40 88.24 39%

31.98 84.43 39%

28.42 83.46 39%

Long-Term Credit / Bonds Total Liabilities Debt to Equity

UMC 4Q14

Analysis of Revenue2 for Foundry Segment Revenue contribution from North America remained at 45% in 4Q14. Europe rose to 8%, partly due to higher demand from European communication customers.

Revenue Breakdown by Region Region

4Q14

3Q14

2Q14

1Q14

4Q13

North America

45%

45%

43%

45%

47%

Asia Pacific

42%

44%

46%

45%

41%

Europe

8%

6%

5%

7%

8%

Japan

5%

5%

6%

3%

4%

Revenue Breakdown by Geometry

28nm revenue continued to increase in 4Q14 strengthened by the demand from handsets and tablets, accounting for 7% of foundry revenue, while 40nm revenue represented 21% during 4Q14.

Geometry

4Q14

3Q14

2Q14

1Q14 4Q13

28nm and below

7%

3%

1%

0%

0%

28nm