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Components | October 31, 2011

ChipPAC reports decreased net income

ChipPAC reported net income for the 3Q/2011 was $18.0 million compared to net income of $19.2 million in the 2Q/2011 and net income of $24.2 million in the 3Q/2010.
Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the third quarter of 2011 increased by 3.8% to $443.4 million over the prior quarter and increased by 2.6% over the third quarter of 2010, at the high end of our guidance. Our third quarter revenue reflected higher demand in the communications market offset by weakness in the consumer market. Our customers were more cautious as they continued to aggressively manage inventory in view of the uncertain macroeconomic outlook."

Net income for the third quarter of 2011 was $18.0 million or $0.01 of net income per diluted ordinary share compared to net income of $19.2 million or $0.01 of net income per diluted ordinary share in the second quarter of 2011 and net income of $24.2 million or $0.01 of net income per diluted ordinary share in the third quarter of 2010. The net income in the third quarter and first three quarters of 2011 included interest expense of $11.2 million and $33.6 million, respectively, from our offering of $600.0 million Senior Notes due 2015 to fund our capital reduction.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Our third quarter gross margin was 17.0% compared to 17.2% in the second quarter of 2011 and 20.2% in the third quarter of 2010 mainly due to unfavorable product mix and higher material costs. Operating margin for third quarter of 2011 was 8.3% of revenue compared to 8.3% in the second quarter of 2011 and 10.6% in the third quarter of 2010. Our adjusted EBITDA in the third quarter of 2011 was 24.3% of revenue compared to 26.3% in the second quarter of 2011 and 27.0% in the third quarter of 2010. Capital spending in the third quarter of 2011 was $70.3 million or 15.9% of revenue compared to $94.1 million or 22.0% of revenue in the second quarter of 2011 and $56.4 million or 13.1% of revenue in the third quarter of 2010. We ended the third quarter of 2011 with cash, cash equivalents and marketable securities of $212.4 million and debt of $820.2 million compared to $301.7 million and $844.2 million as of the end of fourth quarter of 2010, respectively."

Outlook

Tan Lay Koon commented, "Based on current visibility and current assessment of the ongoing flood situation in Thailand, we expect net revenues in the fourth quarter of 2011 to be single digit decrease from prior quarter, with adjusted EBITDA in the range of 20% to 25% of revenue. We expect capital expenditure in the fourth quarter of 2011 to be approximately $50 million to $60 million. Solely for this guidance purpose, we have assumed that our Thailand Plant operations will continue to be suspended until the beginning of December 2011."

The outlook is subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those disclosed in the outlook statements. These statements are based on our management's beliefs and assumptions, which involve judgments about future trends, events and conditions, all of which are subject to change and many of which are beyond our control. Please refer to our Financial Statements for the three and nine months ended 25 September 2011 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the fourth quarter of 2011. Investors should consider these assumptions and make their own assessment of the future performance of STATS ChipPAC and note that there may not be a direct correlation between the net income of the Company with adjusted EBITDA as a percentage of revenue.
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