SMIC Reports 2015 Third Quarter Results

All currency figures stated in this report are in US Dollars unless stated otherwise.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").

News provided by

Semiconductor Manufacturing International Corporation

Nov 10, 2015, 06:09 ET

SHANGHAI, Nov. 10, 2015 /PRNewswire/ -- November 10, 2015. 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 September 30, 2015.

Third Quarter 2015 Highlights

  • Revenue was a record high of $569.9 million in 3Q15, increased 4.3% QoQ from $546.6 million in 2Q15 and increased 9.2% YoY from $521.6 million in 3Q14.
  • Gross profit was a record high of $182.4 million in 3Q15, increased 3.4% QoQ from $176.4 million in 2Q15 and increased 35.1% YoY from $134.9 million in 3Q14.
  • Gross margin was 32.0% in 3Q15, compared to 32.3% in 2Q15 and 25.9% in 3Q14.
  • Net profit for the period attributable to SMIC was $82.6 million in 3Q15, as compared to $76.7 million in 2Q15 and $47.5 million in 3Q14. Excluding the gain of commitment to grant shares and warrants in 2Q10, profit for the period attributable to SMIC was a record high in 3Q15.

Fourth Quarter 2015 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. The Company expects:

  • Revenue to increase by 3% to 6% quarter over quarter.
  • Gross margin to range from 28% to 30%.
  • Non-GAAP operating expenses excluding the effect of employee bonus accrual, government funding and gain from the disposal of living quarters to range from $142 million to $147 million.
  • Non-controlling interests of our majority-owned subsidiaries to range from positive $33 million to positive $36 million (losses to be borne by non-controlling interests).

Dr. Tzu-Yin Chiu, SMIC's Chief Executive Officer and Executive Director, commented, "SMIC has achieved another quarter of record-high revenue and earnings in Q3; undeterred by the industry correction, our utilizations remain high as we guide an additional growth quarter in Q4. We have successfully diversified our products as well as our customer base and have shown resilience in the face of seasonally weaker market trends.

We have started to book small 28nm revenue contributions in Q3 this year. We continue to expand our differentiated portfolio; and I am pleased to announce our 95ULL SPOCULL technology (SMIC Poly Contact for Ultra Low Leakage); when comparing to conventional 0.13LL technology this 8-inch SPOCULL technology can pack 2 times the logic density and three times the SRAM density. We believe this new technology will be very suitable for applications such as ultra-low power MCU, high performance analog, RF, and other IOT related applications.

I am also pleased to announce that we newly received an investment-grade credit rating from Moody's, in addition to an investment-grade credit rating from S&P. Domestically, we have received a triple A rating from a Chinese rating agency, China Chengxin International Credit Rating Co. These signify the recognition and acknowledgement of SMIC's credible and improving financial health.

We have achieved a strong 2015 so far, our best historically in terms of revenue, profitability and utilization. We expect growth again in the fourth quarter, which would represent 4 consecutive quarters of growth in 2015. With our Q4 guidance, our 2015 revenue is expected to grow more than 10% year over year."

Conference Call / Webcast Announcement

Date: November 11, 2015
Time: 8:30 a.m. Shanghai time
Dial-in numbers and pass code:

China

+86 400-620-8038

(Pass code: SMIC)

Hong Kong

+852 3018-6771

(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://edge.media-server.com/m/p/m8ujveyy.

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. SMIC provides integrated circuit (IC) foundry and technology services at 0.35-micron to 28-nanometer. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm mega-fab in Shanghai; a 300mm mega-fab and a second majority owned 300mm fab under development for advance nodes in Beijing; and 200mm fabs in Tianjin and Shenzhen. SMIC also has marketing and customer service 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 "Fourth Quarter 2015 Guidance", "CapEx Summary" and the statements contained in the quotes of our CEO regarding our fourth quarter guidance are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target" 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 cyclical nature of the semiconductor industry, changes in demand for our products, competition in our markets, our reliance on a small number of customers, orders or judgments from pending litigation, intensive intellectual property lawsuits in semiconductor industry and financial stability in end markets, general economic conditions and fluctuations in currency exchange rates.

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 28, 2015, 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.

About Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures

To supplement SMIC's consolidated financial results presented in accordance with IFRS, SMIC uses in this press release non-GAAP operating expenses which consist of total operating expenses as adjusted to exclude the effect of employee bonus accrual, government funding and gain from the disposal of living quarters. This earnings release also includes fourth quarter 2015 guidance for non-GAAP operating expenses. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS.

SMIC believes that use of these non-GAAP financial measures facilitates investors' and management's comparisons to SMIC's historical performance. The Group's management regularly uses these non-GAAP financial measures to understand, manage and evaluate the Group's business and make financial and operational decisions.

The accompanying table has more information and reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Summary of Third Quarter 2015 Operating Results


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

3Q15

2Q15

QoQ

3Q14

YoY

Revenue

569,854

546,615

4.3%

521,646

9.2%

Cost of sales

(387,503)

(370,210)

4.7%

(386,704)

0.2%

Gross profit

182,351

176,405

3.4%

134,942

35.1%

Operating expenses

(108,125)

(115,728)

-6.6%

(94,122)

14.9%

Profit from operations

74,226

60,677

22.3%

40,820

81.8%

Other income (expense), net

(3,459)

11,943

-

7,840

-

Profit before tax

70,767

72,620

-2.6%

48,660

45.4%

Income tax (expense) benefit

(1,793)

(924)

94.0%

18

-

Profit for the period

68,974

71,696

-3.8%

48,678

41.7%

Other comprehensive income:




Exchange differences on
  translating foreign operations

(4,735)

397

-

1,320

-

Change in value of available-
  for-sale financial assets

(23)

(1,006)

-97.7%

-

-

Others

130

-

-

-

-

Total comprehensive income 
  for the period

64,346

71,087

-9.5%

49,998

28.7%




Profit for the period attributable
  to:




SMIC

82,626

76,704

7.7%

47,520

73.9%

Non-controlling interests

(13,652)

(5,008)

172.6%

1,158

-

Profit for the period

68,974

71,696

-3.8%

48,678

41.7%




Gross margin

32.0%

32.3%

-

25.9%

-




Earnings per ordinary share(1)
Basic

0.00

0.00

0.00

Diluted

0.00

0.00

0.00

Earnings per ADS(2)

Basic

0.10

0.10

0.07

Diluted

0.10

0.10

0.07

Wafers shipped (in 8"
equivalent wafers)

771,201

731,730

5.4%

668,811

15.3%




Capacity utilization(3)

100.5%

102.1%

-

91.9%

-


Note:

(1) Based on weighted average ordinary shares of 40,771 million (basic) and 45,020 million (diluted) in 3Q15, 37,192 million (basic) and 41,572 million (diluted) in 2Q15, and 34,846 million (basic) and 38,904 million (diluted) in 3Q14.

(2) Each ADS represents 50 ordinary shares.

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

  • Revenue increased by 4.3% QoQ from $546.6 million in 2Q15 to $569.9 million in 3Q15 mainly due to an increase of wafer shipments in 3Q15.
  • Cost of sales was $387.5 million in 3Q15, up 4.7% QoQ from $370.2 million in 2Q15. The increase was mainly due to the same reason as the revenue increase.
  • Gross profit was $182.4 million in 3Q15, an increase of 3.4% QoQ from $176.4 million in 2Q15.
  • Gross margin was 32.0 % in 3Q15, as compared to 32.3% in 2Q15.
  • Operating expenses were $108.1 million in 3Q15, a decrease of 6.6% QoQ from $115.7 million in 2Q15, mainly due to the reasons stated in Operating Expenses (Income) Analysis below.

Analysis of Revenue


Revenue Analysis


By Application

3Q15

2Q15

3Q14

Computer

4.4%

4.5%

2.3%

Communications

55.1%

49.4%

44.6%

Consumer

31.9%

37.7%

44.3%

Others

8.6%

8.4%

8.8%

By Service Type

3Q15

2Q15

3Q14

Wafers

94.9%

95.4%

94.6%

Mask making, testing, others

5.1%

4.6%

5.4%

By Geography

3Q15

2Q15

3Q14

North America

33.9%

32.0%

43.7%

China(1)

47.9%

51.1%

42.2%

Eurasia(2)

18.2%

16.9%

14.1%

Wafer Revenue Analysis


By Technology

3Q15

2Q15

3Q14

45 nm and below

15.6%

15.3%

10.4%

55/65 nm

22.2%

25.2%

24.3%

90 nm

4.4%

4.8%

3.5%

0.13 µm

11.1%

10.9%

11.5%

0.15/0.18 µm

43.1%

39.9%

45.7%

0.25/0.35 µm

3.6%

3.9%

4.6%


Note:

(1) Including Hong Kong, but excluding Taiwan

(2) Excluding China and Hong Kong

Capacity*


Fab / (Wafer Size)

3Q15

2Q15

Shanghai Mega Fab (8")

100,000

99,000

Shanghai 12-inch Fab (12")

31,500

31,500

Beijing Mega Fab (12")

83,250

83,250

Tianjin Fab (8")

43,000

42,000

Shenzhen Fab (8")

11,000

-

Total monthly wafer fabrication capacity**

268,750

255,750


Note:

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

**Our new 12-inch fab in Beijing have reached an installed capacity of 3,000 wafers per month but not entered into mass production at the end of 3Q15.

  • Monthly capacity increased to 268,750 8-inch equivalent wafers in 3Q15 from 255,750 8-inch equivalent wafers in 2Q15, primarily because our new 8-inch fab in Shenzhen entered into mass production in 3Q15.

Shipment and Utilization


8" equivalent wafers

3Q15

2Q15

QoQ

3Q14

YoY

Wafer shipments

771,201

731,730

5.4%

668,811

15.3%

Utilization rate(1)

100.5%

102.1%

-

91.9%

-


Note:

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

Detailed Financial Analysis

Gross Profit Analysis


Amounts in US$ thousands

3Q15

2Q15

QoQ

3Q14

YoY

Cost of sales

387,503

370,210

4.7%

386,704

0.2%

Depreciation

94,294

95,942

-1.7%

108,623

-13.2%

Other manufacturing costs

291,425

272,552

6.9%

277,278

5.1%

Share-based compensation

1,784

1,716

4.0%

803

122.2%

Gross profit

182,351

176,405

3.4%

134,942

35.1%

Gross margin

32.0%

32.3%

-

25.9%

-

  • Cost of sales was $387.5 million in 3Q15, up 4.7% QoQ from $370.2 million in 2Q15.
  • Depreciation within the cost of sales decreased 1.7% to $94.3 million in 3Q15, compared to $95.9 million in 2Q15.
  • Other manufacturing costs within the cost of sales increased 6.9% to $291.4 million in 3Q15, compared to $272.6 million in 2Q15. The increase was mainly due to an increase of wafer shipments in 3Q15.
  • Gross profit was $182.4 million in 3Q15, an increase of 3.4% QoQ from $176.4 million in 2Q15.
  • Gross margin was 32.0% in 3Q15, as compared to 32.3% in 2Q15.

Operating Expenses (Income) Analysis


Amounts in US$ thousands

3Q15

2Q15

QoQ

3Q14

YoY

Operating expenses

108,125

115,728

-6.6%

94,122

14.9%

Research and development, net

62,381

55,202

13.0%

54,887

13.7%

General and administrative

51,387

52,051

-1.3%

34,668

48.2%

Selling and marketing

11,154

9,159

21.8%

10,090

10.5%

Other operating income

(16,797)

(684)

2355.7%

(5,523)

204.1%

  • R&D expenses increased by $7.2 million QoQ to $62.4 million in 3Q15, compared to $55.2 million in 2Q15. Excluding the funding of R&D contracts from the government, R&D expenses increased by $6.4 million QoQ to $72.0 million in 3Q15. The change was mainly due to higher R&D activities in 3Q15. Funding of R&D contracts from the government was $9.6 million in 3Q15, compared to $10.4 million in 2Q15.
  • Other operating income increased from $0.7 million in 2Q15 to $16.8 million in 3Q15, mainly because of the gain realized from the disposal of certain living quarters in 3Q15.

Other Income (expense), Net


Amounts in US$ thousands

3Q15

2Q15

QoQ

3Q14

YoY

Other income (expense), net

(3,459)

11,943

-

7,840

-

Interest income

1,378

956

44.1%

2,968

-53.6%

Finance costs

(2,009)

(2,416)

-16.8%

(2,539)

-20.9%

Foreign exchange gains or losses

(25,963)

4,960

-

6,838

-

Other gains or losses, net

3,072

8,592

-64.2%

264

1063.6%

Fair value change

25,455

-

-

-

-

Share of profit (loss) of investment using equity method

(5,392)

(149)

3518.8%

309

-

  • The change in foreign exchange gains or losses was mainly due to a devaluation of RMB against USD in 3Q15. Foreign monetary assets mainly consist of cash and cash equivalent and accounts receivables in RMB. And foreign monetary liabilities mainly consist of loans, accounts payables and other payables in RMB. The Group is in net foreign monetary asset position.
  • The change in other gains or losses, net was mainly caused by 1) the lower revenue from our schools in 3Q15 due to summer vacation and 2) the lower gains from investment in the financial products sold by banks in 3Q15.
  • The change in fair value change was due to gain arising from the put option, which was granted by Jiangsu Changjiang Electronics Technology Co., Ltd ("JCET"), to sell the shares of Suzhou Changjiang Electric Xinke Investment Co., Ltd ("Changjiang Xinke") to JCET, pursuant to an investment exit agreement entered into by SilTech Shanghai (a subsidiary of SMIC), JCET and Jiangsu Xinchao Technology Group Co., Ltd (a substantial shareholder of JCET).
  • The change in share of profit (loss) of investment using equity method was mainly due to the loss attributable to Changjiang Xinke.

Depreciation and Amortization


Amounts in US$ thousands

3Q15

2Q15

QoQ

3Q14

YoY

Depreciation and amortization

130,460

124,911

4.4%

138,889

-6.1%

Liquidity


Amounts in US$ thousands

3Q15

2Q15

Cash and cash equivalent

741,576

766,165

Restricted cash

88,685

105,791

Other financial assets(1)

462,280

568,886

Trade and other receivables

466,130

489,675

Prepayment and prepaid operating expenses

47,518

37,507

Inventories

398,987

365,332

Assets classified as held-for-sale

111,374

-

Total current assets

2,316,550

2,333,356

Current tax liabilities

694

412

Accrued liabilities

146,844

132,714

Deferred government funding

67,190

62,368

Short-term Borrowings

57,499

119,727

Trade and other payables

786,961

863,210

Total current liabilities

1,059,188

1,178,431

Cash Ratio(2)

0.7x

0.7x

Quick Ratio(3)

1.8x

1.7x

Current Ratio(4)

2.2x

2.0x


Note:

(1) Other financial assets contain financial products sold by bank and bank deposits over 3 months.

(2) Cash and cash equivalent divided by total current liabilities.

(3) Current assets excluding inventories divided by total current liabilities

(4) Total current assets divided by total current liabilities.

As of September 30, 2015, the assets classified as held-for-sale balance of $111.4 million were living quarter units, which the Group has committed to sell to its employees in the future.

Capital Structure


Amounts in US$ thousands

3Q15

2Q15

Cash and cash equivalent

741,576

766,165

Restricted cash

88,685

105,791

Other financial assets(1)

462,280

568,886

Short-term borrowings

57,499

119,727

Long-term borrowings

108,557

85,484

Convertible bonds

389,268

385,947

Corporate bonds

492,790

492,383

Total debt

1,048,114

1,083,541

Net debt(2)

(155,742)

(251,510)

Equity

3,942,898

3,846,024

Total debt to equity ratio(3)

26.6%

28.2%

Net debt to equity ratio(4)

N/A

N/A


Note:

(1) Other financial assets contain financial products sold by bank and bank deposits over 3 months.

(2) Net debt is total debt minus cash and cash equivalent, and other financial assets.

(3) Total debt divided by equity.

(4) Net debt divided by equity. The ratio was not applicable due to the negative net debt in 3Q15 and 2Q15.

Cash Flow


Amounts in US$ thousands

3Q15

2Q15

Net cash from operating activities

180,172

154,577

Net cash used in investing activities

(187,920)

(170,372)

Net cash (used in) from financing activities

(8,908)

379,423

Effect of exchange rate changes

(7,933)

159

Net change in cash and cash equivalent

(24,589)

363,787

Capex Summary

  • Capital expenditures for 3Q15 were $315.0 million.
  • The planned 2015 capital expenditures for foundry operations are approximately $1.45 billion.
  • The planned 2015 capital expenditures for non-foundry operations, mainly for the construction of living quarters, are approximately $100 million. The Group plans to rent out or sell these living quarter units to employees in the future.

Recent Highlights and Announcements

  • Connected Transaction Formation of Joint Venture with China IC Fund (2015-10-15)
  • Datang Holdings (Hongkong) Investment Company Limited subscribed 961,849,809 ordinary shares of SMIC (2015-10-09)
  • Country Hill Limited subscribed 323,518,848 ordinary shares of SMIC (2015-09-25)
  • SMIC Receives 'Hi-Tech Enterprise Achievement Award' for the Second Time (2015-09-24)
  • SMIC, CICIIF and Qualcomm Intend to Invest into SJsemi (2015-09-16)
  • Grant of Options (2015-09-14)
  • SMIC Best IP Partner Award of 2015 (2015-09-14)
  • Circulars -Notification Letter and Request Form for Non-registered Shareholders (2015-09-09)
  • Circulars -Notification Letter for Registered Shareholders (2015-09-09)
  • Circulars -Notification Letter and Change Request Form to Registered Shareholders (2015-09-09)
  • Circulars - Letter and Reply Form to New Registered Shareholders - Election of Means of Receipt and Language of Corporate Communication (2015-09-09)
  • Announcement of Unaudited Interim Results for the Six Months Ended June 30, 2015 (2015-08-28)
  • SMIC Reports Unaudited Results for the Three Months Ended June 30, 2015 (2015-08-11)
  • Poll Results of Extraordinary General Meeting Held on 11 August 2015 (2015-08-11)
  • List of Directors and Their Roles and Functions (2015-08-11)
  • Appointment of Non-executive Director  (2015-08-11)
  • SMIC's 28nm Chips Power Mainstream Smartphones Marking a New Era for Advanced Chip Manufacturing in China (2015-08-10)
  • List of Directors and Their Roles and Functions (2015-08-07)
  • Appointment of Members of Audit Committee and Nomination Committee (2015-08-07)
  • Circulars - Notification Letter and Request Form to Non-registered Shareholders (2015-07-23)
  • Circulars - Notification Letter for Registered Shareholders(2015-07-23)
  • Closure of Register of Members (2015-07-23)
  • Notice of Extraordinary General Meeting (2015-07-23)
  • Proxy Forms - Form of Proxy for Use at the Extraordinary General Meeting to be Held on 11 August 2015 (2015-07-23)
  • Circulars - Non-exempt Connected Transactions - (1) Pre-emptive Subscriptions for Shares by Datang and Country Hill (2) Proposed Specific Mandates to Issue Pre-emptive Shares (3) Grant of Restricted Share Units to a Director and (4) Notice of Extraordinary General Meeting (2015-07-23)
  • Notification of Board Meeting (2015-07-14)

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 PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(In US$ thousands except share data)

For the three months ended

September 30, 2015

June 30, 2015

(Unaudited)

(Unaudited)



Revenue

569,854

546,615

Cost of sales

(387,503)

(370,210)

Gross profit

182,351

176,405

Research and development expenses, net

(62,381)

(55,202)

General and administration expenses

(51,387)

(52,051)

Sales and marketing expenses

(11,154)

(9,159)

Other operating income

16,797

684

Operating expenses

(108,125)

(115,728)

Profit from operation

74,226

60,677

Other income, net

(3,459)

11,943

Profit before tax

70,767

72,620

Income tax expense

(1,793)

(924)

Profit for the period

68,974

71,696

Other comprehensive income



Item that may be reclassified subsequently to profit or loss



Exchange differences on translating foreign operations

(4,735)

397

Change in value of available-for-sale financial assets

(23)

(1,006)

Others

130

-

Total comprehensive income for the period

64,346

71,087

Profit for the period attributable to:



Owners of the Company

82,626

76,704

Non-controlling interests

(13,652)

(5,008)

68,974

71,696

Total comprehensive income for the period attributable to:



Owners of the Company

77,998

76,090

Non-controlling interests

(13,652)

(5,003)

64,346

71,087



Earnings per share attributable to Semiconductor Manufacturing
   International Corporation ordinary shareholders



Basic

0.00

0.00

Diluted

0.00

0.00

Earnings per ADS attributable to Semiconductor Manufacturing
   International Corporation ordinary ADS holders



Basic

0.10

0.10

Diluted

0.10

0.10



Shares used in calculating basic earnings per share

40,770,627,643

37,191,800,114

Shares used in calculating diluted earnings per share

45,020,233,609

41,571,630,732



Reconciliations of Non-GAAP Financial Measures to 
   Comparable GAAP Measures(1)



 Non-GAAP operating expenses

(121,365)

(110,901)

Note:

(1) Non-GAAP operating expenses are defined as operating expenses adjusted to exclude the effect of employee bonus accrual, government funding and gain from the disposal of living quarters. SMIC reviews non-GAAP operating expenses together with operating expenses to understand, manage and evaluate its business and make financial and operational decisions. The Group also believes it is useful supplemental information for investors and analysts to assess its operating performance. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact our net profit for the period. In addition, because non-GAAP financial measures are not calculated in the same manner by all companies, they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider the non-GAAP operating expenses in isolation from or as an alternative to operating expenses prepared in accordance with IFRS.

The following table sets forth the reconciliation of the non-GAAP operating expenses to its most directly comparable financial measure presented in accordance with IFRS, for the periods indicated.

For the three months ended

September 30, 2015

June 30, 2015

September 30, 2014

(Unaudited)

(Unaudited)

(Unaudited)

Operating expenses

(108,125)

(115,728)

(94,122)

Employee bonus accrual

13,619

16,035

7,336

Government funding

(9,836)

(11,208)

(6,608)

Gain from the disposal of living quarters

(17,023)

-

(4,872)

Non-GAAP operating expenses

(121,365)

(110,901)

(98,266)


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In US$ thousands)

As of

September 30, 2015

June 30, 2015

(Unaudited)

(Unaudited)

ASSETS



Non-current assets



Property, plant and equipment

3,289,217

3,252,963

Prepaid land use right

91,647

143,220

Intangible assets

232,415

202,488

Investments in associates

161,605

160,744

Investments in joint ventures

16,908

14,594

Deferred tax assets

44,908

44,701

Derivative financial instrument

25,455

-

Other assets

28,109

12,957

Total non-current assets

3,890,264

3,831,667

Current assets



Inventories

398,987

365,332

Prepayment and prepaid operating expenses

47,518

37,507

Trade and other receivables

466,130

489,675

Other financial assets

462,280

568,886

Restricted cash

88,685

105,791

Cash and cash equivalent

741,576

766,165

2,205,176

2,333,356

Assets classified as held-for-sale

111,374

-

Total current assets

2,316,550

2,333,356

TOTAL ASSETS

6,206,814

6,165,023



EQUITY AND LIABILITIES



Capital and reserves



Ordinary shares, $0.0004 par value, 50,000,000,000 shares authorized,
41,079,582,648 and 40,750,102,963 shares issued and outstanding at
September 30, 2015 and June 30, 2015, respectively

16,432

16,300

Share premium

4,819,921

4,792,011

Reserves

96,027

96,168

Accumulated deficit

(1,326,083)

(1,408,709)

Equity attributable to owners of the Company

3,606,297

3,495,770

Non-controlling interests

336,601

350,254

Total equity

3,942,898

3,846,024

Non-current liabilities



Borrowings

108,557

85,484

Convertible bonds

389,268

385,947

Bonds payable

492,790

492,383

Deferred tax liabilities

2,048

1,383

Deferred government funding

189,706

173,291

Other liabilities

22,359

2,080

Total non-current liabilities

1,204,728

1,140,568

Current liabilities



Trade and other payables

786,961

863,210

Borrowings

57,499

119,727

Deferred government funding

67,190

62,368

Accrued liabilities

146,844

132,714

Current tax liabilities

694

412

Total current liabilities

1,059,188

1,178,431

Total liabilities

2,263,916

2,318,999

TOTAL EQUITY AND LIABILITIES

6,206,814

6,165,023


Semiconductor Manufacturing International Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US$ thousands)

For the three months ended

September 30, 2015

June 30, 2015

(Unaudited)

(Unaudited)

Cash flow from operating activities



Profit for the period

68,974

71,696

Depreciation and amortization

130,460

124,911

Share of loss of investment using equity method

5,392

149

Changes in working capital and others

(24,654)

(42,179)

Net cash from operating activities

180,172

154,577



Cash flow from investing activities:



Payments for property, plant and equipment

(289,049)

(235,515)

Payments for intangible assets

(10,088)

(6,633)

Payments for land use rights

-

(9,265)

Net proceeds after netting off land appreciation tax from disposal of
    property, plant and equipment and assets classified as held for sale

10,351

41,656

Changes in restricted cash relating to investing activities

28,246

122,557

Payments to acquire financial assets

(545,714)

(551,419)

Proceeds on sale of financial assets

642,266

575,380

Net cash outflow from deconsolidation of subsidiaries

(49)

(248)

Payment to acquire long-term investment

(23,883)

(106,885)

Net cash used in investing activities

(187,920)

(170,372)



Cash flow from financing activities:



Proceeds from borrowings

26,904

79,256

Repayment of borrowings

(63,658)

(105,907)

Proceeds from issuance of ordinary shares

27,522

399,460

Proceeds from exercise of employee stock options

324

6,614

Net cash (used in) from financing activities

(8,908)

379,423



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

(7,933)

159



Net (decrease) increase in cash and cash equivalent

(24,589)

363,787

Cash and cash equivalent, beginning of period

766,165

402,378



Cash and cash equivalent, end of period

741,576

766,165

As at the date of this announcement, the directors of the Company are:

Executive Directors
Zhou Zixue (Chairman)
Tzu-Yin Chiu (Chief Executive Officer)
Gao Yonggang (Chief Financial Officer)

Non-executive Directors
Chen Shanzhi (Li Yong Hua as his Alternate)
Zhou Jie
Ren Kai

Independent Non-executive Directors
William Tudor Brown
Sean Maloney
Lip-Bu Tan
Carmen I-Hua Chang

By order of the Board
Semiconductor Manufacturing International Corporation
Dr. Tzu-Yin Chiu
Chief Executive Officer
Executive Director

Shanghai, PRC
November 10, 2015

* For identification purposes only

Contact:

Investor Relations
+86-21-3861-0000 ext. 12804
[email protected]

SOURCE Semiconductor Manufacturing International Corporation