Semiconductor Manufacturing International (981) Q4 2011 earnings summary

Executive summary

• FY2011 revenue was $1.32B, down 15.1% YoY; the second half was weak amid cautious industry inventories and economic uncertainty. Q1 rebound and continued Q2 growth were expected.

• Priorities were sustainable profitability, higher fab utilization and efficiency, differentiated specialty products, and a customer-demand-led 45/40 nm ramp.

Financial highlights

• Q4 revenue was $289.6M, down 5.6% QoQ; excluding managed-fab Wuhan Xinxin revenue in both quarters, revenue declined 3.6%.

• Q4 gross margin was -7.4% vs. 1.4% in Q3; excluding the $11.4M one-time Elpida settlement, Q4 gross margin was -3.4%.

• Q4 ordinary-shareholder loss was $165.6M and diluted EPS was approximately -$0.30 per ADS; FY2011 net loss was $274.2M.

• FY2011 gross margin was 7.7%, down from 19.9% in 2010; revenue was $1.32B vs. $1.55B in 2010.

Outlook and guidance

• Q1 2012 revenue guidance was +7% to +9% QoQ; gross margin was expected at 4%–7%, with operating expenses of $96M–$99M.

• Q1 growth drivers included higher Beijing 12-inch shipments in communications and consumer products, power-management demand, and a rebound among U.S. customers.

• 2012 CapEx was planned at $430M, with over 80% for 12-inch equipment; spending was expected to be fairly linear.

• 45/40 nm revenue was targeted to reach 9% of Q4 revenue by Q4 2012; 32/28 nm process readiness was targeted for 2013.

• 2012 capacity growth was expected in the mid-single digits; Shanghai 12-inch 40/45 nm capacity was targeted to rise from ~4,000 to 9,000–10,000 wafers.