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SMIC Reports 2017 Fourth Quarter Results

2018-02-08 18:53
-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").

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)

Basic

$0.05


$0.03


$0.12


Diluted

$0.05


$0.03


$0.11


 

Wafers shipped (in 8" equivalent wafers)

1,124,821


1,076,039


1,096,011


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 
  using equity method

(3,023)

1,181

-

(1,413)

113.9%

  • 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
  expenses

34,371

37,545

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™ Quickly Deliver the First Quantum™-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
accounted for using the equity method(3)


11,755


5,891

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 
  machinery and equipment


(5,913)


(4,972)


9,936

Gain from the disposal of living 
  quarters


(3,268)


(1,074)


(1,246)

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
property, plant and equipment  and assets classified as held for sale(1)


10,182


418,956

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

currencies


15,744


5,013






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

Source: Semiconductor Manufacturing International Corporation

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