Semiconductor Manufacturing International Corporation Q1 2010 Earnings Call Transcript

Semiconductor Manufacturing International Corporation Q1 2010 Earnings Call Transcript
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Semiconductor Manufacturing International Corporation (SMI)

Q1 2010 Earnings Call Transcript

May 11, 2010 8:30 am ET

Executives

En-Ling Feng – Director, IR

Gary Tseng – CFO

David Wang – Executive Director, President and CEO

Simon Yang – COO

Chris Chi – Chief Business Officer

Analysts

Randy Abrams – Credit Suisse

Bill Lu – Morgan Stanley

Dan Heyler – Banc of America

Steven Pelayo – HSBC

Presentation

Operator

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Welcome to the Semiconductor Manufacturing International Corporation's first quarter 2010 webcast conference call. Today's conference call is chaired by Dr. David N.K. Wang, Chief Executive Officer and President; Mr. Gary Tseng, Chief Financial Officer; Dr. Simon Yang, Chief Operating Officer; Mr. Chris Chi, Chief Business Officer; Barry Quan, Chief Administrative Officer; and Mr. En-Ling Feng, Director of Investor Relations.

Today's webcast conference call will be simultaneously streamed through the Internet at SMIC’s website at www.smics.com. Please be advised that your dial-ins are in listen-only mode. However, at the conclusion of the management presentation, we will be having a question-and-answer session upon which you will receive further instructions as to how to participate. The earnings press release is available for download at www.smics.com.

Without further ado, I would like to introduce to you Mr. En-Ling Feng, Director of Investor Relations for the cautionary statement.

En-Ling Feng

Good morning and good evening to everyone. Welcome to SMIC’s first quarter 2010 earnings conference call. For today's call, we have our CEO, David Wang; our CFO, Gary Tseng; our COO, Simon Yang; and our CBO, Mr. Chris Chi; and our CAO, Mr. Barry Quan.

As usual, our call will be approximately 60 minutes in length. The earnings press release and the presentation are available for you to download at www.smics.com. Please also be reminded of the Safe Harbor statement which provided as follows. SMIC's statements of its current expectations are forward-looking statements, subject to significant risks and uncertainties. The actual results may differ materially from those contained in such forward-looking statements. Information as to those factors that could cause actual results to vary can be found in SMIC's Form 20-F filed with the United States Securities and Exchange Commission on June 22nd, 2009.

For today's agenda, CFO, Gary Tseng will highlight our first quarter 2010 financial results and the second quarter 2010 guidance. Following that, our President and CEO, Dr. David N.K. Wang will speak on SMIC’s key initiatives and comment on our business. Then we will open the call for Q&A.

I will now turn the call over to Gary.

Gary Tseng

Thank you, En-Ling. Good morning and good evening to everyone. I would now take a few moments to highlight our first quarter 2010 financial results and give our second quarter 2010 guidance. Please note that all currency figures are in U.S. dollars, unless otherwise stated.

In the first quarter of 2010, total revenue exceeded our original guidance and increased by 5.6% to $351.7 million from $333.1 million in fourth quarter 2009. Wafer shipments were 455,000 8-inch equivalent wafers, sequentially up 4.2%. Gross margins further improved to 14.6% in the first quarter of 2010. The increase was due primarily to an overall increase in fab utilization, wafer shipments, and ASP.

Total operating expenses decreased to $79.5 million in first quarter of 2010 from $622.2 million in fourth quarter 2009. This was due primarily to costs associated with the litigation settlement, impairment charges related to the agreement and the provision for long-term receivables. If I take this one-time charge away, the loss will be somewhere around $88.5 million.

The net loss was $181.9 million in the first quarter of 2010 compared to net loss of $617.7 million in the first – in the fourth quarter of 2009. Most of the first quarter 2010 net loss is the $146.6 million charge change in fair value of our commitment to issue shares and warrants under the 2009 litigation settlement. Without this non-operating one-time charge, the net loss will be $35.3 million.

Moving forward, depending on future fluctuation in the share price of SMIC, we may incur additional gain or loss to reflect changes in value and give shares and warrant (inaudible) issue following necessary government regulatory approval. For the fourth quarter, if I take the one-time charge away, the net loss will be somewhere around $44.3 million. Fully diluted EPS was negative $0.41 per ADS in first quarter 2010 compared to negative $1.38 per ADS in the previous quarter.

Looking ahead at our second quarter of 2010, we are guiding revenues to range from 3% to 5% increase quarter-over-quarter. We expect our operating expenses, excluding foreign exchange differences, to ranging from $80 million to $84 million and we plan CapEx to range from $150 million to $200 million.

I will now hand the call to David to outline SMIC's key initiatives and to comment on our business. David?

David Wang

Thank you, Gary. Good morning and good evening to everyone. Thank you for joining us for our earnings webcast.

First, I want to update you on our new management team. Our senior executive team now includes the following officers. Chief Operating Officer, Simon Yang; Chief Business Officer, Chris Chi; Chief Financial Officer, Gary Tseng; and Chief Administrative Officer, Barry Quan. Barry joined us most recently and will be responsible for legal, HR, and other administrative and support functions. This senior executive team is now complete. Each officer is evolving his own team and remains fully accountable for its performance.

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