Cracking set of results from TSMC. Gross margins up to 49.6% (although there was some capitalisation of costs which will be backed out in 2Q99).
TAIPEI, April 20 (Reuters) - Taiwan Semiconductor Manufacturing Co <2330.TW> posted a widely expected 41 percent annual drop in first-quarter earnings on Tuesday, but said strong orders were keeping its plants far busier than in 1998.
The world's leading maker of made-to-order "foundry" or logic chips said the utilisation rate at its wafer-fabrication units had risen to 88 percent in the first quarter from 67 percent in the fourth quarter.
"As a result of an obvious pick-up in demand, unit sales for the first quarter of 1999 increased substantially in comparison to the fourth quarter," said spokesman Y.C. Huang.
The company gave no forecasts.
Taiwan Semicon, the island's leading blue chip, had reported on April 9 that first-quarter sales had slipped to T$12.501 billion, a 20.6 percent fall from the same 1998 quarter, though this was a 7.5 percent rise from the fourth quarter.
The firm posted its quarterly net profit at T$4.09 billion, a 41 percent decline from the same 1998 quarter -- but a 62 percent rise compared to the fourth quarter.
The net profit figure was unlikely to come as a surprise, coming in at the high end of analysts' expectations that profits would decline 40-45 percent in annual terms.
The profit figure yielded earnings per share of T$0.68 compared with T$1.71 announced a year ago, though the company said it was revising its first-quarter 1998 EPS figure to T$1.15 to reflect a bonus issue conducted in mid-1998.
In stock trading before Taiwan Semiconductor announced its quarterly results, the company's shares gained T$0.5 to close at T$116.5. It is Taiwan Semiconductor's practice to announce results immediately after the close.
"This is no surprise. It's in line with the market's expectations," said George Hou, vice president at Jardine Fleming Taiwan.
At Beyond Asset Management, president Michael On said the results were slightly better than expected and said the rising capacity utilisation rate indicated a strengthening outlook.
"Several analysts were predicting an EPS of T$0.6 but they came in at T$0.68," On said. "With the utilisation rising since March, things will get better quarter by quarter."
Taiwan Semiconductor has said its wafer fabs were running at 90 percent of capacity in March.
Michael On said he expects earnings per share at the end of 1999 to reach T$3.5 -- compared to T$2.54 in 1998.
Barra's The Estimate Directory net profit consensus for 1999 is T$18.5891 billion, or earings per share of T$3.1.
Taiwan Semiconductor, in its statement, attributed the sharp quarter-on-quarter rise in net profits to its efforts to trim losses at two affiliates, Vanguard International Semiconductor Corp <5347.TWO> and unlisted U.S. venture WaferTech.
"Net income for 1999 first quarter increased signficantly by 62 percent in comparison to that of fourth quarter 1998 as a result of a decrease in investment loss due to better operating results from Vanguard and WaferTech," it said.
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