SMIC Reports 2017 Fourth Quarter Results
SHANGHAI, Feb. 8, 2018 /PRNewswire/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("SMIC", the "Company" or "our"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended December 31, 2017.
Fourth Quarter 2017 Highlights
-- Revenue was $787.2 million in 4Q17, an increase of 2.3% QoQ from $769.7
million in 3Q17 and a decrease of 3.4% YoY from $814.8 million in 4Q16.
-- Gross profit was $148.5 million in 4Q17, compared to $177.3 million in
3Q17 and $246.0 million in 4Q16.
-- Gross margin was 18.9% in 4Q17, compared to 23.0% in 3Q17 and 30.2% in
4Q16.
First Quarter 2018 Guidance:
The following statements are forward looking statements based on current expectations and involved risks and uncertainties, some of which are set forth under "Safe Harbor Statements" below. The Company expects:
-- Revenue to increase by 7% to 9% QoQ, including the forecast to recognize
the technology licensing revenue estimated at $150 million.
-- Gross margin to range from 25% to 27%.
-- Non-GAAP operating expenses, excluding the effect of employee bonus
accrual, government funding, gain or loss on the disposal of machinery
and equipment and gain from the disposal of living quarters, to range
from $212 million to $218 million.
-- Non-controlling interests of our majority-owned subsidiaries to range
from positive $15 million to positive $17 million (losses to be borne by
non-controlling interests).
Dr. Zhao HaiJun and Dr. Liang Mong Song, SMIC's co-Chief Executive Officers commented, "Looking back at 2017, we increased annual revenue 6.4% YoY, in line with the foundry industry growth rate. We also successfully ramped up our 28nm technology portfolio and have seen more than 10% revenue contribution in the fourth quarter of 2017. Meanwhile, we have continued to enrich our technology offerings to diversify our revenue streams; for example, our auto and industrial revenue doubled in 2017 compared to 2016.
SMIC is in transition to align to customers' fast technology migration in today's dynamic foundry environment, and we have great opportunities in front of us as the largest and most advanced foundry in China. At the same time, the overall industry dynamic has become more volatile with increased competition and pricing pressure. However, we are confident in our team's capability to utilize this time to prepare, develop and recalibrate our technology, to create greater value for the future."
Conference Call / Webcast Announcement
Date: February 9, 2018
Time: 8:30 a.m. Beijing 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 https://edge.media-server.com/m6/p/hnx3rwog.
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 on process nodes from 0.35 micron to 28 nanometer. Headquartered in Shanghai, China, SMIC has an international manufacturing and service base. In China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm fab in Shanghai; a 300mm fab and a 200mm fab in Shenzhen; a 300mm fab and a majority-owned 300mm fab for advanced nodes in Beijing; a 200mm fab in Tianjin and a majority-owned joint-venture 300mm bumping facility in Jiangyin; additionally, in Italy SMIC has a majority-owned 200mm fab. 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 "First Quarter 2018 Guidance", "CapEx Summary" and the statements contained in the quotes of our co-Chief Executive Officers 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 are necessarily estimates reflecting the best judgment of SMIC's senior management and 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 cyclicality and market conditions in the semiconductor industry, intense competition in the semiconductor industry, SMIC's reliance on a small number of customers, timely wafer acceptance by SMIC's customers, timely introduction of new technologies, SMIC's ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity, financial stability in end markets, orders or judgments from pending litigation, intensive intellectual property litigation in semiconductor industry, general economic conditions and fluctuations in currency exchange rates.
In addition to the information contained in this press release, you should also consider the information contained in our other filings with the SEC, including our annual report on Form 20-F filed with the SEC on April 27, 2017, especially in the "Risk Factors" section and such other documents that we 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 our 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 measures of operating results that are adjusted to exclude finance cost, depreciation and amortization, income tax benefits and expenses, the effect of employee bonus accrual, government funding, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. This earnings release also includes first quarter 2018 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. This earnings release includes EBITDA, EBITDA margin and non-GAAP operating expenses which consist of total operating expenses as adjusted to exclude the effect of employee bonus accrual, government funding, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for financial measures prepared in accordance with IFRS, and should be read only in conjunction with the Group's financial measures prepared in accordance with IFRS. The Group's non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.
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 because the effect of these adjustment items excluded for the purpose of non-GAAP operating expenses guidance are subject to some unpredictable conditions that cannot be estimated with reasonable certainty.
Contact:
Investor Relations
+86-21-3861-0000 ext. 12804
ir@smics.com
Summary of Fourth Quarter 2017 Operating Results
Amounts in US$ thousands, except for EPS and operating data
4Q17 3Q17 QoQ 4Q16 YoY
----
Revenue 787,174 769,723 2.3% 814,802 -3.4%
Cost of sales (638,678) (592,426) 7.8% (568,790) 12.3%
-------- -------- --------
Gross profit 148,496 177,297 -16.2% 246,012 -39.6%
Operating expenses (145,323) (154,592) -6.0% (196,994) -26.2%
-------- -------- --------
Profit from operations 3,173 22,705 -86.0% 49,018 -93.5%
Other income (expense),
net (6,086) 7,290 - 473 -
------ ----- ---
(Loss) profit before tax (2,913) 29,995 - 49,491 -
Income tax benefit 1,217 595 104.5% 8,547 -85.8%
----- --- -----
(Loss) profit for the
period (1,696) 30,590 - 58,038 -
Other comprehensive income (loss):
Exchange differences on
translating foreign
operations 8,458 5,686 48.8% (11,250) -
Change in value of
available-for-sale
financial assets (67) (455) -85.3% 617 -
Cash flow hedges (595) 5,620 - (34,912) -98.3%
Actuarial gains and
losses on defined
benefit plans (556) 32 - 1,438 -
Share of other
comprehensive income of
joint ventures
accounted for using
equity method(4) 11,755 5,891 99.5% - -
Total comprehensive
income for the period 17,299 47,364 -63.5% 13,931 24.2%
------ ------ ------
Profit (loss) for the period attributable to:
SMIC 47,718 25,899 84.2% 104,008 -54.1%
Non-controlling
interests (49,414) 4,691 - (45,970) 7.5%
------- ----- -------
(Loss) profit for the
period (1,696) 30,590 - 58,038 -
Gross margin 18.9% 23.0% 30.2%
Earnings per ordinary
share((1)) Basic $0.01 $0.01 $0.02
Diluted $0.01 $0.01 $0.02
Earnings per ADS((2)) $0.05 $0.03 $0.12
Basic
Diluted $0.05 $0.03 $0.11
1,124,821 1,076,039 1,096,011
Wafers shipped (in 8" equivalent
wafers)
Capacity
utilization((3)) 85.8% 83.9% 96.5%
----------------- ---- ---- ----
Note:
(1) Based on weighted average ordinary shares of 4,729million (basic) and 5,159 million (diluted) in 4Q17, 4,651million (basic) and 4,690
million (diluted) in 3Q17, and 4,239 million (basic) and 5,055 million (diluted) in 4Q16. The basic and diluted earnings per share for 4Q16
have been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares of par value of $0.0004 each
consolidated into one consolidated share of par value of $0.004 each, which was accounted for as a reverse stock split effective on December
7, 2016 ("Share Consolidation")
(2) Each ADS represents 5 ordinary shares.
(3) Based on total equivalent wafers out divided by estimated total quarterly capacity.
(4) The comparative figure of 3Q17 has been revised to conform the current period's presentation. Such revision reflected the increase of
US$5.9 million in the "share of other comprehensive income of joint ventures accounted for using equity method" in the 3Q17 Condensed
Consolidated Statements of Profit or Loss and Other Comprehensive Income, and both the "reserves" and "investment in joint ventures" in the
Condensed Consolidated Statements of Financial Position as of September 30, 2017.
-- Revenue increased by 2.3% QoQ from $769.7 million in 3Q17 to $787.2
million in 4Q17 mainly due to an increase of wafer shipment in 4Q17.
-- Cost of sales was $638.7 million in 4Q17, an increase of 7.8% QoQ from
$592.4 million in 3Q17.
-- Gross profit was $148.5 million in 4Q17, a decrease of 16.2% QoQ from
$177.3 million in 3Q17.
-- Gross margin was 18.9% in 4Q17, as compared to 23.0% in 3Q17, primarily
due to a product-mix change in 4Q17.
-- Operating expenses were $145.3 million in 4Q17, a decrease of 6.0% QoQ
from $154.6 million in 3Q17, mainly due to the reasons stated in
Operating Expenses (Income) Analysis below.
-- Other income (expense), net was $6.1 million loss in 4Q17, as compared
to $7.3 million gain in 3Q17. The change was mainly due to the reasons
stated in Other Income (Expense), Net below.
-- Share of other comprehensive income of joint ventures accounted for
using equity method was $11.8 million in 4Q17, compared to $5.9 million
in 3Q17. The amount was recognized as the Group's share of the change in
value of available-for-sale financial assets of the joint ventures,
which are all unlisted companies invested indirectly through China IC
Capital Co., Ltd (a wholly-owned investment fund company of the
Company).
-- Non-controlling Interests were $49.4 million losses in 4Q17, as compared
to $4.7 million gains in 3Q17, mainly due to the allocation of the
annual advanced technology R&D expenses to Semiconductor Manufacturing
North China (Beijing) Corporation (the Company's majority-owned
subsidiary in Beijing) in 4Q17.
Analysis of Revenue
Revenue Analysis
By Application 4Q17 3Q17 4Q16
-------------- ---- ---- ----
Computer 6.6% 5.8% 3.9%
Communications 42.5% 45.3% 44.3%
Consumer 37.6% 37.0% 37.4%
Auto/Industrial 8.8% 8.1% 7.0%
Others 4.5% 3.8% 7.4%
By Service Type 4Q17 3Q17 4Q16
--------------- ---- ---- ----
Wafers 99.7% 98.4% 96.4%
Mask making, testing,
others 0.3% 1.6% 3.6%
By Geography 4Q17 3Q17 4Q16
------------ ---- ---- ----
North America 38.1% 41.9% 33.2%
China((1)) 51.3% 45.7% 47.8%
Eurasia((2)) 10.6% 12.4% 19.0%
Wafer Revenue Analysis
----------------------
By Technology 4Q17 3Q17 4Q16
------------- ---- ---- ----
28 nm 11.3% 8.8% 3.5%
40/45 nm 23.6% 20.6% 23.6%
55/65 nm 16.0% 20.2% 19.8%
90 nm 1.8% 1.4% 1.6%
0.11/0.13 µm 6.3% 8.1% 14.8%
0.15/0.18 µm 37.8% 37.8% 34.2%
0.25/0.35 µm 3.2% 3.1% 2.5%
------------ --- --- ---
Note:
(1) Including Hong Kong, but excluding Taiwan
(2) Excluding China and Hong Kong
Capacity*
Fab 4Q17 3Q17
Shanghai 200mm Fab 109,000 114,000
Shanghai 300mm Fab 38,250 40,500
Beijing 300mm Fab 103,500 112,500
Tianjin 200mm Fab 50,000 47,000
Shenzhen 200mm Fab 30,000 32,075
Shenzhen 300mm Fab 6,750 -
Majority-Owned
Beijing 300mm Fab 65,250 61,875
Majority-Owned
Avezzano 200mm Fab 40,000 40,000
------------------- ------ ------
Total monthly wafer
fabrication
capacity 442,750 447,950
------------------- ------- -------
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 decreased to 442,750 8-inch equivalent wafers
in 4Q17 from 447,950 8-inch equivalent wafers in 3Q17,
primarily because of a product-mix change in 4Q17.
Shipment and Utilization
8" equivalent
wafers 4Q17 3Q17 QoQ 4Q16 YoY
Wafer
shipments 1,124,821 1,076,039 4.5% 1,096,011 2.6%
Utilization
rate((1)) 85.8% 83.9% - 96.5% -
----------- ---- ---- --- ---- ---
Note:
(1) Based on total equivalent wafers out divided by estimated total quarterly capacity.
Detailed Financial Analysis
Gross Profit Analysis
Amounts in US$
thousands 4Q17 3Q17 QoQ 4Q16 YoY
Cost of sales 638,678 592,426 7.8% 568,790 12.3%
Depreciation 210,385 178,302 18.0% 159,778 31.7%
Other manufacturing
costs 427,262 413,089 3.4% 407,870 4.8%
Share-based
compensation 1,031 1,035 -0.4% 1,142 -9.7%
Gross profit 148,496 177,297 -16.2% 246,012 -39.6%
Gross margin 18.9% 23.0% - 30.2% -
------------ ---- ---- --- ---- ---
-- Cost of sales was $638.7 million in 4Q17, an increase of 7.8% QoQ from
$592.4 million in 3Q17 mainly due to higher wafer shipments and a
product-mix change in 4Q17.
-- Depreciation within the cost of sales increased by 18.0% to $210.4
million in 4Q17, compared to $178.3 million in 3Q17.
-- Other manufacturing costs within the cost of sales increased by 3.4% to
$427.3 million in 4Q17, compared to $413.1 million in 3Q17.
-- Gross profit was $148.5 million in 4Q17, a decrease of 16.2% QoQ from
$177.3 million in 3Q17.
-- Gross margin was 18.9% in 4Q17, as compared to 23.0% in 3Q17, primarily
due to a product-mix change in 4Q17.
Operating Expenses (Income) Analysis
Amounts
in US$
thousands 4Q17 3Q17 QoQ 4Q16 YoY
Operating
expenses 145,323 154,592 -6.0% 196,994 -26.2%
Research
and
development,
net 101,300 106,848 -5.2% 118,325 -14.4%
General
and
administrative 58,201 46,104 26.2% 60,934 -4.5%
Selling
and
marketing 6,393 9,587 -33.3% 9,087 -29.6%
Other
operating
(income)
loss (20,571) (7,947) 158.9% 8,648 -
---------- ------- ------ ----- ----- ---
-- R&D expenses decreased by $5.5 million QoQ to $101.3 million in 4Q17,
compared to $106.8 million in 3Q17. Excluding the funding of R&D
contracts from the government, R&D expenses increased by $4.1 million
QoQ to $135.1 million in 4Q17. The change was mainly due to higher level
of R&D activities in 4Q17. Funding of R&D contracts from the government
was $33.8 million in 4Q17, compared to $24.2 million in 3Q17.
-- General and administrative expenses increased by 26.2% to $58.2 million
in 4Q17, compared to $46.1 million in 3Q17. The change was mainly due to
an increase in the government tax surcharges, accrued employee bonus and
the patent expenses in 4Q17.
-- The increase in other operating (income) loss was mainly due to the
government funding received in 4Q17.
Other Income (Expense), Net
Amounts
in
US$
thousands 4Q17 3Q17 QoQ 4Q16 YoY
Other
income
(expense),
net (6,086) 7,290 - 473 -
Interest
income 8,297 6,545 26.8% 4,674 77.5%
Finance
costs (9,420) 12,906 - (9,253) 1.8%
Foreign
exchange
gains
or
losses 9,192 (11,685) - 481 1811.0%
Other
gains
or
losses,
net (11,132) (1,657) 571.8% 5,984 -
Share
of
(loss)
profit
of
investment (3,023) 1,181 - (1,413) 113.9%
using
equity
method
-------
-- The change in finance costs was mainly due to the interest subsidies
received from the government in 3Q17 and no interest subsidies in 4Q17.
-- Foreign exchange gains were mainly due to an appreciation of RMB against
USD. Foreign monetary assets mainly consist of cash and cash equivalent
and trade and other receivables in RMB. Foreign monetary liabilities
mainly consist of borrowings, medium-term notes and trade and other
payables in RMB.
-- The change in other gains or losses, net was mainly due to a potential
cash compensation accrued at about $12.5 million in 4Q17 that may be
incurred depending on the profit of Suzhou Changjiang Electric Xinke
Investment Co., Ltd during the three years of 2017, 2018 and 2019. The
potential cash compensation was deemed as the terms of the supplemental
agreement entered by SilTech Semiconductor (Shanghai) Corporation
Limited (an indirectly wholly-owned subsidiary of the Company) and
Jiangsu Changjiang Electronics Technology Co., Ltd on December 9, 2016.
Depreciation and Amortization
Amounts in
US$
thousands 4Q17 3Q17 QoQ 4Q16 YoY
---------- ---- ---- --- ---- ---
Depreciation
and
amortization 251,741 243,196 3.5% 215,586 16.8%
------------ ------- ------- --- ------- ----
Liquidity
Amounts in
US$
thousands 4Q17 3Q17
Cash and
cash
equivalent 1,838,300 1,119,149
Restricted
cash 336,043 339,596
Other
financial
assets -
current
((1)) 683,812 607,258
Trade and
other
receivables 616,308 609,849
Prepayment
and
prepaid
operating 34,371 37,545
expenses
Inventories 622,679 625,283
Assets
classified
as held-
for-sale 37,471 38,942
Total
current
assets 4,168,984 3,377,622
Current tax
liabilities 270 780
Other
financial
liabilities 744 -
Accrued
liabilities 180,912 170,735
Deferred
government
funding 193,158 178,293
Short-term
Borrowings 440,608 437,375
Trade and
other
payables 1,050,460 1,019,153
Other
liabilities 40,627 -
Total
current
liabilities 1,906,779 1,806,336
Cash
Ratio((2)) 1.0x 0.6x
Quick
Ratio((3)) 1.9x 1.5x
Current
Ratio(4) 2.2x 1.9x
--------- ---- ----
Note:
(1) Other financial assets - current mainly contains 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.
Capital Structure
Amounts in US$ thousands 4Q17 3Q17
Cash and cash equivalent 1,838,300 1,119,149
Restricted cash - current 336,043 339,596
Restricted cash - non current 13,438 13,228
Other financial assets - current ((1)) 683,812 607,258
Short-term borrowings 440,608 437,375
Long-term borrowings 1,743,939 1,573,150
Medium-term notes 228,483 224,755
Convertible bonds 403,329 406,357
Corporate bonds 496,689 496,234
Total debt 3,313,048 3,137,871
Net debt((2)) 790,936 1,411,464
Equity 6,721,335 5,996,429
Total debt to equity ratio((3)) 49.3% 52.3%
Net debt to equity ratio(4) 11.8% 23.5%
-------------------------- ---- ----
Note:
(1) Other financial assets - current mainly contains 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.
Cash Flow
Amounts in US$ thousands 4Q17 3Q17
Net cash from operating
activities 323,698 419,540
Net cash used in investing
activities (467,541) (399,015)
Net cash from financing
activities 847,250 217,493
Effect of exchange rate
changes 15,744 5,013
Net change in cash and cash
equivalent 719,151 243,031
--------------------------- ------- -------
Capex Summary
Recent Highlights and Announcements
Capital expenditures were $498.7 million in 4Q17,
compared to $451.1 million in 3Q17.
The 2017
capital expenditures for foundry operations were
$2,458.4 million, of which $948.0 million and
$510.5 million were spent for the expansion of
capacity in our majority-owned Beijing 300mm
fab and in our new Shenzhen 300mm fab
respectively. The 2017 capital expenditures for
non-foundry operations were $29.5 million
primarily for the construction of employees'
living quarters.
The planned 2018 capital
expenditures for foundry operations are
approximately $1.9 billion, of which
approximately $0.5 billion and $0.4 billion are
expected to be spent for the expansion of
capacity in our majority-owned Beijing 300mm
fab and in our new project in Tianjin
respectively. The planned 2018 capital
expenditures for non-foundry operations are
approximately $47.7 million, mainly for the
construction of employees' living quarters.
-- Discloseable Transaction and Connected Transaction Proposed Capital
Contribution and Deemed Disposal of Equity Interest in SMSC (2018-1-30)
-- Notification of Board Meeting (2018-1-18)
-- Notice of Extraordinary General Meeting (2018-1-17)
-- Closure of Register of Members (2018-1-17)
-- Circulars - Notification Letter for Registered Shareholders (2018-1-17)
-- Circulars - Notification Letter and Request Form for Non-registered
Shareholders (2018-1-17)
-- Form of Proxy for Use at the Extraordinary General Meeting to be Held on
8 February 2018 (2018-1-17)
-- Circulars - (1) Discloseable and Continuing Connected Transactions in
Relation to Framework Agreement and (2) Notice of Extraordinary General
Meeting (2018-1-17)
-- Connected Transaction Disposal of Assets (2018-1-2)
-- Non-exempt Connected Transactions - Exercise of Pre-emptive Rights and
Additional Subscriptions by Datang and China IC Fund (2017-12-15)
-- Completion of the Issue of US$65 Million Perpetual Subordinated
Convertible Securities (2017-12-15)
-- SMIC and Efinix(TM) Quickly Deliver the First Quantum(TM)-Accelerated
Silicon Product (2017-12-13)
-- Continuing Connected Transactions and Discloseable Transactions in
Relation to Framework Agreement (2017-12-07)
-- Completion of Placing of New Shares under General Mandate (2017-12-06)
-- (1) Placing of New Shares under General Mandate (2) Proposed Issue of
US$65 Million Perpetual Subordinated Convertible Securities (3)
Pre-emptive Right of Datang (4) Pre-emptive Right of China IC Fund and
(5) Pre-emptive Right of Country Hill (2017-11-29)
-- Potential Non-exempt Connected Transactions - Potential Exercise of
Pre-emptive Rights by Datang and China IC Fund (2017-11-28)
-- SMIC Reports Unaudited Results for the Three Months Ended September 30,
2017 (2017-11-14)
-- Invensas DBI Technology Now Available at SMIC (2017-11-08)
-- Notification of Board Meeting (2017-10-24)
-- List of Directors and Their Roles and Functions (2017-10-16)
-- Appointment of Co-Chief Executive Officer and Executive Directors
(2017-10-16)
-- ACTT's Complete IoT Solution Now Available on SMIC 55nm eFlash Platform
(2017-10-10)
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.
For the three months ended
--------------------------
December 31, 2017 September 30, 2017
(Unaudited) (Unaudited)
---------- ----------
Revenue 787,174 769,723
Cost of sales (638,678) (592,426)
-------- --------
Gross profit 148,496 177,297
------- -------
Research and development expenses, net (101,300) (106,848)
General and administration expenses (58,201) (46,104)
Sales and marketing expenses (6,393) (9,587)
Other operating income (expense), net 20,571 7,947
Operating expenses (145,323) (154,592)
Profit from operations 3,173 22,705
Other income (expense), net (6,086) 7,290
(Loss) profit before tax (2,913) 29,995
Income tax benefit 1,217 595
----- ---
(Loss) profit for the period (1,696) 30,590
====== ======
Other comprehensive income (loss)
Item that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations 8,458 5,686
Change in value of available-for-sale financial assets (67) (455)
Cash flow hedges (595) 5,620
Share of other comprehensive income of joint ventures 11,755 5,891
accounted for using the equity method((3))
Items that will not be reclassified to profit or loss
Actuarial gains and losses on defined benefit plans (556) 32
Total comprehensive income for the period 17,299 47,364
====== ======
Profit (loss) for the period attributable to:
Owners of the Company 47,718 25,899
Non-controlling interests (49,414) 4,691
------- -----
(1,696) 30,590
====== ======
Total comprehensive income (loss) for the period attributable to:
Owners of the Company 66,335 41,903
Non-controlling interests (49,036) 5,461
------- -----
17,299 47,364
====== ======
Earnings per share attributable to Semiconductor Manufacturing
International Corporation ordinary shareholders
Basic $0.01 $0.01
Diluted $0.01 $0.01
Earnings per ADS attributable to Semiconductor Manufacturing
International Corporation ordinary ADS holders
Basic $0.05 $0.03
Diluted $0.05 $0.03
Shares used in calculating basic earnings per share 4,728,773,273 4,651,304,338
Shares used in calculating diluted earnings per share 5,159,200,254 4,690,039,191
============= =============
Reconciliations of Non-GAAP Financial Measures to
Comparable GAAP Measures
Non-GAAP operating expenses((1)) (200,561) (189,097)
======== ========
EBITDA((2)) 258,248 260,285
======= =======
EBITDA margin((2)) 32.8% 33.8%
==== ====
Note:
(1) Non-GAAP operating expenses are defined as operating expenses adjusted to exclude the effect of employee bonus accrual, government funding, gain or loss on the disposal of machinery and equipment 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
--------------------------
December 31, 2017 September 30, 2017 December 31, 2016
(Unaudited) (Unaudited) (Unaudited)
---------- ---------- ----------
Operating expenses (145,323) (154,592) (196,994)
Employee bonus accrued 776 - 28,644
Government funding (46,833) (28,459) (23,635)
(Gain) loss on the disposal of (5,913) (4,972) 9,936
machinery and equipment
Gain from the disposal of living (3,268) (1,074) (1,246)
quarters
Non-GAAP operating expenses (200,561) (189,097) (183,295)
======== ======== ========
(2) EBITDA is defined as profit for the period excluding the impact of the finance cost, depreciation and amortization, and income tax benefit and expense. EBITDA margin is defined as EBITDA divided by revenue. SMIC
uses EBITDA margin as a measure of operating performance; for planning purposes, including the preparation of the Group's annual operating budget; to allocate resources to enhance the financial performance of the
Group's business; to evaluate the effectiveness of the Group's business strategies; and in communications with SMIC's board of directors concerning the Group's financial performance. Although EBITDA is widely used by
investors to measure a company's operating performance without regard to items, such as net finance cost, income tax benefit and expense and depreciation and amortization that can vary substantially from company to
company depending upon their respective financing structures and accounting policies, the book values of their assets, their capital structures and the methods by which their assets were acquired, EBITDA has
limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Group's results of operations as reported under IFRS. Some of these limitations are: it does not
reflect the Group's capital expenditures or future requirements for capital expenditures or other contractual commitments; it does not reflect changes in, or cash requirements for, the Group's working capital needs; it
does not reflect finance cost; it does not reflect cash requirements for income taxes; that, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be
replaced in the future, and these measures do not reflect any cash requirements for these replacements; and that other companies in SMIC's industry may calculate these measures differently than SMIC does, limiting
their usefulness as comparative measures.
The following table sets forth the reconciliation of EBITDA and EBITDA margin to their most directly comparable financial measures presented in accordance with IFRS, for the periods indicated.
For the three months ended
--------------------------
December 31, 2017 September 30, 2017 December 31, 2016
(Unaudited) (Unaudited) (Unaudited)
---------- ---------- ----------
(Loss) profit for the period (1,696) 30,590 58,038
Finance costs 9,420 (12,906) 9,253
Depreciation and amortization 251,741 243,196 215,586
Income tax benefit (1,217) (595) (8,547)
------ ---- ------
EBITDA 258,248 260,285 274,330
======= ======= =======
Profit margin -0.2% 4.0% 7.1%
==== === ===
EBITDA margin 32.8% 33.8% 33.7%
==== ==== ====
(3) The comparative figure of 3Q17 has been revised to conform the current period's presentation. For further details, please refer to Note (4) on Page 5 and the analysis on Page 6.
As of
-----
December 31, 2017 September 30, 2017
(Unaudited) (Unaudited)
---------- ----------
ASSETS
Non-current assets
Property, plant and equipment 6,523,403 6,289,743
Land use right 97,477 98,040
Intangible assets 219,944 228,072
Investments in associates 758,241 740,931
Investments in joint ventures((2)) 31,681 20,907
Deferred tax assets 44,875 42,027
Other financial assets 17,598 10,448
Restricted cash 13,438 13,228
Other assets 42,810 33,359
------ ------
Total non-current assets 7,749,467 7,476,755
--------- ---------
Current assets
Inventories 622,679 625,283
Prepayment and prepaid operating expenses 34,371 37,545
Trade and other receivables 616,308 609,849
Other financial assets 683,812 607,258
Restricted cash 336,043 339,596
Cash and cash equivalent 1,838,300 1,119,149
--------- ---------
4,131,513 3,338,680
Assets classified as held-for-sale 37,471 38,942
------ ------
Total current assets 4,168,984 3,377,622
--------- ---------
TOTAL ASSETS 11,918,451 10,854,377
========== ==========
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares, $0.004 par value, 10,000,000,000 shares authorized,
4,916,106,889 and 4,651,624,748 shares issued and outstanding at
December 31, 2017 and September 30, 2017, respectively((1)) 19,664 18,606
Share premium((1)) 4,827,619 4,475,807
Reserves((2)) 134,669 119,791
Retained earnings 187,008 131,961
------- -------
Equity attributable to owners of the Company 5,168,960 4,746,165
Perpetual subordinated convertible securities((3)) 64,073 -
Non-controlling interests 1,488,302 1,250,264
--------- ---------
Total equity 6,721,335 5,996,429
--------- ---------
Non-current liabilities
Borrowings 1,743,939 1,573,150
Convertible bonds 403,329 406,357
Bonds payable 496,689 496,234
Medium-term notes 228,483 224,755
Deferred tax liabilities 16,412 13,280
Deferred government funding 299,749 291,894
Other financial liabilities 1,919 15,633
Other liabilities(4) 99,817 30,309
Total non-current liabilities 3,290,337 3,051,612
--------- ---------
Current liabilities
Trade and other payables 1,050,460 1,019,153
Borrowings 440,608 437,375
Deferred government funding 193,158 178,293
Accrued liabilities 180,912 170,735
Other financial liabilities 744 -
Current tax liabilities 270 780
Other liabilities(4) 40,627 -
Total current liabilities 1,906,779 1,806,336
--------- ---------
Total liabilities 5,197,116 4,857,948
--------- ---------
TOTAL EQUITY AND LIABILITIES 11,918,451 10,854,377
========== ==========
Note:
(1) On December 6, 2017, pursuant to the terms and conditions of the placing agreement entered by the Company and joint placing agents, the Company allotted and issued
241,418,625 placing shares, representing approximately 4.92% of the issued share capital of the Company as enlarged by the issue of the placing shares, to not less than six
independent placees at the price of HK$10.65 per placing share. The gross proceeds of the placing are approximately HK$2.57 billion (approximately US$329.1 million) and the
net proceeds of the placing (after deduction of fees, commissions and expenses) are approximately HK$2.55 billion (approximately US$326.4 million).
(2) Both reserves and investments in joint ventures included an accumulated amount of $17.6 million in 4Q17 (3Q17: $5.9 million). The amount was recognized as the Group's
share of the change in value of available-for-sale financial assets of the joint ventures, which are all unlisted companies invested indirectly through China IC Capital
Co., Ltd (a wholly-owned investment fund company of the Company).
(3) On December 14, 2017, the Company fulfilled all conditions set out in the placed perpetual subordinated convertible securities (the "PSCS") subscription agreement and
completed the issue of the PSCS in the principal amount of US$65.0 million. The net proceeds (after deduction of fees, commissions and expenses) are approximately US$64.1
million. Assuming full conversion of the PSCS at the initial conversion price of HK$12.78, the PSCS will be convertible into 39,688,654 paced conversion shares.
(4) Other liabilities including the non-current and current portion of long-term payables for the new purchased tangible and intangible assets were classified into the
non-current and current liabilities respectively in 4Q17. Additionally, other liabilities included a potential cash compensation accrued in 4Q17 that may be incurred
depending on the profit of Suzhou Changjiang Electric Xinke Investment Co., Ltd during the three years of 2017, 2018 and 2019. The potential cash compensation was deemed as
the terms of the supplemental agreement entered by SilTech Semiconductor (Shanghai) Corporation Limited (an indirectly wholly-owned subsidiary of the Company) and Jiangsu
Changjiang Electronics Technology Co., Ltd on December 9, 2016.
For the three months ended
--------------------------
December 31, 2017 September 30, 2017
(Unaudited) (Unaudited)
---------- ----------
Cash flow from operating activities
(Loss) profit for the period (1,696) 30,590
Depreciation and amortization 251,741 243,196
Share of loss (gain) of investment using equity method 3,023 (1,181)
Changes in working capital and others 70,630 146,935
------ -------
Net cash from operating activities 323,698 419,540
------- -------
Cash flow from investing activities:
Payments for property, plant and equipment (410,945) (691,170)
Payments for intangible assets (7,410) (7,217)
Net proceeds after netting off land appreciation tax from disposal of 10,182 418,956
property, plant and equipment and assets classified as held for sale((1))
Changes in restricted cash relating to investing activities 26,732 -
Payments to acquire financial assets (86,233) (99,668)
Proceeds on sale of financial assets 14,200 9,871
Payment to acquire long-term investment (15,095) (30,042)
Proceeds from disposal of equity investment 1,028 -
Distributions received from associates - 255
Net cash used in investing activities (467,541) (399,015)
-------- --------
Cash flow from financing activities:
Proceeds from borrowings 389,547 275,554
Repayment of borrowings (240,076) (58,417)
Proceeds from exercise of employee stock options 13,078 356
Proceeds from issuance of perpetual subordinated convertible securities 64,350 -
Proceeds from non-controlling interest - capital contribution 294,000 -
Proceeds from issuance of shares 326,351 -
Net cash from financing activities 847,250 217,493
------- -------
Effects of exchange rate changes on the balance of cash held in foreign 15,744 5,013
currencies
Net increase in cash and cash equivalent 719,151 243,031
Cash and cash equivalent, beginning of period 1,119,149 876,118
Cash and cash equivalent, end of period 1,838,300 1,119,149
========= =========
Note:
(1) In 3Q17, there were seven financing arrangements in total consideration of US$410.8 million entered into by the Group with Xincheng Leasing (Tianjin) Co., Ltd, Xindian Leasing (Tianjin) Co., Ltd and Xinlu Leasing (Tianjin) Co., Ltd. (the three
leasing companies are wholly-owned subsidiaries of Sino IC Leasing Co., Ltd., an associate of the Group) respectively, in the form of a sale and leaseback transaction with a repurchase option. A batch of production equipment of the Group was sold and
leased back under these financing arrangements. As the repurchase prices are set at the expected fair value and the Group is not reasonably certain that it will exercise the repurchase options, the above transactions have been accounted for a disposal
of property, plant and equipment followed with an operating lease.
As at the date of this announcement, the directors of the Company are:
Executive Directors
Zhou Zixue (Chairman)
Zhao HaiJun (Co-Chief Executive Officer)
Liang Mong Song (Co-Chief Executive Officer)
Gao Yonggang (Chief Financial Officer and Joint Company Secretary)
Non-executive Directors
Tzu-Yin Chiu (Vice Chairman)
Chen Shanzhi
Zhou Jie
Ren Kai
Lu Jun
Tong Guohua
Independent Non-executive Directors
William Tudor Brown
Lip-Bu Tan
Carmen I-Hua Chang
Shang-yi Chiang
Jason Jingsheng Cong
By order of the Board
Semiconductor Manufacturing International Corporation
Dr. Gao Yonggang
Executive Director, Chief Financial Officer and Joint Company Secretary
Shanghai, PRC
February 8, 2018
* For identification purposes only
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SOURCE Semiconductor Manufacturing International Corporation
