SMIC Reports Unaudited Results for the Three Months Ended June 30, 2013

-- Revenue of $541.3 million in 2Q13, representing the fifth consecutive quarter of record high revenue, an increase of 28.3 % year over year, and up 7.9 % quarter over quarter.

-- Revenues from China-based customers increased to 40.9% of overall revenue in 2Q13, an all-time high, compared to 32.7% in 2Q12 and 38.6% in 1Q13.

-- Gross profit of $135.2 million in 2Q13 was a record high, compared to $101.7 million in 2Q12 and $98.3 million in 1Q13.

-- Gross margin improved to 25.0% in 2Q13, compared to 24.1% in 2Q12 and 19.6% in 1Q13.

-- Profit attributable to SMIC was $75.4 million in 2Q13, more than 10 times the profit of $7.1 million in 2Q12 and an 85.7% increase compared to the profit of $40.6 million in 1Q13.

News provided by

Semiconductor Manufacturing International Corporation

Aug 08, 2013, 07:30 ET

SHANGHAI, Aug. 8, 2013 /PRNewswire/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("SMIC" or the "Company"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended June 30, 2013.

Third Quarter 2013 Guidance:

The following statements are forward looking statements which are based on current expectations and which involve risks and uncertainties, some of which are set forth under "Safe Harbor Statements" below.

  • Excluding wafer shipments from Wuhan Xinxin which is expected to gradually phase out starting in 3Q13, revenue is expected to be down 1% to up 2% quarter over quarter.
  • Revenue including wafer shipments from Wuhan Xinxin is expected to be down 3% to flat quarter over quarter.
  • Gross margin excluding wafer shipments from Wuhan Xinxin is expected to range from 18.5% to 21.5%.
  • Gross margin including Wuhan Xinxin is expected to range from 17.5% to 20.5%
  • Operating expenses excluding the effect of foreign exchange, funding of R&D contracts from the government and gain from the disposal of living quarters are expected to range from $81 million to $85 million.

Dr. Tzu-Yin Chiu, SMIC's Chief Executive Officer and Executive Director, commented, "I am very pleased to report that SMIC has exceeded expectations and again achieved record high revenue of $541.3 million in the second quarter of 2013, representing year over year growth of 28.3% and sequential growth of 7.9%. The utilization increased to 98.5% in 2Q 2013 compared to 95.2% in 2Q 2012 and 89.0% in 1Q 2013. Both gross profit and profit from operations reached record highs of $135.2 million and $79.1 million respectively. "

"Revenue from our China customers grew 14.3% sequentially and 60.6% year-over-year, contributing 40.9% of total revenue in the second quarter of 2013, an all-time high. Our 40/45nm revenue grew 71.9% sequentially contributing 10.0% of total wafer revenue compared to 6.4% in the first quarter of 2013. "

"Demand for our differentiated applications continues to be strong, especially in the areas of power management. CMOS Image Sensor, and EEPROM. In order to further capture the market opportunities and to enhance our position in differentiated technologies, we are looking into various opportunities to expand our 8-inch capacity. "

Conference Call / Webcast Announcement

Date: August 9, 2013

Time: 8:30 a.m. Shanghai time

Dial-in numbers and pass code:




China                                       

400-620-8038                

(Pass code: SMIC)

Hong Kong                               

852-2475-0994              

(Pass code: SMIC)

Taiwan                                     

886-2-2650-7825           

(Pass code: SMIC)

United States, New York           

1-845-675-0437             

(Pass code: SMIC)

The call will be webcast live with audio at http://www.smics.com/eng/investors/ir_presentations.php or http://www.media-server.com/m/p/8s7n2w4d.

An archived version of the webcast, along with an electronic copy of this news release will be available on the SMIC website for a period of 12 months following the webcast.

About SMIC

Semiconductor Manufacturing International Corporation ("SMIC"; NYSE: SMI; SEHK: 981) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China, providing integrated circuit (IC) foundry and technology services at 0.35-micron to 40-nanometer. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm mega-fab in Shanghai, a 300mm mega-fab in Beijing, a 200mm fab in Tianjin, and a 200mm fab project under development in Shenzhen. SMIC also has customer service and marketing offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

For more information, please visit www.smics.com.

Safe Harbor Statements
(Under the Private Securities Litigation Reform Act of 1995)

This press release contains, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements under "Third Quarter 2013 Guidance" and  the statement regarding our looking into various opportunities to expand our 8-inch capacity, are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC's actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with the global economic slowdown, orders or judgments from pending litigation and financial stability in end markets.

Investors should consider the information contained in SMIC's filings with the U.S. Securities and Exchange Commission (SEC), including its annual report on 20-F filed with the SEC on April 15, 2013, especially the consolidated financial statements, and such other documents that SMIC may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on SMIC's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Except as may be required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact:

IR
[email protected]
+86 21 3861 0000 ext 12804

Summary of Second Quarter 2013 Operating Results

Amounts in US$ thousands, except for EPS and operating data

2Q13

1Q13

QoQ

2Q12

YoY

Revenue

541,302

501,609

7.9%

421,825

28.3%

Cost of sales(3)

(406,075)

(403,321)

0.7%

(320,110)

26.9%

Gross profit

135,227

98,288

37.6%

101,715

32.9%

Operating expenses(3)

(56,095)

(46,967)

19.4%

(87,973)

-36.2%

Profit from operation

79,132

51,321

54.2%

13,742

475.8%

Other expense, net

(3,292)

(8,273)

-60.2%

(8,188)

-59.8%

Profit before tax

75,840

43,048

76.2%

5,554

1265.5%

Income tax (expenses) benefit

(510)

(2,536)

-79.9%

1,461

-

Profit for the period

75,330

40,512

85.9%

7,015

973.8%

Other comprehensive income:




Exchange differences on
  translating foreign operations

278

43

546.5%

(230)

-

Total comprehensive income  
  for the period

75,608

40,555

86.4%

6,785

1014.3%




Profit attributable to SMIC

75,401

40,604

85.7%

7,060

968.0%




Gross margin

25.0%

19.6%

-

24.1%

-




Earnings per ordinary share
(basic and diluted)(1)

0.00

0.00

-

0.00

-

Earnings per ADS (basic and
diluted)

0.12

0.06

-

0.01

-




Wafers shipped (in 8"
equivalent wafers)

687,651

631,776

8.8%

557,683

23.3%




Capacity utilization(2)

98.5%

89.0%

-

95.2%

-


Note:

(1) Based on weighted average ordinary shares of 32,051 million (basic) and 32,312 million (diluted) in 2Q13, 32,014 million (basic) and 32,182 million (diluted) in 1Q13, and 28,789 million (basic) and 28,830 million (diluted) in 2Q12.

(2) Based on total equivalent wafers out divided by estimated total quarterly capacity.

(3) The Company made reclassifications in 1Q13 to allocate employee bonuses among cost of sales and operating expenses, which were previously all included in operating expense.

  • Revenue increased to $541.3 million in 2Q13, up 7.9% QoQ from $501.6 million in 1Q13, mainly due to an increase in wafer shipments.
  • Revenue generated by shipments from Wuhan Xinxin was $39.5 million in 2Q13 compared to $29.2 million in 1Q13. This portion of revenue will gradually be phased out starting in 3Q13.
  • Cost of sales in 2Q13 was $406.1 million, comparable to $403.3 million in 1Q13 despite an increase in shipments primarily due to significantly higher fab utilization. As a result, depreciation expense was distributed to a larger number of wafers produced.
  • Gross profit was $135.2 million in 2Q13, an increase of 37.6% QoQ from $98.3 million in 1Q13.
  • Gross margin was 25.0% in 2Q13, up from 19.6% in 1Q13 primarily due to significantly higher fab utilization in 2Q13.
  • Operating expenses increased to $56.1 million in 2Q13, an increase of 19.4% QoQ from $47.0 million in 1Q13, mainly due to the reasons stated in Operating Expenses (Income) Analysis.
  • Income tax expenses was $0.5 million in 2Q13, a decrease of 79.9% QoQ from $2.5 million in 1Q13, due to the effect of the decrease in the number of living quarter units disposed in 2Q13 compared to 1Q13, which also resulted in decreased income tax.

Analysis of Revenue

Revenue Analysis


By Application

2Q13

1Q13

2Q12

Computer

1.5%

1.3%

2.6%

Communications

45.6%

47.3%

41.1%

Consumer

45.3%

42.5%

47.8%

Others

7.6%

8.9%

8.5%

By Service Type

2Q13

1Q13

2Q12

Wafers

96.2%

94.1%

94.4%

Mask making, testing, others

3.8%

5.9%

5.6%

By Customer Type

2Q13

1Q13

2Q12

Fabless semiconductor companies

87.7%

88.7%

87.4%

Integrated device manufacturers (IDM)

7.0%

6.1%

9.4%

System companies and others

5.3%

5.2%

3.2%

By Geography

2Q13

1Q13

2Q12

North America

48.3%

51.4%

56.3%

China(1)

40.9%

38.6%

32.7%

Eurasia(2)

10.8%

10.0%

11.0%

Wafer Revenue Analysis


By Technology (logic, memory only)

2Q13

1Q13

2Q12

40/45 nm

10.0%

6.4%

0.2%

55/65 nm

30.9%

32.1%

32.8%

90 nm

4.6%

6.7%

8.7%

0.13 µm

10.5%

10.7%

15.5%

0.15/0.18 µm

40.1%

39.9%

36.5%

0.25/0.35 µm

3.9%

4.2%

6.3%


Note:

(1) Including Hong Kong, but excluding Taiwan

(2) Excluding China

Capacity*

Fab / (Wafer Size)

2Q13

1Q13

Shanghai Mega Fab (8")

90,000

90,000

Shanghai 12-inch Fab (12")

18,000

14,150

Beijing Mega Fab (12")

81,000

81,000

Tianjin Fab (8")

34,500

34,450

Total monthly wafer fabrication capacity

223,500

219,600


Note:

* Wafers per month at the end of the period in 8" equivalent wafers, calculated on a 30-day basis for comparison purposes

  • Monthly capacity increased to 223,500 8-inch equivalent wafers in 2Q13 from 219,600 8-inch equivalent wafers in 1Q13, primarily due to the expansion of capacity in our Shanghai 12-inch fab.

Shipment and Utilization

8" equivalent wafers

2Q13

1Q13

QoQ

2Q12

YoY

Wafer shipments

687,651

631,776

8.8%

557,683

23.3%

Utilization rate(1)

98.5%

89.0%

-

95.2%

-


Note:

(1) Based on total equivalent wafers out divided by estimated total quarterly capacity.

Detailed Financial Analysis

Gross Profit Analysis

Amounts in US$ thousands

2Q13

1Q13

QoQ

2Q12

YoY

Cost of sales

406,075

403,321

0.7%

320,110

26.9%

Depreciation

107,759

127,339

-15.4%

91,184

18.2%

Other manufacturing costs

295,840

275,537

7.4%

228,344

29.6%

Share-based compensation

2,476

445

456.4%

582

325.4%

Gross profit

135,227

98,288

37.6%

101,715

32.9%

Gross margin

25.0%

19.6%

-

24.1%

-

  • Cost of sales was $406.1 million in 2Q13, up 0.7% QoQ from $403.3 million in 1Q13.
  • Depreciation within the cost of sales decreased in 2Q13 relative to 1Q13 primarily due to significantly higher fab utilization; as a result, depreciation expense was distributed to a greater number of wafers produced and to inventory costs as of the period end.
  • Other manufacturing costs within the cost of sales increased in 2Q13 relative to 1Q13 primarily due to an increase in wafer shipments.
  • Gross profit was $135.2 million in 2Q13, an increase of 37.6% QoQ from $98.3 million in 1Q13.
  • Gross margin was 25.0% in 2Q13, up from 19.6% in 1Q13 primarily due to significantly higher fab utilization in 2Q13.

Operating Expenses (Income) Analysis

Amounts in US$ thousands

2Q13

1Q13

QoQ

2Q12

YoY

Operating expenses

56,095

46,967

19.4%

87,973

-36.2%

Research and development

36,736

24,758

48.4%

51,021

-28.0%

General and administrative

42,636

34,203

24.7%

29,093

46.6%

Selling and marketing

9,775

8,254

18.4%

7,786

25.5%

Other operating expense (income)

(33,052)

(20,248)

63.2%

73

-

  • R&D expenses increased to $36.7 million in 2Q13, up 48.4% QoQ from $24.8 million in 1Q13 mainly due to 1) a $7.5 million decrease in the funding of R&D contracts from the government in 2Q13, which offset the costs and 2) an increase of employee bonus accrual in 2Q13.
  • General and administrative expenses increased to $42.6 million in 2Q13, up 24.7% QoQ from $34.2 million in 1Q13, mainly due to higher employee bonus accrual in 2Q13.
  • Other operating expense (income) in 2Q13 included 1) the gain arising from the disposal of part of the living quarters in Shanghai and 2) the gain arising from the disposal of the Company's total ownership interest in SMIC (Wuhan) Development Corporation which was mainly engaged in the construction, operation and management of SMIC living quarters and schools in Wuhan.

Other Income (expense), Net

Amounts in US$ thousands

2Q13

1Q13

QoQ

2Q12

YoY

Other income (expense), net

(3,292)

(8,273)

-60.2%

(8,188)

-59.8%

Interest income

936

1,352

-30.8%

1,827

-48.8%

Finance costs

(9,080)

(10,850)

-16.3%

(10,174)

-10.8%

Foreign exchange gains or losses

2,949

2,145

37.5%

(2,336)

-

Other gains or losses

1,126

(1,366)

-

2,054

-45.2%

Share of profits of associates

777

446

74.2%

441

76.2%

  • Finance costs decreased to $9.1 million in 2Q13, down 16.3% QoQ from $10.9 million in 1Q13, mainly due to 1) the Company retired some of the bank borrowings in early 2Q13 and 2) more interest expense was capitalized as part of the costs of assets under construction in 2Q13.
  • The change of other gains or losses was mainly due to the payment of land idling tax charged by the local government in 1Q13.

Depreciation and Amortization


Amounts in US$ thousands

2Q13

1Q13

QoQ

2Q12

YoY

Depreciation and amortization

135,712

135,752

-0.0%

140,770

-3.6%

Liquidity

Amounts in US$ thousands

2Q13

1Q13

Cash and bank balances

262,955

292,932

Restricted cash

214,430

185,031

Other financial assets

2,881

1,239

Trade and other receivables

472,426

355,293

Prepaid operating expenses

57,231

51,061

Inventories

308,328

284,653

Assets classified as held-for-sale

922

1,428

Total current assets

1,319,173

1,171,637

Current tax liabilities

143

60

Other financial liabilities

107

8

Promissory notes

14,791

29,582

Accrued liabilities

104,678

73,696

Borrowings

586,425

529,440

Trade and other payables

537,003

459,235

Total current liabilities

1,243,147

1,092,021

Cash Ratio

0.2x

0.3x

Quick Ratio

0.8x

0.8x

Current Ratio

1.1x

1.1x

Capital Structure

Amounts in US$ thousands

2Q13

1Q13

Cash and cash equivalents

262,955

292,932

Restricted cash

214,430

185,031

Current portion of promissory notes

14,791

29,582

Short-term borrowings

586,425

529,440

Long-term debt

474,692

429,000

Total debt

1,061,117

958,440

Equity

2,403,738

2,319,036

Total debt to equity ratio(1)

44.1%

41.3%


Note:

(1) Total debt divided by equity, total debt including short-term borrowings and long-term debt.

Cash Flow

Amounts in US$ thousands

2Q13

1Q13

Net cash generated from operating activities

108,360

154,638

Net cash used in investing activities

(242,559)

(82,628)

Net cash generated from (used in) financing activities

104,167

(137,503)

Effect of exchange rate changes

55

(65)

Net change in cash

(29,977)

(65,558)

Capex Summary

  • Capital expenditures for 2Q13 were $301.8 million.
  • The planned 2013 capital expenditures for our foundry operation are $675 million.
  • In addition, the Company has budgeted capital expenditures of another $130 million in 2013 for the construction of living quarters for employees as part of the employee retention program.  The Company plans to either rent out or sell these living quarter units to employees in the future.

Recent Highlights and Announcements

Please visit SMIC's website at http://www.smics.com/eng/press/press_releases.php and http://www.smics.com/eng/investors/ir_filings.php for further details regarding the recent announcements.

Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In US$ thousands except share data)

For the three months ended

June 30, 2013

March 31, 2013

(Unaudited)

(Unaudited)



Revenue

541,302

501,609

Cost of sales

(406,075)

(403,321)

Gross profit

135,227

98,288

Research and development

(36,736)

(24,758)

General and administration expenses

(42,636)

(34,203)

Sales and marketing expenses

(9,775)

(8,254)

Other operating income

33,052

20,248

Profit from operation

79,132

51,321

Other expense, net

(3,292)

(8,273)

Profit before tax

75,840

43,048

Income tax expense

(510)

(2,536)

Profit for the period

75,330

40,512

Other comprehensive income



Item that may be reclassified subsequently to profit or loss



Exchange differences on translating foreign operations

278

43

Total comprehensive income for the period

75,608

40,555

Profit for the period attributable to:



Owners of the Company

75,401

40,604

Non-controlling interests

(71)

(92)

75,330

40,512

Total comprehensive income for the period attributable to:



Owners of the Company

75,679

40,647

Non-controlling interests

(71)

(92)

75,608

40,555



Earnings per share attributable to Semiconductor Manufacturing
       International Corporation ordinary shareholders, basic and diluted

0.00

0.00

Earnings per ADS attributable to Semiconductor Manufacturing
       International Corporation ordinary ADS holders, basic and diluted

0.12

0.06



Shares used in calculating basic earnings per share

32,051,257,487

32,014,142,052

Shares used in calculating diluted earnings per share

32,311,620,628

32,182,139,336


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In US$ thousands)

As of

June 30, 2013

  March 31, 2013

(Unaudited)

(Unaudited)

ASSETS



Non-current assets



Property, plant and equipment

2,523,893

2,443,230

Prepaid land use right

124,818

73,576

Intangible assets

228,898

226,787

Investments in associates

23,189

22,190

Deferred tax assets

43,802

43,461

Other assets

37,926

41,065

Total non-current assets

2,982,526

2,850,309

Current assets



Inventories

308,328

284,653

Prepaid operating expenses

57,231

51,061

Trade and other receivables

472,426

355,293

Other financial assets

2,881

1,239

Restricted cash

214,430

185,031

Cash and bank balances

262,955

292,932

1,318,251

1,170,209

Assets classified as held-for-sale

922

1,428

Total current assets

1,319,173

1,171,637

TOTAL ASSETS

4,301,699

4,021,946



EQUITY AND LIABILITIES



Capital and reserves



Ordinary shares, $0.0004 par value, 50,000,000,000 shares authorized,

  32,075,631,400 and 32,023,168,050 shares issued and outstanding at June 

  30, 2013 and  March 31, 2013, respectively

12,830

12,809

Share premium

4,088,071

4,084,942

Reserves

53,079

46,857

Accumulated deficit

(1,751,031)

(1,826,432)

Equity attributable to owners of the Company

2,402,949

2,318,176

Non-controlling interests

789

860

Total equity

2,403,738

2,319,036

Non-current liabilities



Borrowings

474,692

429,000

Deferred tax liabilities

257

314

Deferred government grant

174,876

171,987

Long-term financial liabilities

4,989

4,588

Other liabilities

-

5,000

Total non-current liabilities

654,814

610,889

Current liabilities



Trade and other payables

537,003

459,235

Borrowings

586,425

529,440

Accrued liabilities

104,678

73,696

Promissory notes

14,791

29,582

Other financial liabilities

107

8

Current tax liabilities

143

60

Total current liabilities

1,243,147

1,092,021

Total liabilities

1,897,961

1,702,910

TOTAL EQUITY AND LIABILITIES

4,301,699

4,021,946


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US$ thousands)

For the three months ended

June 30, 2013

March 31, 2013

(Unaudited)

(Unaudited)

Cash flow from operating activities



Profit for the period

75,330

40,512

Depreciation and amortization

135,712

135,752

Share of profits of associates

(777)

(446)

Changes in working capital and others

(101,905)

(21,180)

Net cash generated from operating activities

108,360

154,638



Cash flow from investing activities:



Payments for property, plant and equipment

(188,008)

(123,132)

Payments for intangible assets

(14,914)

(14,580)

Payments for land use right

(61,391)

-

Proceeds from (payment for) disposal of property, plant and equipment and
      intangible assets

7,553

(8,416)

Changes in restricted cash relating to investing activities

(12,721)

46,388

Payments to acquire financial assets

(2,852)

(1,527)

Proceeds on sale of financial assets

1,215

18,966

Proceeds from disposal of subsidiary

28,639

-

Others

(80)

(327)

Net cash used in investing activities

(242,559)

(82,628)



Cash flow from financing activities:



Proceeds from borrowings

306,939

55,675

Repayment of borrowings

(189,323)

(193,745)

Repayment of promissory notes

(15,000)

-

Proceeds from exercise of employee stock options

1,551

567

Net cash generated from (used in) financing activities

104,167

(137,503)



Effects of exchange rate changes on the balance of cash held in foreign
currencies

55

(65)



Net decrease in cash and cash equivalents

(29,977)

(65,558)



Cash and bank balances, beginning of period

292,932

358,490



Cash and bank balances, end of period

262,955

292,932

SOURCE Semiconductor Manufacturing International Corporation