Q Financial Results. April 27, 2011

Transcription

1 Q Financial Results April 27, 2011

2 2 Q111 Highlights Net revenues of $2,535 million Up 9.0% year-over-year and down 10.5% sequentially Driven by solid demand in Automotive applications and Analog, MEMS, Microcontrollers and Power Discrete offerings Stronger than anticipated decline at ST-Ericsson due to steeper drop in sales of legacy products and weak demand at a single customer Gross margin of 39.1% Up 140 basis points year-over-year and down 80 basis points sequentially Net earnings of $170 million 19 cents per diluted share, 20 cents clean* 14.3% RONA attributable to ST* Remaining Micron shares sold in Q1 Closed Phoenix Fab Capex of $466M Temporary pick-up designed to support areas of growth in 2011 and beyond * See appendix ST had a solid start to 2011 overall

3 3 Business Segment Overview 50/50 JV with Ericsson Wireless Automotive, Consumer, Computer & Communication Infrastructure ( ACCI ) Industrial and Multisegment Sector ( IMS ) Major Product Lines Home Entertainment & Displays ( HED ) Computer & Communication Infrastructure ( CCI ) Automotive Products Group ( APG ) Analog, MEMS & Microcontrollers ( AMM ) Power Discrete Products ( PDP ) Products Major Customers

4 4 ST Q111 Revenues Q111 Revenues up 9.0% year-over-year to $2,535M Combined ACCI, AMM and PDP up 24% Wireless revenues decreased 34% as sales of ST-Ericsson s legacy products declined more than anticipated while the company is progressing in its portfolio transition and the expansion of its customer base Q211 guidance: to evolve sequentially in the range of about -2% and +5% led by Automotive, Imaging, Analog and Power Discrete Accelerated growth expected in 2H driven by MEMS, Digital Consumer and Microcontrollers US$M 3,000 2,500 2,000 Q guidance range 1,500 1, Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 (e) Actual Guidance

5 5 Top Customers Top 10 OEM Customers FY 2010 (listed alphabetically) Apple Bosch Cisco/Scientific Atlanta Continental HP Nokia Research in Motion Samsung Seagate Sony Ericsson

6 6 Revenues by Regions* Q111 Revenues: $2,535M 9% year-over-year growth led by Greater China & South Asia and the Americas, up 18% and 13% respectively Americas 13% EMEA 25% 45% Greater China & South Asia 5% 12% * By location of order shipment Japan Korea

7 Revenues by Market Segment / Channel* Q111 Revenues: $2,535M Q111 Y-o-Y Performance Distribution 24% 17% Automotive Computer Automotive +34% Computer +24% Industrial & Other +11% 14% Consumer +2% 26% 11% Telecom -20% 8% Distribution +39% Telecom Consumer Industrial & Other * See appendix 7

8 8 Revenues by Product Segment Wireless* Q111 Revenues: $2,535M Computer and Communication Infrastructure (CCI) 15% 41% 25% Power Discrete Products (PDP) * See appendix ** Includes Imaging business 13% 30% Analog, MEMS & Microcontrollers (AMM) 42% Automotive, Consumer, Computer & Communication Infrastructure (ACCI) Automotive (APG) 34% Home Entertainment & Displays (HED)** ST s exposure to the Wireless segment at the earnings level is ~8%

9 9 Q111 Products Highlights Revenue strength of recently launched products MEMS accelerometers and gyroscopes Secure and general-purpose MCUs Automotive applications still strong Automotive +34% y-o-y Significant design win for VIPower devices from a large tier one customer in car-body electronics for its next-generation Body-Control Modules Gaining traction on new products In Digital TV, first shipments to a Japanese customer of the Freeman idtv SoC Design wins for the SPEAr embedded microprocessor family for markets including smart grid, test instruments and solar-energy applications In Secure MCUs, partnering effort with Gemalto on secure solutions for NFC applications

10 Q111 Product Introductions Products introduced this quarter In MEMS, market s smallest three-axis analog gyroscope For high precision gesture and user interfaces Mobility Display Port interface standard Enabling seamless transmission of full HD audio and video from smart mobile devices to TVs Launched and demonstrated at Mobile World Congress inemo Engine, an advanced software solution for accurate motion-sensor data Enabling new applications and features in smartphones, handsets, tablets and gaming devices 10

11 11 ST-Ericsson Q111 Product Highlights Launched the NovaThor family, combining the most advanced application processor (Nova ) with the latest generation of modems (Thor ) Smart mobility & multimedia Samsung selected the Thor M5720 modem to power its Samsung Galaxy S 4G and T-Mobile s Sidekick 4G by Samsung Quanta Computer selected ST-Ericsson to power its LTE tablets using the NovaThor platform Cooperation with Verizon Wireless on Thor 4G LTE

12 12 Financial Performance FY10 In US$M, except EPS Q110 Q410 Q111 10,346 Net Revenues 2,325 2,833 2, % Gross Margin 37.7% 39.9% 39.1% % Operating Income Before Restructuring* Operating Margin Before Restructuring Attributable to ST* % % % 830 Net Income Reported EPS Diluted Adjusted EPS Diluted* ,152 Free Cash Flow* Net Financial Position* , , Effective Exchange Rate /$ * See appendix

13 13 Currency Exposure ~Total Costs (COGS+OpEx) By Currency * Q111 Current Exposure to the Euro COGS: Q111 ~ 38% OpEx: Q111 ~ 54% Fixed Assets: Q111 ~ 60% * 41% $ 52% Quarterly Currency Effect ±1% change ( vs. $) = ±$4M to $5M on gross profit Further ±$4M to $5M on OpEx SEK 2% Other 5% * Euro ( ) includes currencies such GBP, CHF, MAD Morocco ** As of April 26 th 2011 Total EBIT impact is ~ ±$8M to $10M Hedging: % of Euro exposure currently hedged** Period % of Exposure Avg. Rate Q ~55% 1.33 Q ~40% 1.35 Q ~30% 1.35 Q ~15% 1.39

14 14 Operating Margin by Segment ACCI AMM % % Q110 Q410 Q111 13% 0% Q111 $1.05B revenue Up 18% y-o-y 11.0% op. margin Q111 $755M Revenue Up 38% y-o-y 22.0% op. margin Q110 Q410 Q111 13% 0% Wireless PDP Q110 Q410 Q Q111 $384M revenue Down 34% y-o-y -$180M op. result Q111 $333M Revenue Up 18% y-o-y 15.1% op. margin Q110 Q410 Q111 25% 13% 0% 50% minority interest Revenue Operating Margin Operating Income (US$M)

15 15 IMS Businesses Analog, MEMS & Microcontrollers (AMM) IMS Q111 Sales: $1.09B Advanced analog Op Amps / Comparators MEMS Gyroscopes / Accelerometers Microphones Pressure sensors Microcontrollers 32-bit General purpose / secure Memories E-EPROM / EPROM Power Discrete Products (PDP) Discrete Thyristors / Triacs / Rectifiers IPAD Protection Power Transistors MOSFET IGBT Power RF AMM Q111: Revenues: $755M Operating Margin: 22.0% PDP Q111: Revenues: $333M Operating Margin: 15.1%

16 16 Return on Invested Capital Return on Net Assets* (%) 30% RONA RONA attributable to ST* 20% 10% 7.6% 5.1% 11.9% 6.0% 19.0% 20.7% 13.0% 13.9% 14.3% 7.8% 0% -5.3% 4.6% 0.7% -10% -16.1% -13.8% -7.1% -20% -16.2% -16.6% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 * See appendix

17 17 Free Cash Flow* Temporary pick-up in Cap Ex & ST-Ericsson impact Q111 Cap Ex at $466M compared to $179M in Q110, as anticipated US$M Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q * Excluding M&A. See appendix. Q410 and Q111 include net proceeds from Micron shares sales of $319 million and $195 million, respectively.

18 18 Net Financial Position* End of period (US$M) Available Cash (excluding Micron shares held at period end) Restricted Cash and Non-current Marketable Securities** Mar. 27, 2010 Dec. 31, 2010 Apr. 2, ,340 2,783 2, Total Liquidity 2,757 2,922 2,887 Total Financial Debt (2,191) (1,770) (1,749) Net Financial Position 566 1,152 1,138 All remaining Micron shares sold in Q111 Further opportunity with the FINRA award * See appendix ** Includes cash of JV, restricted cash and non-current marketable securities (excluding Micron shares held at period end)

19 19 Q211 Outlook Revenue: evolve sequentially in the range of about -2% and +5% Takes into account ST-Ericsson s anticipated sequential net sales decline Gross Margin: about 38.7% plus or minus 1 percentage point While the impacts of earthquake in Japan have been manageable to date for ST, we remain vigilant and prepared to adjust to and support any shifts in demand or changes to the semiconductor supply-chain in the near term Outlook based on an assumed effective currency exchange rate of approximately $1.37 = 1.00 for the 2011 second quarter and includes the impact of existing hedging contracts. The second quarter will close on July 2, 2011.

20 20 Forward Looking Statements Some the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) that are based on management s current views and assumptions, and are conditioned upon and also involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those in such statements due to, among other factors: Changes in demand in the key application markets and from key customers served by our products, which make it extremely difficult to accurately forecast and plan our future business activities; our ability to utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs during periods of reduced customer demand, as well as our ability to ramp up production efficiently and rapidly to respond to increased customer demand, in an intensely cyclical and competitive industry; the operations of the ST-Ericsson Wireless joint venture, which represents a significant investment and risk for our business and which may lead to significant additional impairment and restructuring charges, in the event ST-Ericsson is unable to successfully compete in a rapidly changing and increasingly competitive market; our ability to compete with products and prices in an intensely competitive industry and the financial impact of obsolete or excess inventories if actual demand differs from our expectations; our ability to maintain or improve our competiveness when a high percentage of our costs are fixed and are incurred in Euros and currencies other than U.S. dollars, especially in light of the increasing volatility in the foreign exchange markets and, more particularly, in the U.S. dollar exchange rate as compared to the Euro and the other major currencies we use for our operations; the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, and our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets; the impact of intellectual property ( IP ) claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions; product warranty or liability claims based on epidemic or delivery failures or recalls by our customers for a product containing one of our parts; our ability in an intensively competitive environment to successfully develop and secure customer acceptance and to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing; availability and costs of raw materials, utilities, third-party manufacturing services, or other supplies required by our operations; and changes in the political, social or economic environment, including as a result of military conflict, social unrest and/or terrorist activities, economic turmoil, as well as natural events such as severe weather, health risks, epidemics, earthquakes, tsunami (in particular, the aftermath of the recent events in Japan), volcano eruptions or other acts of nature in, or affecting, the countries in which we, our key customers or our suppliers, operate and causing unplanned disruptions in our supply chain and reduced or delayed demand from our customers. Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Certain forward-looking statements can be identified by the use of forward-looking terminology, such as believes, expects, may, are expected to, should, would be, seeks or anticipates or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Some of these risk factors are set forth and are discussed in more detail in Item 3. Key Information Risk Factors included in our Annual Report on Form 20-F for the year ended December 31, 2010, as filed with the SEC on March 7, Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release as anticipated, believed or expected. We do not intend, and do not assume any obligation, to update any industry information or forward-looking statements set forth in this release to reflect subsequent events or circumstances.

21 21 Appendix Free cash flow is defined as net cash from operating activities minus net cash used in investing activities, excluding payment for purchases of and proceeds from the sale of marketable securities (both current and non-current), short-term deposits and restricted cash. We believe free cash flow provides useful information for investors and management because it measures our capacity to generate cash from our operating and investing activities to sustain our operating activities. Free cash flow is not a U.S. GAAP measure and does not represent total cash flow since it does not include the cash flows generated by or used in financing activities. In addition, our definition of free cash flow may differ from definitions used by other companies. Net financial position: resources (debt), represents the balance between our total financial resources and our total financial debt. Our total financial resources include cash and cash equivalents, net of bank overdrafts, if any, current and non-current marketable securities excluding Micron shares received in connection with the sales of Numonyx, short-term deposits and non-current restricted cash, and our total financial debt includes short term borrowings, current portion of long-term debt and long-term debt, all as reported in our consolidated balance sheet. We believe our net financial position provides useful information for investors because it gives evidence of our global position either in terms of net indebtedness or net cash position by measuring our capital resources based on cash, cash equivalents and marketable securities and the total level of our financial indebtedness. Net financial position is not a U.S. GAAP measure. Return on Net Assets (RONA) is the ratio of operating income before impairment and restructuring charges divided by average net assets used during the period. ST defines average net assets as average total assets net of total liabilities as reported in our consolidated balance sheet excluding all items related to our financial position such as cash and cash equivalents, marketable securities, short term deposits, bank overdrafts, current portion of long term debt and long term debt. Operating income (loss) before restructuring excludes impairment, restructuring charges and other related closure costs. Operating income before restructuring attributable to ST is calculated as operating income (loss) before restructuring excluding 50% of ST-Ericsson operating income (loss) before restructuring as consolidated by ST. Operating margin before restructuring attributable to ST is calculated as operating income before restructuring attributable to ST divided by reported revenues excluding 50% of ST-Ericsson revenues as consolidated by ST. Return on Net Assets (RONA) attributable to ST is calculated as annualized operating income before restructuring attributable to ST divided by reported net assets excluding 50% of ST-Ericsson net assets as consolidated by ST. Adjusted net earnings and earnings per share (EPS) are used by our management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items. Adjusted earnings excludes impairment, restructuring charges and other related closure costs attributable to ST, the impact of equity investment divestiture and subsequent sale of Micron shares, other-than-temporary impairment (OTTI) charges on financial assets, net of the relevant tax impact. Consolidation of ST-Ericsson: ST-Ericsson, a joint venture owned 50% by ST, began operations on February 3, 2009 and is consolidated into ST s operating results as of that date. ST-Ericsson is led by a development and marketing company and is consolidated by ST. A separate platform design company providing platform designs mostly to the development and marketing company is accounted for by ST using the equity method. Wireless Segment: As of February 3, 2009, Wireless includes the portion of sales and operating results of the 50/50 ST-Ericsson joint venture as consolidated in the Company s revenues and operating results, as well as other items affecting operating results related to the wireless business. Sales recorded by ST-Ericsson and consolidated by ST are included in Telecom and Distribution

22 22 Pre-Tax Items to Adjusted Earnings* OPERATING RESULT NET EARNINGS In US$M Q110 Q410 Q111 U.S. GAAP Net Earnings Impairment & Restructuring (attributable to Parent Company s shareholders)** (Gain)Loss on sale of Micron shares OTTI Estimated Income Tax effect of Adjustment (15) (9) (21) 5 (1) Adjusted Net Earnings* * See appendix ** Total Impairment & Restructuring Charges were $33M in Q110, $32M in Q410, $24M in Q111