Jean-Marc Chery, STMicroelectronics President & CEO, commented: “In the first quarter of 2020, net revenues increased 7.5% year-over-year, led by higher sales of our Imaging products and growth in Analog and Microcontrollers, partially offset by lower sales in Automotive, Power Discrete and Digital. Operating margin improved to 10.4% and net income increased 7.9% to $192 million."
“Our revenues came in about 5% below the mid-point of our outlook when entering the quarter. The COVID-19 outbreak and subsequent containment measures by governments around the world brought challenges in our manufacturing operations and, especially in the last few days of the quarter, logistics. Our Q1 gross margin of 37.9% was largely in line with our mid-point target", he continued.
Quarterly Financial Summary
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| (US$ m); (U.S. GAAP) | Q1 2020 | Q4 2019 | Q1 2019 | Q/Q | Y/Y
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| Net Revenues | $2,231 | $2,754 | $2,076 | -19.0% | 7.5%
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| Gross Profit | $846 | $1,081 | $818 | -21.8% | 3.5%
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| Operating Income | $231 | $460 | $211 | -49.8% | 9.4%
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| Net Income | $192 | $392 | $178 | -51.0% | 7.9% |
“We exited the first quarter with a stable net financial position of $668 million, available liquidity of $2.7 billion and available credit facilities of $1.1 billion. Our second quarter outlook is taking into account the declining demand environment, especially in Automotive, as well as the ongoing operational and logistics challenges due to current governmental regulations. We anticipate that all of our manufacturing sites will be operational. Some of them will run at reduced capacity, with unsaturation charges currently estimated to be about 400 basis points",
First Quarter 2020 Summary Review
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| Net Revenues By Product Group (US$ m) | Q1 2020 | Q4 2019 | Q1 2019 | Q/Q | Y/Y
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| Automotive and Discrete Group (ADG) | 753 | 924 | 903 | -18.4% | -16.6%
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| Analog, MEMS and Sensors Group (AMS) | 852 | 1,085 | 552 | -21.5% | 54.3%
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| Microcontrollers and Digital ICs Group (MDG) | 623 | 742 | 617 | -16.0% | 1.0%
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| Others | 3 | 3 | 4 | - | - |
Net revenues totalled USD 2.23 billion, representing a year-over-year increase of 7.5%. On a year-over-year basis, the manufacturer recorded higher sales of Imaging, Analog and Microcontrollers, partially offset by lower sales in Automotive, Power Discrete and Digital. Year-over-year sales to OEMs increased 22.5% and to Distribution decreased 21.4%. On a sequential basis, net revenues decreased 19.0%, about 5% below the mid-point of the outlook when entering the quarter. The COVID-19 outbreak and subsequent containment measures by governments around the world brought challenges for the companies manufacturing operations and, especially in the last few days of the quarter, logistics. All product group revenues declined on a sequential basis.
Gross profit totalled USD 846 million, representing a year-over-year increase of 3.5%. Gross margin of 37.9% decreased 150 basis points year-over-year, mainly impacted by price pressure and unsaturation charges, including COVID-19 workforce related restrictions. First quarter gross margin was 10 basis points lower than the mid-point of the company’s guidance.
Operating income increased 9.4% to USD 231 million, compared to USD 211 million in the year-ago quarter. The company’s operating margin increased 20 basis points on a year-over-year basis to 10.4% of net revenues, compared to 10.2% in the 2019 first quarter.
Business Outlook
“We will drive the Company based on a plan for FY20 revenues between $8.8 billion and $9.5 billion. We plan for growth in the second half over the first half to be in the range of $340 million to $1.04 billion. Growth will be driven by already engaged customer programs and the removal of supply constraints. The growth range is linked to the evolution of the market", the CEO continues.
