© bdriver Business | August 02, 2017

STMicro with 2Q net revenues of USD 1.92 billion

Chip manufacturer STMicroelectronics reported second quarter net revenues of USD 1.92 billion, gross margin was 38.3 percent and net income was USD 151 million for the second quarter (ended July 1, 2017).
“It was another solid quarter, with both net revenues and gross margin sequentially performing better than seasonality and above the mid-point of our guidance,” commented Carlo Bozotti, STMicroelectronics President and CEO. “On a year-over-year basis, revenue growth came from all product groups and sales channels. In Internet of Things and smartphones, we continue to win with our complete portfolio of microcontrollers, sensors, analog and power management, connectivity and security solutions. In Smart Driving, we continue to capture opportunities both with products developed in our Automotive and Discrete Group, as well as from the rest of our organization which fit the needs of our automotive customers, such as sensors and general purpose analog.

“On top of our sales initiatives, during the quarter we improved our profitability thanks to our operating leverage, better product mix and manufacturing efficiencies driving our operating margin before impairment and restructuring to 9.6% in the second quarter.

“To strengthen our capital structure and further enhance our financial flexibility, in July we raised USD 1.5 billion at an overall zero cost, through a convertible bond offering. Additionally, the combination of the net share settlement option and the on-going repurchase of the underlying shares implies substantially no dilution at conversion to shareholders.”

Second quarter net revenues increased 5.6 percent sequentially, a better than seasonal performance and 60 basis points higher than the midpoint of the company’s guidance. On a sequential basis, both Analog and MEMS Group (AMG) and Automotive and Discrete Group (ADG) performed better than the company average, with AMG’s revenues up 8.9% and ADG’s revenues up 6.6 percent. Microcontrollers and Digital ICs Group (MDG) revenues were up 3.3 percent sequentially led by general purpose microcontrollers which posted a record quarter sales level, offset in part by lower sales of Digital ICs including the businesses undergoing phase-out. Imaging Product Division revenues, reported in Others, decreased temporarily reflecting, as anticipated, the timing of new programs ramping.

On a year-over-year basis, second quarter net revenues increased by 12.9 percent on growth across all product groups and strong traction with new products. Analog and MEMS Group (AMG) second quarter revenues grew 28.3 percent year-over-year while Microcontrollers and Digital ICs Group (MDG) revenues increased 10.0 percent on double-digit growth for general purpose microcontrollers offset in part by lower sales of businesses undergoing phase-out. Automotive and Discrete Group (ADG) second quarter revenues increased 4.7 percent compared to the year-ago quarter. Automotive industry growth was also reflected in the results of the company’s other businesses. Imaging Product Division second quarter revenues increased significantly year-over-year thanks to ST’s Time-of-Flight technology.

By region of shipment, revenues on a sequential basis increased 8.6 percent in Asia Pacific and 4.1 percent in EMEA, while decreasing 3.7 percent in the Americas. On a year-over-year basis, Asia Pacific revenues were up 21.4 percent, EMEA revenues increased 7.5 percent, while decreasing 7.2 percent in the Americas.

Second quarter gross profit was USD 736 million and gross margin was 38.3 percent, 20 basis points above the midpoint of the Company’s guidance. On a sequential basis, gross margin increased 70 basis points, reflecting both the Company’s product and profitability initiatives. Gross margin increased 440 basis points year-over-year, mainly due to significant manufacturing efficiencies and improved fab loading.

Combined R&D and SG&A expenses in the second quarter were USD 567 million, similar to USD 568 million and USD 565 million in the prior and year-ago quarter, respectively. Second quarter other income and expenses, net, registered income of USD 15 million compared to USD 17 million and USD 28 million in the prior and year-ago quarter, respectively. Operating income of USD 178 million in the second quarter increased by USD 49 million and USD 150 million compared to the prior and year-ago quarter, respectively.

Second quarter operating income before impairment and restructuring charges was USD 184 million, equivalent to 9.6 percent of net revenues and expanded gross margin, increasing from USD 134 million, or 7.4 percent of net revenues in the previous quarter mainly due to higher revenues. On a year-over-year basis, operating income before impairment and restructuring charges improved by USD 144 million reflecting higher revenues, improved product mix, manufacturing efficiencies and better fab loading.

Second quarter net income was USD 151 million, compared to a net income of USD 108 million in the prior quarter. On a year-over-year basis, net income improved by USD 128 million, from net income of USD 23 million in the year-ago quarter.

Third Quarter 2017 Business Outlook

Mr. Bozotti commented, “Based on current booking activity and visibility on our anticipated key new program, we expect third quarter revenues to increase about 9.0 percent on a sequential basis, representing year-over-year growth of about 16.6 percent at the mid-point of our guidance range. We anticipate another quarter of margin expansion with third quarter gross margin of about 39.0 percent at the mid-point, leading to strong year-over-year improvement in operating and net income. Overall, we believe we are very well positioned to reach the short-term financial targets we outlined for the second half of 2017 at our Capital Markets Day held in May.”

The company expects third quarter 2017 revenues to increase about 9.0 percent on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the third quarter is expected to be about 39.0 percent plus or minus 2.0 percentage points.
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