CSMF.SI closed @7.250 +0.500 +7.41% 19,136,000
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Chartered Semicon Posts $71.6 Mln in 3rd-Qtr Profit
10/19/00 2:52:00 AM
Source: Bloomberg News
Singapore, Oct. 19 (Bloomberg) -- Chartered Semiconductor
Manufacturing Ltd., the No. 3 maker of chips to other companies'
designs, said it posted a profit for a fourth straight quarter on
more orders from customers such as Lucent Technologies Inc.
Chartered reported a better-than-expected third-quarter
profit of $71.6 million, or 52 cents an American depositary
receipt or block of 10 shares, from a loss of $6.2 million, or 6
cents a year ago. That's better than the average of $61.5 million
based on a Bloomberg poll of six analysts. The forecasts ranged
from $59 million to $64.7 million.
''Overall, it's a good set of results: they had better
margins with lower start up costs and the average selling prices
were up,'' said Pearly Yap, an analyst at BNP Prime Peregrine
Ltd., who rates the stock a ''market performer.''
The results put the Singapore company on track for its first
annual profit in four years. That should also help Chartered
convince investors it's getting enough contracts even as analysts
are predicting slower growth for semiconductors. The lower
forecasts for chip demand also come at a time when it's building a
$2.1 billion plant to double capacity by end 2001.
Chartered's shares rose 50 cents, or 7.4 percent, to S$7.25,
its biggest one-day gain in nearly five months.
''We see continued strength in the markets we serve and we
still see healthy growth rates,'' said Larry James, corporate
officer of investor relations. That, he said, was the feedback the
company got after Chief Executive Barry Waite visited eight of the
10 biggest customers in the past six weeks.
Next year, he expects sales to rise 40 percent, adding that
analysts' earnings estimates of $2.20 to $2.35 for each depositary
receipt is ''consistent with the markets we see and with our
operational plans.''
In the fourth quarter, Chartered expects sales to see ''mid
to high single-digit growth'' from the recent quarter. Earnings,
however, will be ''flat'' because of the start up costs for a $1
billion joint venture plant with Lucent which has been completed
and the new $2.1 billion factory it's building. The quarter's
results were also boosted by interest income from $1 billion cash
holding, which will be used for its new plant.
Capacity
Having most of its factories and equipment running at full
production capacity also means it's harder to increase sales. The
company's third-quarter sales rose 13 percent from the second.
''We will not be having double digit growth sequentially,''
Chia Song Hwee, Chartered's chief financial officer, said on a
analyst conference call. Most of the plants ''have approached full
capacity.''
During the quarter, sales rose by two thirds to $305.6
million from $183.3 million. The company's key customers such as
Lucent, the No. 1 phone equipment maker, and Ericsson AB -- the
biggest builder of cellular phone networks -- are buying more
chips for their equipment, analysts said.
The Lucent joint venture plant, which is in Singapore, has
helped Chartered boost chip output. Chartered's share of earnings
from the venture was $5 million in the quarter from a loss of $6.6
million last year.
Chartered, which competes with Taiwan Semiconductor
Manufacturing Co. and United Microelectronics Corp. in Taiwan, the
two biggest makers of chips on contract, said it set aside $11.6
million to improve its chip-making technology.
''This has helped them bring up their technology faster but
they're still behind the curve,'' Yap said.
Average Prices
Chartered's average selling price for wafers rose to $1,242
each from $1,200 in the second quarter. That's better than the
estimate by the company three months ago, when it expected prices
to rise to $1,212 with a mix of more complex chips.
''Going forward, pricing could be stronger -- they are
accelerating their technology process roadmap, so it gives you a
sense there's a lot of potential on the average selling price
front,'' said Lucas Ward, an analyst at Chase H&Q in San
Francisco, who rates Chartered a ''strong buy.''
In the fourth quarter, it expects prices to rise another one
to two percent from the third quarter. It also expects full-year
prices to climb by 21 percent to 22 percent from last year's
average of $999.
Next year, it expects a 5 percent to 10 percent gain in
prices, Chartered's James said. By comparison, Taiwan
Semiconductor, or TSMC, charged customers an average of $1,700 in
the third quarter. That price is, however, expected to fall in the
fourth quarter by an unspecified amount.
For Chartered, the higher price also comes with stronger
demand for its chips. Chartered's wafer shipments rose 39 percent
to 246,000 from 176,800 in the three months. Wafers are cut into
chips and used as memory in equipment from personal computers to
cellular phones.
Production of chips for communications companies made up most
begin to expand into that area.
''Even though Chartered has the biggest pie now, TSMC may eat
into their pie soon,'' said Anthony Leong, an analyst at
Millennium Securities Research Pte. in Singapore, who rates the
stock a ''trading sell.'' ''If TSMC strays into the communications
sector, they may get some Chartered's customers.''
Chartered's James said he isn't too concern because
communications customers tend to be more ''conservative'' and are
more inclined to build longer-term relationships.
''They'll get some of the market but we really feel good
about our position,'' he said.
Some investors also worry that the company's outlook for the
next year could be hurt as customers such as Lucent and other
chipmakers may cut orders. Lucent last week lowered its profit
forecast for the next fiscal year.
Market researcher Dataquest Inc. said earlier this month it
expects semiconductor sales to jump 37 percent this year to $231.6
billion, with a slower 28 percent expansion next year and 14
percent growth in 2002.
Efficiency
Chartered's capacity utilization fell to 103 percent, from
107 percent in the second quarter. Utilization refers to how
efficiently manufacturers use their production equipment, and
takes into account unexpected power cuts and other precautionary
measures.
Chartered's numbers mean if its machines can make 100,000
wafers, the company is producing 103,000 in the quarter by
minimizing power cuts, daily inspection time of machines and other
factors that may slow production.
The U.S. remains Chartered's biggest market, making up 58
percent of sales in the year-ended September from 59 percent for
the year-ended June. Europe accounted for a quarter, or little
changed from the year-ended June.
Concerns about slower growth in the industry as well as
weaker demand in the U.S. and European markets for technology
products have pushed Chartered's shares down 42 percent in the
past month. During the same period, the Bloomberg Asia Pacific
Semiconductors Index had declined 33 percent.
Chartered also said that last month it took a $820 million
six-year loan from a group of banks led by ABN Amro Holding NV,
the largest Dutch bank, to finance a $1 billion chip plant in
Singapore with Hewlett-Packard Co., the No. 2 computer maker.
The interest on the loan is about 7.3 percent to 7.6 percent,
calculated as 0.6 to 0.85 percentage points above the London
interbank offered rate. Libor is what banks in London are willing
to lend a specified currency to other banks for a set time period.
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TSMC Q3 net beats forecasts, says outlook good
(UPDATE: Adds more details from company news conference, foreign fund manager's comments, writes through)
By Alice Hung
TAIPEI, Oct 19 (Reuters) - The world's largest maker of made-to-order computer chips, Taiwan Semiconductor Manufacturing Co (NYSE:TSM - news), beat market forecasts with record third quarter profits on Thursday but was still forced to allay fears about its outlook for next year.
The chipmaker, in a statement released after the stock market closed, said third quarter profit surged 226.8 percent to T$20.058 billion (US$626.8 million) from the same period a year ago as demand continued to outstrip supply.
It reported earnings per share (EPS) of T$1.74, well above a Reuters poll of five analysts which forecast T$1.48. In the first nine months of 2000, EPS was T$3.86.
TSMC's senior vice president and chief financial officer Harvey Chang said he was optimistic the firm's performance would only get better, shrugging off market concerns that the hi-tech sector was slowing.
``Our outlook in 2001 has shown no signs of regressing,'' he told a briefing for institutional investors. ``Not a single customer has told us they want to decrease their wafer bookings for 2001.''
``Q4 this year will be better than Q3. And Q1 next year will be better than Q4,'' he said, adding that the company's utilisation rate would be over 100 percent.
Analysts, however, remained concerned about the company's outlook.
``What worries us most is not how well it does in the third quarter but how it will perform next year,'' said Roger Hu, assistant vice president of Masterlink Investment.
``With PC demand slowing, it will be difficult for TSMC to do that well next year,'' Hu said.
SHARES SLUMP
Before the results were released, TSMC's shares fell by their daily seven percent limit on the local exchange on concerns over a global technology slowdown. The stock ended down T$6.00 at T$81.50 and was the most actively traded with turnover of 57.20 million shares.
TSMC's share price has fallen 52 percent from this year's high of T$171 in mid-February, though that was before it was diluted by a T$2.80-per-share dividend in the form of a bonus issue.
Foreign fund managers stressed they still liked TSMC but said they had little choice but to join the selling if investors unnerved by sliding world technology markets made redemptions.
``For a lot of the companies like TSMC, it's not wise to sell it now, because we have not actually seen earnings slow down. The capacity of those companies are running at 100 percent,'' said Agnes Chow, investment manager at Investec Asset Management in Hong Kong. Investec manages US$500 million in Hong Kong.
``At least for now these companies are trading at historical low valuations, lower than the middle of 1998 which was the worst,'' said Chow, who manages Asia regional ex-Japan funds.
TSMC CONFIDENT IN THE WHOLE INDUSTRY
Chang said TSMC had not slowed its capital expenditures and was confident in the whole industry.
TSMC has already spent US$2.40 billion of its planned capital expenditure of US$3.90 billion for this year.
TSMC's sales and net profit figures in the third quarter were both at record levels despite concerns that demand is weakening in the United States.
Personal computer makers ordered extra parts in the second quarter for an expected ``back to school'' sales boom in the United States, but that boom never materialised, leaving PC makers to digest component stockpiles instead of ordering new parts and worrying analysts.
For the third quarter, computer-related chips accounted for the largest chunk of TSMC's total sales at 35 percent, little changed from 36 percent in the second quarter and 35 percent in the first quarter.
Communication chips came in second with 33 percent.
TSMC said in September it expected net profits to soar 160.60 percent this year to T$62.88 billion for a 2000 EPS of
T$3.24.
TSMC was spared the weak sales suffered by many semiconductor firms in the past quarter.
It broke sales records in July, August and September, reaching a total of T$47.492 billion for the three months. That represented a rise of 141 percent from the same quarter in 1999 |
