UMC Posts Smallest Profit in Three Years, Sees Turnaround
February 08, 2012, 4:23 AM ESTBy Tim Culpan
(Updates with comment from CEO in the fourth paragraph.)
Feb. 8 (Bloomberg) -- United Microelectronics Corp., the world’s second-largest contract maker of chips, posted its smallest profit in almost three years as demand continued to slide and clients cut stockpiles.
Fourth-quarter net income dropped to NT$1.18 billion ($40 million) in the three months ended Dec. 31 from NT$6.4 billion a year earlier, the Hsinchu, Taiwan-based company said in a statement today. The average of 15 analysts’ estimates compiled by Bloomberg was for profit of NT$850 million.
United Microelectronics suffered as demand declined amid a slowing global economy and the European debt crisis. Revenue growth may reach its lowest point this quarter as clients start to increase orders to rebuild inventories.
“We have observed several signs that the industry cycle is reaching the bottom and believe that the multi-quarter inventory correction will end soon,” Chief Executive Officer Sun Shih-wei said at an investors’ conference today.
Unconsolidated sales dropped 22 percent to NT$24.4 billion.
United Microelectronics rose 0.3 percent to NT$15.40 at the close of trading in Taipei before the earnings announcement. The stock has gained 21 percent this year, compared with an 11 percent advance for the benchmark Taiex index.
Shipments this quarter will climb “marginally” from the prior quarter while average price per wafer will decline about 5 percent in U.S. dollar terms, UMC said in a statement today. Factory usage will be in the high 60 percent range, compared with 68 percent in the fourth quarter, it said.
‘Re-Stock Inventory’
Prices will fall as it sells a higher ratio of lower-value chips, with computer and consumer electronics semiconductors being the strongest segments during the period, Sun said.
“We are seeing the semiconductor supply chain start to re- stock inventory, which we think will lead foundry sales to outperform peers in the first quarter,” Ricky Liu, who rates the stock “outperform” at KGI Securities Co. in Taipei, wrote in a Feb. 3 report.
Operating margin, a key measure of profitability which tracks sales less operating costs, will be a low single-digit percentage in the first quarter, compared with 9.6 percent in the fourth quarter, the company said.
UMC has budgeted 2012 capital expenditure of $2 billion after spending $1.6 billion last year, it said.
--Editors: Suresh Seshadri, Frank Longid
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
