SMIC Reports 2016 Fourth Quarter Results

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. 14, 2017 /PRNewswire/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("SMIC" or the "Company"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended December 31, 2016.

Fourth Quarter 2016 Highlights

• Revenue was a record high of $814.8 million in 4Q16, an increase of 5.2% QoQ from $774.8 million in 3Q16 and an increase of 33.5% YoY from $610.1 million in 4Q15.
• Gross profit was $246.0 million in 4Q16, compared to $232.1 million in 3Q16 and $173.9 million in 4Q15
• Gross margin was 30.2% in 4Q16, compared to 30.0% in 3Q16 and 28.5% in 4Q15.
• Net profit for the period attributable to SMIC was $104.0 million in 4Q16, as compared to $113.6 million in 3Q16 and $38.6 million in 4Q15.

First Quarter 2017 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 decline by 2% to 4% QoQ.
• Gross margin to range from 25% to 28%.
• Non-GAAP operating expenses, excluding the effect of employee bonus accrual, government funding and gain from the disposal of living quarters, to range from $158 million to $164 million.
• Non-controlling interests of our majority-owned subsidiaries to range from positive $6 million to positive $8 million (losses to be borne by non-controlling interests).

Dr. Tzu-Yin Chiu, SMIC's Chief Executive Officer and Executive Director, commented, "We just finished another record year in 2016 with great performance and significant business accomplishments. We recorded historical high revenue of $2.9 billion and annual revenue growth of 30.3% in 2016, outpacing the foundry industry growth rate by almost 3 times. Operating profit reached an all-time high of $339.2 million, representing 12% operating margin. Net margin was a high of 11% and net profit attributable to SMIC reached a record high of $376.6 million. EBITDA surpassed $1 billion for the first time, and we achieved an improved annual ROE of 9.6% from 7.6% in the prior year. In 2016, we successfully acquired LFoundry S.r.l. ("LFoundry", the Company's majority-owned subsidiary in Avezzano, Italy), thus securing a significant foothold in the auto IC market. I am also proud of the team's quick ramp up of our Beijing JV fab and Shenzhen fab, while maintaining high overall utilization of 97.5% last year. In addition, SMIC exemplified productivity improvement with an 8.9% increase in revenue per headcount in 2016 compared to 2015.

We achieved our 8th consecutive quarter of record high revenue: $814.8 million, representing a growth of 33.5% year over year and 5.2% quarter over quarter. Our Q4 gross margin was 30.2% and annualized ROE maintained double digit at 10.1%.

We experienced great demand from 40nm in 2016, and in 2017 we begin to transition some of our 28/40nm flexible capacity towards 28nm. Other growth drivers in 2017 include a more diverse variety of mature technologies.

We reiterate our target of 20% compounded annual growth from 2016 to 2019, and for 2017, we target revenue growth of 20% year over year, gross margin of mid to high-20's% and EBITDA margin of high-30's%.

We have an advantageous position here in China, and we continue to work hard to seize opportunities for the benefit of our stakeholders."

Conference Call / Webcast Announcement

Date: February 15, 2017
Time: 8:30 a.m. Shanghai time
Dial-in numbers and pass code:

The call will be webcast live with audio at http://www.smics.com/eng/investors/ir_presentations.php or http://edge.media-server.com/m/p/irxikncv.

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 majority-owned 300mm fab for advanced nodes in Beijing; 200mm fabs in Tianjin and Shenzhen; 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 2017 Guidance", "CapEx Summary" and the statements contained in the quotes of our CEO 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 25, 2016, as amended on December 9, 2016, 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 and gain from the disposal of living quarters. This earnings release also includes first quarter 2017 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 margin and non-GAAP operating expenses which consist of total operating expenses as adjusted to exclude the effect of employee bonus accrual, government funding 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.

To see the complete results including financial tables, please click here: http://www.smics.com/eng/investors/ir_filings.php?year=2017