Q Financial Results

Transcription

1 Q Financial Results

2 STMicroelectronics Global Presence* Q208 Revenues = $2.39B 13% North America Carrollton Phoenix Malta Morocco 29% Europe 26% Greater China France (Crolles I & II, Rousset, Tours) Italy (Agrate, Catania) China 21% Asia Pacific 15 main production sites 16 advanced R&D centers 39 design and application centers 78 direct sales offices in 36 countries Listed on NYSE Euronext (New York & Paris), Borsa Italiana Malaysia 7% Emerging Markets** Singapore 5% Japan * Sales by region of destination as % of Q208 sales (Percentages may not equal 100% due to rounding) ** India, Russia, Africa, Latin America, Middle East 2

3 Gaining Market Share ST vs. Total Available Market (TAM) 20% 15% 14.6% 13.2% 10% 8.2% 9.7% 6.1% 5% 0% 2.0% Q208 / Q207 Q208 / Q108 1H08 / 1H07 TAM ST Source: ST, WSTS forecast May

4 Q208 Highlights Revenues grew double-digit in the telecom (wireless), industrial and consumer market segments Growth drivers included a more competitive product line-up and marketing initiatives Gross margin and operating expenses were essentially in-line with expectations ASG posted strong sequential revenue growth and an improved operating margin IMS sales and operating profit grew double-digit sequentially and year-over-year ICs and discrete products grew 20% and 4% year-over-year, respectively ST entered into advanced negotiations to sell its Phoenix fab; significant operational and financial impacts upon completion Repurchased $83M in common stock; paid $81M in dividends 4

5 ST Total Revenues* Q208 Revenues = $2.39B +9.7% vs. Q108; +14.6% vs. Q207 2,800 2,400 US$M 2,000 1,600 1, Q105 Q205 *Revenues excluding flash Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 5

6 Revenues by Market Segment* Q208 Sales: $2.39B 17% 32% Y-o-Y Growth 16% Industrial Segment +20% Telecom +19% Computer +12% Consumer +11% Automotive +7% 18% 17% Automotive Computer Consumer Industrial Telecom * The above chart estimates, within a variance of 5% - 10% in the absolute dollar amount, the relative weighting of each of the Company s target market segments 6

7 Revenues by Product Segment Excluding Flash ASG: +8.4% Q/Q, +15.9% Y-o-Y Strong growth driven by wireless (3G DBB, connectivity) and consumer (PND) IMS: +11.9% Q/Q, +12.8% Y-o-Y Strong growth driven by MEMS, smartcards/mcu & advanced analog 2,500 2,000 US$M 1,500 1, Q105 Q106 Q107 Q108 * Based on mid-point of company guidance Q205 Q206 Q207 Q208 Q305 Q306 Q307 Q308 (est.*) ASG IMS Other Q405 Q406 Q407 7

8 Key Customers & Regions Q208 Results Excluding Flash Strong improvement in all key sales initiatives New Major Key Accounts Japan Sales: +36% sequentially +73% Y-o-Y Sales: +12% sequentially +33% Y-o-Y Mass Market Greater China Sales: +18% sequentially +20% Y-o-Y Sales: +11% sequentially +7% Y-o-Y* *Transnational customer request to change shipment location from Greater China region 8

9 New Products: Wireless Baseband 3G Digital Baseband 3X unit growth expected in 2008 ST continues to be a strategic partner to Ericsson Mobile Platforms (EMP) in technology nodes beyond 90nm Analog Baseband working to develop a future high-volume EMP platform Imaging Moving to higher resolution sensor Design win for 5MP sensor Diversifying customer base Application Processor Ramping in mobile phone and automotive applications Connectivity WLAN handset market share >30% Bluetooth handset market share from standing start to >10% in 2 years ST connectivity products designed-in >150 phones; over half on the market today Ramping up Bluetooth headsets 9

10 MORE New Products Digital Consumer Set-top Box Strong H.264 (SD/HD) sales; transition from MPEG-2 to H.264 will continue throughout 2008 Sampled four different products in 65nm to worldleading set-top-box manufacturers Digital TV Addressing market with STB plug-in solutions (SD/HD) Genesis integration ongoing; integrating image and video processors into ST s product offering Nomadik-based Cartesio: embedded-gps application processor ramping in portable navigation devices for Garmin Computer Peripherals Data Storage 90nm SoC ramping in volume now Printers New design wins in the US for SPEAr processor in printers & networking applications 10

11 MORE New Products MEMS Very well positioned in Gaming, supplying sensors for the Nintendo Wii Serving a differentiated customer base with new design-wins for sensors in game controllers and a consumer application Introduced a Gyroscope angular-rate sensor offering extended voltage range and reduced standby power Industrial Advanced analog: numerous design-wins for logic switches and translators in computer and communications applications Power applications: several design-wins for MOSFETS including high-end desktop PCs Automotive New design-wins in powertrain and car body applications (dynamic vehicle control & ABS platform for a major Japanese manufacturer; smart actuators in body-control modules in China and India) 11

12 Financial Performance As Reported In US$M, except EPS Q207 Q108 Q208 Net Revenues 2,418 2,478 2,391 Gross Margin 34.7% 36.3% 36.8% Operating Expenses / Sales (excluding in-process R&D in Q108) 29.6% 31.9% 31.4% Operating Margin* (before impairment, restructuring & other charges) 5.5% 4.7% 6.7% Net Income EPS Diluted (before impairment, restructuring & other charges) ** Pre-tax restructuring & total impairment charges*** Effective Exchange Rate / $ * Accounting for Assets of Flash Memory Business Held for Sale started in June The pro-forma operating margin excludes impairment, restructuring and inprocess R&D charges of $906M for Q207, $204M for Q108 and $185M for Q208. ** In addition to the charges for impairment, restructuring and in-process R&D, diluted EPS also excludes the other-than-temporary impairment of financial assets, a pre-tax charge, of $29M in Q108 and $39M in Q208. *** Includes charges related to the deconsolidation of FMG of $857M in Q207, $164M in Q108 and $35M in Q

13 Financial Performance Excluding FMG In US$M, except EPS Q207 Q108 Q208 Net Revenues 2,086 2,179 2,391 Gross Margin 37.8% 37.6% 36.8% Operating Expenses / Sales (excluding in-process R&D in Q108) 30.7% 33.3% 31.4% Operating Margin* (before impairment, restructuring & other charges) 7.6% 4.6% 6.7% RONA** 9.1% 5.4% 8.6% * The pro-forma operating margin excludes impairment, restructuring and in-process R&D of $906M for Q207, $204M for Q108 and $185M for Q208. ** RONA is not a US GAAP measure and is considered by company management to be the key financial and economic metric to measure the return on invested capital. RONA as the ratio between the operating income (excluding impairment and restructuring and in-process R&D charges) and 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. 13

14 Year-over-Year Comparison (ex FMG): EBIT before Impairment & Restructuring US$M 71% of incremental revenues (ex FMG) Q Operating Income* -134 Currency Genesis Operating Improvements Q Operating Income* * Q207 and Q208 Operating Profit before impairment & restructuring charges of $906 million and $185 million, respectively 14

15 Currency Impact on Profitability US$M $1.75 $1.50 $1.25 $1.00 $0.75 $300 $250 $200 $150 $100 $50 $ Effective Exchange Rate ($ to Euro) $1.33 $ Q Q Q208 Effective Exchange Rate ($ to Euro) Y-o-Y Currency Impact (Est.) EBIT** +37% 1.55 In US$ M & % Effective $/Euro Net Revenues Gross Profit Gross Margin R&D SG&A Operating Income (Proforma)** Estimated Q208 results at Q207 exchange rate*: $1.33 2, (431) (252) 293 Q208 as reported: $1.55 2, (470) (281) 159 Q207 ex FMG: $1.33 2, (397) (243) 159 The above chart reflects non-gaap best estimates of exchange rate impact on selected financial metrics for ST. Net revenues is based on the assumption that industry prices adjust to equivalent US$ prices with a delay of one quarter. **Pro-forma EBIT excluding impairment & restructuring charges is a metric management believes represent a meaningful comparison of operating performance. The Q207 amount is derived by adding $906 million in impairment & restructuring charges to the reported operating loss (excluding FMG) of $747 million; while the Q208 amount comes from the addition of $185 million in impairment & restructuring to the reported operating loss of $26 million. 15

16 Operating Expense Control (As reported in US$M) Q108 to Q408 recovery targets: Genesis restructuring target about $10M SG&A reduction target about $10M Post Flash realignment target about $10M Steady and focused R&D investment Wireless IC design team, Genesis, etc. Exit 2008 with a combined operating expense target 28% of sales % % 30% 28% 0 26% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108* Q208 R&D SG&A % of Sales *Q108 excludes $21M of one-time in-process R&D related to the acquisition of Genesis 16

17 Product Segments: Revenue & Operating Margin Trends Revenues Operating Margin 2,000 Application Specific Group 6% Application Specific Group 1,500 4% 1, % 0 Q207 Q108 Q208 0% Q207 Q108 Q208 LTM* 1,000 Industrial & Multisegment Sector 20% Industrial & Multisegment Sector 15% % 5% 0 Q207 Q108 Q208 0% Q207 Q108 Q208 LTM* *Last Twelve Months 17

18 Reducing CapEx to Sales Ratio Increasing use of silicon foundry: Approximately 8% of wafers out in Q208 to over 9% in Q308 Partnership and manufacturing joint ventures IBM Alliance Acceleration of US manufacturing restructuring Advanced negotiations to sell Phoenix fab as an ongoing business 45% 40% 35% 30% 25% ST Average = 26% 20% 15% 10% 5% Avg.=16% 07= 11.4% 2008e 10% 0% e CapEx as % of Revenues 18

19 Generating Cash US$M Net Operating Cash Flow* % 8% % % 200 2% 0 0% H08 NOCF* NOCF/Sales (%) NOCF* (ex Genesis) *Non US GAAP measure defined as: Net cash from operating activities minus net cash used in investing activities excluding payments for purchase of and proceeds from the sale of marketable securities and short term deposits.

20 Balance Sheet Highlights End of period In US$M 30 June March June 2008 Total Assets 13,432 15,334 15,053 Shareholders Equity 8,915 9,838 9,357 Cash and Cash Equivalents 3,030 3,709 3,584 Net Financial (Debt)/Cash Position 870 1,085 1,118 Inventory Turns 3.7x (Ex FMG) 3.9x 3.5x 3.8x Net Asset Turns

21 Portfolio Management Actions in 2008 Acquisitions ~ $200M sales Accretive 2009 Divestitures Wireless Assets FY07 Sales ~ $1.5B FY07 EBIT ~ $100M + Synergies Consolidated ST FY07 Sales ~ $1.3B Negative EBIT in

22 Outlook Q308 revenues to increase sequentially in the range between -1% and +6% Q308 gross margin expected to be equal to 36.8% +/- 1 percentage point 2008 capex to sales ratio at or below 10% Q308 outlook based on: Expected effective currency rate of about $1.57 = 1 ST as currently configured and does not include any impact of the ST-NXP Wireless joint venture, which is expected to close in the 2008 third quarter. 22

23 Forward Looking Statements Some of 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) based on management s current views and assumptions and 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: future developments of the world semiconductor market, in particular the future demand for semiconductor products in the key application markets and from key customers served by our products; the results of actions by our competitors, including new product offerings and our ability to react thereto; curtailments of purchases from key customers or pricing pressures which are highly variable and difficult to predict; the financial impact of obsolete or excess inventories if actual demand differs from our anticipations; the impact of intellectual-property claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions; the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; our ability to close as planned in the third quarter of 2008 the purchase of the wireless business of NXP Semiconductors, which we announced on April 10, 2008, as well as our ability to sign and close an agreement for the sale of our manufacturing facility in Phoenix (AZ) in accordance with the currently envisaged terms; changes in the exchange rates between the US dollar and the Euro, compared to an assumed effective exchange rate of US $1.57 = 1.00 and between the U.S. dollar and the currencies of the other major countries in which we have our operating infrastructure; our ability to manage in an intensely competitive and cyclical industry, where a high percentage of our costs are fixed, incurred in currencies other than US dollars which is our reporting currency and difficult to reduce in the short term; our ability to adequately utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs; our ability to restructure in accordance with our plans if unforeseen events require adjustments or delays in implementation; our ability in an intensively competitive environment to 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; the ability of our suppliers to meet our demands for supplies and materials and to offer competitive pricing; significant differences in the gross margins we achieve compared to expectations, based on changes in revenue levels, product mix and pricing, capacity utilization, variations in inventory valuation, excess or obsolete inventory, manufacturing yields, changes in unit costs, impairments of long-lived assets (including manufacturing, assembly/test and intangible assets), and the timing, execution and associated costs for the announced transfer of manufacturing from facilities designated for closure and associated costs, including start-up costs; changes in the economic, social or political environment, including military conflict and/or terrorist activities, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we, our key customers and our suppliers, operate; 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. 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. Such forward-looking statements can be identified by the use of forward-looking terminology such as believes, may, will, should,, would be or anticipates or similar expressions or the negative thereof or other variations thereof, or by discussions of strategy, plans or intentions. Some of the risk factors we face 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, 2007, as filed with the SEC on March 3, 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 information or forward-looking statements set forth in this release to reflect subsequent events or circumstances. Unfavorable changes in the above or other factors listed under Risk Factors from time to time in our SEC filings, including our Form 20-F, could have a material adverse effect on our results of operations or financial condition 23