Q4 & FY09 Financial Results. Paris, France

Transcription

1 Q4 & FY09 Financial Results Paris, France January 27, 2010

2 Agenda: ST Q4 & FY09 Financial Results Time Presentation Speaker 11:00 Welcome & Introduction Tait Sorensen Business & Corporate Initiatives Overview Alain Dutheil Financial Results Carlo Ferro Strategic Overview Carlo Bozotti Q&A Panel 13:00 Lunch

3 Business & Corporate Initiatives Overview Alain Dutheil Chief Operating Officer

4 STMicroelectronics A Global Semiconductor Company FY09 revenue by location of order shipment: $8.51B 12% America 28% EMEA 25% Greater China 5% Japan 13 main production sites 30% Asia Pacific 16 advanced R&D units Over 50,000 employees, including ST-Ericsson Listed on NYSE Euronext (New York & Paris) and Milan stock exchanges

5 Reshaping ST s Product Portfolio Wireless Mobile Platforms 5 years R&D grants secured Manufacturing restructuring t ST NXP synergy plan Headcount realignment ST Ericsson cost realignment Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 50%

6 Business Segments 50/50 JV with Ericsson Wireless Automotive, Consumer, Computer and Communication Infrastructure ( ACCI ) Industrial and Multisegment Sector ( IMS ) Major Product Lines Home Computer & Automotive Analog, Microcontrollers, Entertainment Communication Products Power and Memories and & Displays Infrastructure Group MEMS Smartcards Products Market Position * Wireless: #2 Consumer: #2 in Set Top Box Computer: #2 (HDD & Printers) Automotive: #3 Industrial: #1 Major Customers * source: isuppli-2008 rankings, ST and ST-Ericsson

7 Revenues by Product Group FY09 Sales: $8.51B ACCI Group 33% 29% Computer and Communication Infrastructure (CCI) Home Entertainment & Displays (HED) 38% Automotive (APG) IMS Group 28% 72% Analog, Power and MEMS (APM) Micro, non-flash Memory and Smartcard (MMS) * ST s exposure to the Wireless segment at the earnings level is ~18% * see appendix

8 ST Total Revenues FY09 Reported Revenues = $8.51B -13.5% vs. FY08, -10.8% excluding FMG Wireless mergers* partially offsetting impact of weak industry conditions US$M * see appendix

9 Revenues by Market Segment / Channel* FY09 Sales: $8.51B FY09 (ex FMG) 16% 40% 12% 13% 12% 8% Telecom +9% Computer -6% Consumer -25% Automotive -23% Industrial -26% Distribution -23% Automotive Consumer Telecom Computer Industrial & Other Distribution * see appendix

10 Market Share Drivers New Targeted Key Accounts Regional Focus Focused on Key Marketing Initiatives Innovative Products to Drive Market Share Gains New Marketing Programs New Products

11 New Products Driving Sales Performance 2009: 32-bit MCUs (Industrial, Smartcards, Automotive) Set-top-box (cost-optimized 55nm/low power for Cable, Satellite, IPTV) MEMS and Advanced Analog Medical (diagnostic systems, insulin nanopumps, other microfluidics) TD-SCDMA 2010 & beyond: inemo Single Node Solution The Wave of Innovation Continues

12 Product Strategy Maintain world leadership Industrial Power Conversion MEMS Consolidate leading position in: Wireless ICs Digital Consumer ICs Automotive ICs Computer Peripherals ICs Increase presence in Microcontrollers and Advanced Analog, with leadership in selected segments Gain market share on selected standard product families

13 New Products: A Better Future For All Energy savings: new products addressing the issue of volatile and soaring oil prices and contributing to the reduction of global warming: Microelectronic devices in home appliances Electric/hybrid cars Photovoltaic technologies, including control and conversion Healthcare: new solutions improving quality of life for millions of people and addressing the problem of skyrocketing health care costs Lab-on-chip virus diagnostic Insulin pumps, other microfluidics Remote monitoring of patients with chronic disease

14 Q409 New Solutions and Design-Wins Digital it Consumer Adoption of the ARM Cortex -A9 MPCore processor for upcoming set-top-box and digital TV System-on-Chip (SoC) ICs. Launch of the new «Freeman» SoCs. Automotive Major design win for a 32-bit MCU based automatic-transmission platform from a world-leading US car maker In powertrain, design wins from major tier-one OEMs in Europe & Japan. Healthcare Cooperation with Mayo Clinic for the remote monitoring of patients. MEMS Portfolio expanded with next-generation acoustic MEMS microphones. Design wins for motion sensors in various applications. Smartcard & Microcontrollers STM32 family achieved an industry first for MCUs based on ARM Cortex-M processor cores with devices featuring 90nm embedded Flash. World s first security certification at level EAL6+ for a secure MCU that targets security-demanding governmental applications such as passports and identity cards. Power & Advanced Analog New series of highly accurate LED drivers with automatic power saving. Design wins for controller and high-voltage converter chips in LED-backlit LCD TV power supplies.

15 ST-Ericsson Highlights in Q4 Achieved first LTE/HSPA mobility with a multimode device together with Ericsson Smart mobility & multimedia Accelerating innovation with ARM in leading-edge graphics Mobile HSPA broadband to power LG GW990 smartphone Shipped 6.5 million TD chipsets Extended the long-standing collaboration with Nokia into TD area 15

16 Key Corporate Initiatives in 2009 Creation of ST-Ericsson Technology R&D partnership Re-shaping manufacturing Further corporate initiatives

17 ST-Ericsson Born in February 2009 Merging Ericsson Mobile Platforms and ST-NXP Wireless 50/50 joint venture Unique and winning combination of: Advanced modem expertise Multimedia processing capabilities Proforma sales in 2009: ~$2.7B

18 ST-Ericsson: Key Areas of Focus Integration of three different companies New organization and new CEO in place Restructuring plans $250M cost synergies program - now completed $230M savings plan announced in April in progress Additional $115M savings plan - announced in December 2009 Devised new portfolio strategy and started its transition to next generation offering Good progress achieved, more still needs to be done 2010: preparing the company for future, profitable growth

19 Advancing Process R&D Partnerships Leadership and reduced process development costs are enabled through the International Semiconductor Development Alliance (ISDA) ST & Philips Semi (NXP) ST & Philips Semi (NXP) + Motorola (Freescale)

20 Lighter Asset Model Manufacturing Flexibility Through The Market Cycle MARKET DEMAND AVERAGE MARKET GROWTH SUPPLIED THROUGH EXTERNAL FLEXIBILITY ST INTERNAL CAPACITY SUPPLIED THROUGH INTERNAL CAPACITY TIME

21 ST Manufacturing Evolution ST STRATEGY PATH: IDM Flexible IDM Lighter Asset NUMBER OF FRONT END FABS: WAFER PROBING (EWS): From Europe to a major WW center in Singapore ASSEMBLY NUMBER OF PLANTS: In Mediterranean : 3 2 In Asia: 3 (1 China) 4 (2 China) Expand Asia 2005 end 2009 end 2010

22 Manufacturing Locations France (Crolles I & II, Rousset, Tours) Malta China (2 plants) Morocco Phoenix Italy (Final stages of closure) (Agrate, Catania 6 & 8 ) Philippinesi Malaysia Singapore Front-end fabs Back-end fabs

23 Photovoltaic JV: The Deal Equity Injection (Almost All In-kind 70M)* Equity Injection (Cash 70M) Equity Injection (Cash 70M) 1/3 Ownership of JV 1/3 Ownership of JV 1/3 Ownership of JV State Grants + Project Financing (non-recourse) Photovoltaic Joint Venture * The ST contribution into the PV joint venture consists primarily of the contribution in-kind of the M6 factory. Through an option agreement with Numonyx, Numonyx will transfer M6 to ST, against the off-set of a portion of the outstanding 30-year note due to ST, immediately before the closing of the PV JV. Upon closing, ST will then contribute M6 to the PV JV.

24 2009 Summary A very difficult year for ST, the semiconductor industry and the global economy FY09 revenue down about 14% to $8.51B Q409 reflects a positive finish Focused on key targeted actions Creation of the wireless JV completed Navigate the downturn Enhance ST s capital structure Stabilize, then improve the performance of the operating businesses

25 Financial Results Carlo Ferro Chief Financial Officer

26 Q409 Highlights Revenue of $2.58 billion, +13.6% sequentially and +13.5% year-over-year Gross margin of 37.0%, up 570 basis points sequentially Operating income before restructuring charges returned to profitability: 3.5% operating margin IMS and ACCI profitable: average 7.9% operating margin Inventory turns improved to 5.1x Net operating cash flow* of $221 million or 8.6% of sales * see appendix ALL TARGETS OF OUR TRANSITIONAL FINANCIAL MODEL MET IN Q4 2009

27 Continued Progress Through FY09 3, ,500 2, ,500 1, Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 09 Q Operating Income (before restructuring) Net Operating Cash Flow (ex M&A) Revenue

28 FY09 Highlights Revenue of $8.51B, down 13.5% vs. prior year Excluding FMG, down 10.8% Severe losses reflect the economic recession, related restructuring and transition in integrating ST-Ericsson: Gross margin of 30.9% impacted by significant fab under-loading, operating inefficiencies and above normal price pressure R&D expenses increase after wireless consolidation while the synergy plan is on-going g $291M restructuring charges $337M non-cash loss in equity investment of JV $1B cost savings plan launched and now about 75% complete Focus on cash protection translated into strengthening the capital structure: Inventory reduced by $565M in 2009 vs Net financial position improved from $545M debt balance to $420M cash balance

29 Financial Performance In US$M, except EPS Q109 Q209 Q309 Q409 FY09 FY08 Net Revenues 1,660 1,993 2,275 2,583 8,510 9,842 Gross Margin 26.3% 26.1% 31.3% 37.0% 30.9% 36.2% Adjusted Operating Profit* (337) (342) (143) 90 (731) 468 Adjusted Operating Margin* -20.0% 0% -17.2% -6.3% 63% 35% 3.5% -8.6% 86% 48% 4.8% Net Income Reported (541) (318) (201) (70) (1,131) (786) EPS Diluted (0.62) (0.36) (0.23) (0.08) 08) (1.29) (0.88) Adjusted EPS Diluted* (0.31) (0.28) (0.17) 0.04 (0.72) 0.40 Net Operating Cash Flow before (139) M&A** Effective Exchange Rate /$ * see next slide ** see appendix

30 Pre-Tax Items to Adjusted Earnings* OPER RATING RES SULT NE ET EARNING GS In US$M Q109 Q209 Q309 Q409 FY09 FY08 U.S. GAAP Net Earnings (541) (318) (201) (70) (1,131) (786) NXP Wireless Inventory Step-up Genesis in Process R&D NXP Wireless in Process R&D Impairment & Restructuring Charges (attributable to Parent Company s shareholders)** Other-than-Temporary Impairment Numonyx Impairment Estimated Income Tax effect of Adj (40) 13 (12) 3 68 (27) (79) (141) Adjusted Net Earnings* (267) (243) (153) 36 (627) 356 * see appendix ** Total Impairment & Restructuring Charges were $56M in Q109, $86M in Q209, $53M in Q309 and $96M in Q409

31 ST Q409 Revenues Q409 Revenues = $2.58B +13.6% sequential growth driven by all regions; and double-digit gains in all market segments except Telecom +13.5% year-over-year, reflecting growth in all regions except Japan and all market segments except Consumer and Industrial Q revenue expected to decrease between about -7% and -13% sequentially Q guidance range US$M * see appendix * *

32 Gross Margin: Driven by Volume Impact to Manufacturing Rapid and sharp cut in wafer production due to global recession Adjusting to the business downturn Achieved significant inventory reduction in 2009 Major negative impact on ST s gross margin Unsaturation charges impacted FY09 GM by about 400 basis points Volume swing resulted into significant manufacturing inefficiencies Above normal price pressure due to industry conditions Gross Margin Change Analysis Capacity Utilization 8 Equivalent 40% 35% 30% 25% Q408 GM NXP Step Up $ effect Price Mix MP Volume Q409 GM additional Efficiency

33 Lowering the Break-Even Point Actions Completed in 2009 Restructuring Effort Total Annual Savings at Completion Savings Completion Status Manufacturing $170M ~70% Rationalize OpEx $140M 100% Rationalize sites, procurement, etc. $120M 100% ST-NXP Wireless Synergies $250M 100% ST-Ericsson Synergies $230M ~25% Support to Technology R&D $90M 100% TOTAL ANNUAL SAVINGS $1B ~75% Closure of Phoenix Shift assembly towards Asia ~800 headcount reduction by mid ~$300M in 2010 ST-Ericsson additional plan announced in December 2009 ~600 headcount $115M 0% reduction by end 2010

34 Product Segments: Revenue & Operating Margin Trends ACCI IMS Wireless* US$M US$M US$M % % % % % % 0% 0% 0% % % % 0 Q308 Q408 Q309 Q409-20% 0 Q308 Q408 Q309 Q409-20% 0 Q308 Q408 Q309 Q409-20% Turnaround to pre-crisis levels All groups profitable except Imaging Back to double-digit margin On track to recover precrisis level 50% losses are minority interest On-going synergy plan to recover profitability Revenue Operating Margin ** * see appendix ** Segment operating results exclude, among others, unsaturation charges.

35 Assets Management: PPE $451M capex in 2009 vs. plan of $500M Representing 5.3% of total sales Sustainable 5% to about 7% average capex-to-sales ratio over next years CapEx to Sales Ratio Depreciation 45% 2009 Base = 100 at constant Euro/US$ rate 40% 35% 30% 25% 20% 15% 10% 5% 5.3% 0% CapEx as % of Revenues

36 Assets Management: CCC (Cash Conversion Cycle) Inventory further reduced by $24M in Q409, by $565M in 2009 Turns again improved to 5.1x in Q x to 5x sustainable target DSO improved & credit control resulted in no material loss on bad debt despite financiali crisis i Inventory Level (US$B)

37 Net Operating Cash Flow Net Operating Cash Flow (ex M&A)* US$M US$M % % 8% NOCF* NOCF/Sales (%) 8% 6% 4% 2% 0% Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 NOCF* NOCF/Sales (%) 6% 4% 2% 0% -2% -4% -6% -8% -10% * see appendix

38 Strengthening the Financial Position in FY09 L:\ STMicroelectronics Today Focus on Cash Management Dec 2009 / Jan 2010 Repurchased $314.6M of 2016 convertible bonds; 13 million shares to be cancelled FY 2009 $226M Net Operating Cash Flow ex M&A $1.1B net proceeds from M&A $158M dividend distributed $0.5B un-drawn committed credit facilities Feb 2009 Won FINRA award ordering Credit Suisse to pay to ST $406M plus interest Net Operating Cash Flow */Sales in Q409 = 8.6% Strong balance sheet and cash position: $2.91B gross cash and marketable securities $2.39B unrestricted liquidity $2.49B financial debt Next significant debt redemption: $0.73B in February 2011 Flexibility via extended credit facilities Distribution of dividend maintained: ~1.4% dividend yield at current share price Rated: A- (Fitch); BBB+ (S&P); Baa1 (Moody s) * see appendix

39 Net Financial Position* Net Financial Position (US$ and in millions) Dec. 31, 2007 Dec. 31, 2008 Sept. 26, 2009 Dec. 31, 2009 Available Cash 2,869 1,640 2,321 2,394 ST-Ericsson Cash Marketable Securities, Non-current Restricted Cash Total Liquidity 3,488 2,132 2,951 2,912 Total Financial Debt (2,220) (2,677) (2,685) (2,492) Net Financial Position 1,268 (545) * see appendix

40 Recovering from the Crisis In US$M Q308 Q409 Net Revenues 2,696 2,583 Net Revenues proforma ~2.9B Gross Margin* 37.7% 37.0% Opex (SG&A and R&D) Clean Operating Profit % % 2010 Continued growth Recover fab efficiency i Improve product mix Complete restructuring Net Operating Cash Flow** % % Sustainable new Cash Conversion Cycle asset lighter model (Days) * before purchase accounting ** see appendix

41 Q Outlook Revenue: down sequentially between about -7% and -13% In-line with historical trends Equals +35% to +45% y-o-y growth Both IMS and ACCI anticipate better than company average revenue trend Gross Margin: about 37.5% plus or minus 1 percentage point Better than historical sequential evolution Sequential improvement driven by manufacturing loading and efficiency and an improved product mix Outlook based on an assumed effective currency exchange rate of approximately $1.42 = 1.00 for the 2010 first quarter, which reflects an assumed exchange rate of $1.44 = 1.00 combined with the impact of existing hedging contracts averaging a hedged rate of about $1.41 = In addition, the first quarter will close on March 27, 2010.

42 Our Financial Model Transitional model achieved in Q409 despite unfavorable currency environment KEY FINANCIAL TARGETS: ~ All segments at / above break-even Low /Mid-single-digit digit Operating Margin Back to Net Operating Cash Flow* of 6% to 10% of Sales KEY FINANCIAL RESULTS: ~ All segments but wireless above break-even 3.5% Operating Margin, 7.4% ex Wireless Net Operating Cash Flow* of 8.6% of Sales Wireless plan to recover profitability on-going Back to our Financial Model: MID-TERM FINANCIAL TARGETS: 9% to 12% Operating Margin x Net Assets Turn Back to 12% to 18% RONA target Double digit Net Operating Cash Flow* as % of Sales * see appendix

43 Value Proposition A worldwide semiconductor leader positioned to capture higher value from the industry up-cycle The semiconductor industry is steadily recovering ST value-driven by two major strategic transformations Product portfolio Technology and Manufacturing towards an asset lighter company by momentum with products and customers Customers expansion initiatives A wave of new products and supported by a strong capital structure Towards a solid profitability model

44 Strategic Overview Carlo Bozotti Chief Executive Officer

45 Q&A

46 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) 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: Significant changes in demand in the key application markets and from key customers served by our products make it extremely difficult to accurately forecast and plan our future business activities. In particular following a period of significant order cancellations we recently experienced a strong surge in customer demand, which is leading to capacity constraints in certain applications; our ability to utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs in periods of reducedcustomer customer demand as well as to ramp up production efficiently and rapidly to respond to increased customer demand, as well as 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; our ability to successfully integrate the acquisitions we pursue, in particular the successful integration and operation of the ST Ericsson joint venture; we hold significant non marketable equity investments in Numonyx, our joint venture in the flash memory market segment, and in the ST Ericsson joint venture. Additionally, we are a guarantor for certain Numonyx debts. Therefore, further declines in these market segments or the inability of Numonyx and /or ST Ericsson to successfully compete could result in further significant impairment charges, restructuring charges and gains/losses on equity investments; our ability to compete in our industry since a high percentage of our costs are fixed and are incurred in currencies other than U.S. dollars, especially in light of the volatility in the foreign exchange markets and more particularly in the rate of the U.S. Dollar compared to the other major currencies which we use for our operations; our ability to execute our restructuring initiatives in accordance with our plans if unforeseen events require adjustments or delays in implementation ti or require new plans; 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; 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 or earthquakes in the countries in which we, our key customers or our suppliers, operate; the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; and 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. Certain forward looking statements can be identified by the use of forward looking terminology, such as believes, expects, may, are expected to, will, will continue, 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, 2008, as filed with the SEC on May 13, Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described din this release as anticipated, bl 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.

47 Appendix Net operating 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 net operating 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. Net operating 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 net operating 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, current and non-current marketable securities, short-term deposits and restricted cash, and our total financial debt include bank overdrafts, the current portion of long-term debt and long-term debt, all as represented 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 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. Adjusted Net Earnings is a non-gaap measure and is used by the Company s management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items. Non-GAAP earnings excludes impairment, restructuring charges and other related closure costs attributable to Parent Company s shareholders, the impact of purchase accounting (such as in-process R&D costs and inventory stepup charges), other-than-temporary impairment charges on financial assets and impairment related to equity investments, net of the relevant tax impact. Financial Model: Presented at May 2009 Analyst Day Key Information on Consolidation / Deconsolidation: ST completed the deconsolidation of its Flash Memory Group (FMG) segment and took an equity interest in Numonyx on March 30, 2008, which is reported under the equity method of valuation with a one quarter lag in reporting. ST-NXP Wireless, a joint venture initially owned 80% by ST, began operations on August 2, 2008 and was fully consolidated into ST s operating results. On February 1, 2009 and prior to the closing of the merger of ST-NXP Wireless and Ericsson Mobile Platforms to create ST-Ericsson, ST exercised its option to buy out NXP s 20% ownership stake of ST-NXP Wireless. 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