UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May, 2019

Commission File Number: 001-31994

Semiconductor Manufacturing International Corporation

(Translation of registrant’s name into English)

18 Zhangjiang Road

Pudong New Area, Shanghai 201203

People’s Republic of China

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 Form 20-F     Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

 Yes     No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Semiconductor Manufacturing International Corporation

 

 

 

 

 

Date: May 9, 2019

 

By:

/s/ Dr. Gao Yonggang

 

 

 

Name:

Dr. Gao Yonggang

 

 

 

Title:

Executive Director, Chief Financial Officer and Joint Company Secretary

 


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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

 

 

 

 

 

 

SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION

中 芯 國 際 集 成 電 路 製 造 有 限 公 司*

(Incorporated in the Cayman Islands with limited liability)

(STOCK CODE: 0981)

 

SMIC REPORTS UNAUDITED RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2019

 

 

Revenue was $668.9 million in 1Q19, compared to $787.6 million in 4Q18 and $831.0 million in 1Q18. Excluding the recognition of the technology licensing revenue (the “Licensing Revenue”), revenue was $668.9 million in 1Q19, compared to $787.6 million in 4Q18 and $723.4 million in 1Q18.

 

Gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18 and $220.2 million in 1Q18. Excluding the recognition of the Licensing Revenue, gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18 and $112.6 million in 1Q18.

 

Gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18 and 26.5% in 1Q18. Excluding the recognition of the Licensing Revenue, gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18 and 15.6% in 1Q18.

 

 

Set out below is a copy of the full text of the press release by the Company and its subsidiaries (the “Group”) on May 8, 2019, in relation to its unaudited results for the three months ended March 31, 2019.

 

All currency figures stated in this report are in US Dollars unless stated otherwise.

 

The consolidated financial information is prepared in accordance with International Financial Reporting Standards (“IFRS”) and is presented in accordance with IFRS unless otherwise stated below.

 

Shanghai, China – May 8, 2019. Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) (“SMIC”, the “Company” or “our”), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended March 31, 2019.


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Second Quarter 201 9 Guidance:

 

The following statements are forward looking statements based on current expectations and involved risks and uncertainties, some of which are set forth under “Safe Harbor Statements” below. The Company expects:

 

 

Revenue to increase by 17% to 19% QoQ.

 

Gross margin to range from 18% to 20%.

 

Non-GAAP operating expenses, excluding the effect of employee bonus accrual, government funding, impairment loss of tangible and intangible assets, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters, to range from $269 million to $273 million.

 

Non-controlling interests of our majority-owned subsidiaries to range from positive $34 million to positive $36 million (losses to be borne by non-controlling interests).

 

Dr. Zhao Haijun and Dr. Liang Mong Song, SMIC’s Co-Chief Executive Officers commented, “For the past two years, SMIC was in a period of transition. Through optimization and reformation, we enhanced our capability and accelerated R&D significantly. We have been building up competency and competitiveness to accelerate our pace and catch up with the new trends in the industry, meet the needs of the upcoming market opportunities, emerge from the transitional period and accelerate our growth.”

 

Dr. Zhao said, “Looking at 2019, the first quarter seems to be the bottom for us, as the inventory adjustment cycle is coming to an end and new mature technology platforms that SMIC worked hard to prepare are also ready. New applications such as analog power management, and CMOS RF for Internet of Things will drive revenue growth. Revenue in the second quarter is expected to increase by 17% to 19% quarter over quarter.”

 

Dr. Liang said, “Our FinFET technology R&D is progressing smoothly, as our 12nm is entering customer engagement, and the research and development of our next generation of FinFET is progressing well based on our accumulated technology development.  The construction of SMIC South FinFET Fab was completed successfully, and we have begun capacity deployment. We will prepare ourselves to be ready for rapid transitions in customer technology migration to face the ever-changing industry environment.”


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Conference Call / Webcast Announcement

 

Date: May 9, 2019

Time: 8:30 a.m. Beijing time

Dial-in numbers:

 

China

+86 400-620-8038

(Pass code: SMIC)

Hong Kong

+852 3018-6771

(Pass code: SMIC)

Taiwan

+886 2-5572-3895

(Pass code: SMIC)

United States

+1 845-675-0437

(Pass code: SMIC)

 

The call will be webcast live with audio at:

http://www.smics.com/en/site/company_activity or https://edge.media-server.com/m6/p/mawu377c .

 

An archived version of the webcast, along with an electronic copy of this news release will be available on the SMIC website for a period of 12 months following the webcast.

 

 

About SMIC

 

Semiconductor Manufacturing International Corporation (“SMIC”; NYSE: SMI; SEHK: 981), one of the leading foundries in the world, is Mainland China’s largest foundry in scale, broadest in technology coverage, and most comprehensive in semiconductor manufacturing services. SMIC provides integrated circuit (IC) foundry and technology services on process nodes from 0.35 micron to 28 nanometer. Headquartered in Shanghai, China, SMIC has an international manufacturing and service base. In China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm fab in Shanghai; a 300mm fab and a majority-owned 300mm fab for advanced nodes in Beijing; 200mm fabs in Tianjin and Shenzhen; and a majority-owned joint-venture 300mm bumping facility in Jiangyin; additionally, in Italy SMIC has a majority-owned 200mm fab. SMIC also has marketing and customer service offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

 

For more information, please visit www.smics.com .

 

 

Safe Harbor Statements

(Under the Private Securities Litigation Reform Act of 1995)

 

This press release contains, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These forward-looking statements, including statements under “Second Quarter 2019 Guidance”, “Capex Summary” and the statements contained in the quotes of our Co-Chief Executive Officers are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target" and similar expressions to identify forward looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting judgment of SMIC's senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC's actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, intense competition, timely wafer acceptance by SMIC's customers, bad debt risk, timely introduction of new technologies, SMIC's ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity and financial stability in end markets.

 


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In addition to the information contained in this press release, you should also consider the informatio n contained in our other filings with the SEC, including our annual report on Form 20-F filed with the SEC o n April 30 , 201 9 , esp ecially in the "Risk Factors" section and such other documents that we may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. In light of these risks, uncertainties, assumptio ns and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this press release. Except as required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise .

 

 

About Non-Generally Accepted Accounting Principles (“non-GAAP”) Financial Measures

 

To supplement SMIC’s consolidated financial results presented in accordance with IFRS, SMIC uses in this press release non-GAAP measures of operating results that are adjusted to exclude finance cost, depreciation and amortization, income tax benefits and expenses, the effect of employee bonus accrual, government funding, impairment loss of tangible and intangible assets , gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. This earnings release also includes second quarter 2019 guidance for non-GAAP operating expenses. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. This earnings release includes EBITDA, EBITDA margin and non-GAAP operating expenses which consist of total operating expenses as adjusted to exclude the effect of employee bonus accrual, government funding, impairment loss of tangible and intangible assets , gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for financial measures prepared in accordance with IFRS, and should be read only in conjunction with the Group's financial measures prepared in accordance with IFRS. The Group's non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

 

SMIC believes that use of these non-GAAP financial measures facilitates investors’ and management’s comparisons to SMIC’s historical performance. The Group’s management regularly uses these non-GAAP financial measures to understand, manage and evaluate the Group's business and make financial and operational decisions.

 

The accompanying table has more information and reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis because the effect of these adjustment items excluded for the purpose of non-GAAP operating expenses guidance are subject to some unpredictable conditions that cannot be estimated with reasonable certainty.


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Summary of First Quarter 201 9 Operating Resul t s

 

Amounts in US$ thousands, except for EPS and operating data

 

1Q19

4Q18

QoQ

1Q18

YoY

Revenue

668,899

787,565

-15.1%

831,044

-19.5%

Cost of sales

(546,829)

(653,440)

-16.3%

(610,868)

-10.5%

Gross profit

122,070

134,125

-9.0%

220,176

-44.6%

Operating expenses

(97,625)

(175,055)

-44.2%

(177,914)

-45.1%

Profit (loss) from operations

24,445

(40,930)

-

42,262

-42.2%

Other income, net

6,055

43,473

-86.1%

776

680.3%

Profit before tax

30,500

2,543

1099.4%

43,038

-29.1%

Income tax (expense) benefit

(6,123)

8,332

-

(15,958)

-61.6%

Profit for the period

24,377

10,875

124.2%

27,080

-10.0%

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

Exchange differences on translating
  foreign operations

10,378

(7,601 )

-

18,384

-43.5%

Cash flow hedges

(12,572 )

461

-

17,881

-

Actuarial gains and losses on defined
   benefit plans

(757 )

(758)

-0.1%

(39)

1841.0%

Total comprehensive income
  for the period

21,426

2,977

619.7 %

63,306

-66.2 %

 

 

 

 

 

 

Profit ( loss) for the period attributable to:

 

 

 

 

 

  SMIC

12,272

26,520

-53.7 %

29,377

-58.2 %

   Non-controlling interests

12,105

( 15,645)

-

( 2,297)

-

Profit for the period

24,377

10,875

124.2 %

27,080

-10.0 %

 

 

 

 

 

 

Gross margin

18.2%

17.0 %

 

26.5 %

 

 

 

 

 

 

 

Earnings per ordinary share (1)

 

 

 

 

 

  Basic

$0.00

$ 0.00

 

$ 0.01

 

  Diluted

$0.00

$ 0.00

 

$ 0.01

 

Earnings per ADS (2)

 

 

 

 

 

  Basic

$0.01

$0.02

 

$0.03

 

  Diluted

$0.01

$ 0.02

 

$ 0.03

 

 

 

 

 

 

 

Wafers shipped (in 8” equivalent wafers)

1,089,502

1,217,690

-10.5 %

1,083,630

0.5 %

Capacity utilization (3)

89.2 %

89.9 %

 

88.3 %

 

 

 

 

 

 

 

Note:

(1)

Based on weighted average ordinary shares of 5,041 million (basic) and 5,060 million (diluted) in 1Q19, 5,039 million (basic) and 5,058 million (diluted) in 4Q18, and 4,918 million (basic) and 4,962 million (diluted) in 1Q18.

Earnings per share were $0.0019(basic) and $0.0019 (diluted) in 1Q19 and $0.0045 (basic) and $0.0045 (diluted) in 4Q18.

(2)

Each ADS represents 5 ordinary shares.

(3)

Based on total equivalent wafers out divided by estimated total quarterly capacity.


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Revenue was $ 668.9 million in 1 Q1 9 , compared to $787.6 million in 4Q18 . Revenue decreased in 1Q19 mainly due to a de crease of wafer shipment and product-mix change in 1 Q1 9 .

 

 

Cost of sales was $546.8 million in 1Q19, compared to $653.4 million in 4Q18. Cost of sales decreased in 1Q19 mainly due to the decrease in wafer shipment and product-mix change in 1Q19.

 

 

Gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18.

 

 

Gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18.

 

 

Operating expenses were $97.6 million in 1Q19, a decrease of 44.2% QoQ from $175.1 million in 4Q18, mainly due to the reasons stated in Operating Expenses (Income) Analysis below.

 

 

Other income (expense), net was $6.1 million gain in 1Q19, as compared to $43.5 million gain in 4Q18. The change was mainly due to the reasons stated in Other Income (Expense), Net below.

 

 

Income tax expense was $6.1 million in 1Q19, as compared to income tax benefit of $8.3 million in 4Q18. The change was mainly due to that some subsidiaries were levied income tax in 1Q19 and recognized expected income tax refund in 4Q18.

 

 

Exchange differences on translating foreign operations were $10.4 million gain in 1Q19 and $7.6 million loss in 4Q18. The change was mainly due to the translation difference from the subsidiaries and associates using RMB as the functional currency caused by the appreciation of RMB against USD in 1Q19.


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Analysis of Revenue

 

Revenue Analysis

 

 

 

By Application

1Q19

4Q18

1Q18

Computer

5.1%

6.4%

6.8%

Communications

43.0%

44.7%

33.6%

Consumer

32.5%

32.1%

35.6%

Auto/Industrial

9.8%

8.0%

8.5%

Others ( 4 )

9.6%

8.8%

15.5%

By Service Type

1Q19

4Q18

1Q18

Wafers

94.2%

93.2%

83.5%

Mask making, testing, others ( 4 )

5.8%

6.8%

16.5%

By Geography

1Q19

4Q18

1Q18

North America ( 1 )

32.3%

31.7%

28.6%

China ( 2 )

53.9%

57.5%

62.4%

Eurasia ( 3 )

13.8%

10.8%

9.0%

Wafer Revenue Analysis

 

 

 

By Technology

1Q19

4Q18

1Q18

28 nm

3.0%

5.4%

3.2%

40/45 nm

15.3%

20.3%

21.7%

55/65 nm

21.8%

23.0%

20.9%

90 nm

2.2%

1.7%

3.8%

0.11/0.13 µ m

7.4%

7.3%

7.6%

0.15/0.18 µ m

46.0%

38.7%

38.9%

0.25/0.35 µ m

4.3%

3.6%

3.9%

 

Note:

(1) Presenting the revenue to those companies whose headquarters are in the United States, but ultimately selling and shipping the products to their global customers.

(2) Including Hong Kong, but excluding Taiwan.

(3) Excluding China and Hong Kong.

(4) Recognized technology licensing revenue of $107.6 million, 12.9% of total revenue in 1Q18.


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Capacity *

 

Fab

1Q19

4Q18

Shanghai 200mm fab

112,000

109,000

Shanghai 300mm fab

22,500

22,500

Beijing 300mm fab

105,750

94,500

Tianjin 200mm fab

58,000

60,000

Shenzhen 200mm fab

45,000

42,000

Shenzhen 300mm fab

6,750

6,750

Majority-owned Beijing 300mm fab

74,250

74,250

Majority-owned Avezzano 200mm fab

42,325

42,325

Total monthly wafer fabrication capacity

466,575

451,325

 

Note:

* Wafers per month at the end of the period in 8” equivalent wafers, calculated on a 30-day basis for comparison purposes.

 

Monthly capacity was 466,575 8-inch equivalent wafers in 1Q19 from 451,325 8-inch equivalent wafers in 4Q18, primarily because of the capacity expansion Beijing 300mm fab in 1Q1 9.

 

Shipment and Utilization

 

8” equivalent wafers

1Q19

4Q18

QoQ

1Q18

YoY

Wafer shipments

1,089,502

1,217,690

-10.5%

1,083,630

0.5%

Utilization rate (1)

89.2%

89.9%

-

88.3%

-

 

Note:  

(1)

Based on total equivalent wafers out divided by estimated total quarterly capacity.

 

Detailed Financial Analysis

 

Gross Profit Analysis

Amounts in US$ thousands

1Q19

4Q18

QoQ

1Q18

YoY

Cost of sales

546,829

653,440

-16.3%

610,868

-10.5%

  Depreciation and amortization

161,750

216,588

-25.3%

195,171

-17.1%

  Other manufacturing costs

384,705

436,152

-11.8%

414,874

-7.3%

  Share-based compensation

374

700

-46.6%

823

-54.6%

Gross profit

122,070

134,125

-9.0%

220,176

-44.6%

Gross margin

18.2%

17.0%

-

26.5%

-

 

Depreciation and amortization in the cost of sales was $161.8 million in 1Q19, compared to $216.6 million in 4Q18, mainly due to the decrease in wafer shipment and product-mix change in 1Q19.

 

Other manufacturing costs within the cost of sales were $384.7 million in 1Q19, compared to $436.2 million in 4Q18, mainly due to the decrease in wafer shipment in 1Q19.

 

Gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18.

 

Gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18.

 


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Operating Expenses (Income) Analysis

Amounts in US$ thousands

1Q19

4Q18

QoQ

1Q18

YoY

Operating expenses

97,625

175,055

-44.2%

177,914

-45.1%

  Research and development, net

77,175

134,970

-42.8%

122,995

-37.3%

  General and administrative

43,148

50,003

-13.7%

51,022

-15.4%

  Selling and marketing

6,811

7,701

-11.6%

8,513

-20.0%

  Net impairment losses recognized
    (reversal) on financial assets

1,078

(90 )

-

484

122.7%

  Other operating income

(30,587 )

(17,529 )

74.5%

(5,100 )

499.7%

 

R&D expenses, net decreased by $57.8 million QoQ to $77.2 million in 1Q19, compared to $135.0 million in 4Q18. Excluding the funding of R&D contracts from the government, R&D expenses decreased by $34.8 million QoQ to $150.3 million in 1Q19. The change was mainly due to less R&D activities in 1Q19. Funding of R&D contracts from the government was $73.1 million in 1Q19, compared to $50.1 million in 4Q18.

 

The change in other operating income was mainly due to more government funding as other operating income received in 1Q19.

 

Other Income (Expense), Net

Amounts in US$ thousands

1Q19

4Q18

QoQ

1Q18

YoY

Other income, net

6,055

43,473

-86.1%

776

680.3%

  Interest income

29,699

20,155

47.4%

12,855

131.0%

  Finance costs

(14,819 )

(8,320 )

78.1%

(13,525 )

9.6%

  Foreign exchange gains (losses)

11,112

(5,545 )

-

(4,221 )

-

  Other gains, net

6,222

15,802

-60.6%

2,324

167.7%

  Share of (loss) gain of investment
    accounted for using equity method

(26,159 )

21,381

-

3,343

-

 

The increase in interest income was mainly due to more financial assets at amortized cost acquired in 1Q19.

 

The increase in finance costs was mainly due to 1) new financial liabilities and related finance costs recognized as IFRS 16 Lease adopted in 1Q19 and 2) new medium-term notes issued in 1Q19.

 

Foreign exchange gains or losses were mainly due to the net impact of cash flow hedging and the appreciation of RMB against USD in 1Q19. Foreign monetary assets mainly consist of cash and cash equivalent and trade and other receivables in RMB. Foreign monetary liabilities mainly consist of borrowings, medium-term notes and trade and other payables in RMB.

 

The decrease in other gains or losses, net was mainly caused by less gain on fair value change of financial assets at fair value through profit or loss in 1Q19.

 

The change in share of (loss) gain of investment accounted for using equity method was due to the loss of investments in joint ventures and associates in 1Q19.


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Depreciation and Amortization

Amounts in US$ thousands

1Q19

4Q18

QoQ

1Q18

YoY

Depreciation and amortization

277,773

253,290

9.7%

268,516

3.4%

 

As the adoption of IFRS 16 Lease since January 1, 2019, the Group recognized $24.4 million depreciation of right-of-use assets (the right to use the leased item) in 1Q19.

 

Liquidity

Amounts in US$ thousands

1Q19

4Q18

Cash and cash equivalent

1,370,041

1,786,420

Restricted cash

685,598

592,290

Derivative financial instruments

10,362

2,583

Financial asset at fair value
  through profit or loss

46,951

41,685

Financial assets at amortized cost

2,510,503

1,996,808

Trade and other receivables

739,882

837,828

Prepayment and prepaid operating
  expenses

56,614

28,161

Inventories

661,633

593,009

Assets classified as held-for-sale

267,264

270,807

Total current assets

6,348,848

6,149,591

 

 

 

Current tax liabilities

5,653

2,607

Derivative financial instruments

18,285

15,806

Accrued liabilities

118,307

164,604

Deferred government funding

239,909

244,708

Bonds payable

499,027

498,551

Medium-term notes

222,640

218,247

Short-term borrowings

416,311

530,005

Contract liabilities

56,367

44,130

Trade and other payables

1,126,129

964,860

Other liabilities

110,573

32,263

Liabilities directly associated with assets
  classified as held for sale

143,903

143,447

Total current liabilities

2,957,104

2,859,228

 

 

 

Cash ratio (1)

0.5x

0.6x

Quick ratio (2)

1.9x

1.9x

Current ratio (3)

2.1x

2.2x

 

Note:

(1)

Cash and cash equivalent divided by total current liabilities.

(2)

Current assets excluding inventories divided by total current liabilities.

(3)

Total current assets divided by total current liabilities.

 


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Capital Structure

Amounts in US$ thousands

1Q19

4Q18

Cash and cash equivalent

1,370,041

1,786,420

Financial asset at fair value
  through profit or loss - current (1)

46,951

41,685

Financial assets at amortized cost (2)

2,510,503

1,996,808

 

 

 

Short-term borrowings

416,311

530,005

Long-term borrowings

1,907,211

1,760,763

Medium-term notes

444,454

218,247

Convertible bonds

422,479

418,592

Corporate bonds

499,027

498,551

Total debt

3,689,482

3,426,158

 

 

 

Net debt (3)

(238,013)

(398,755)

Equity

8,947,675

8,923,580

Total debt to equity ratio (4)

41.2%

38.4%

Net debt to equity ratio (5)

-2.7%

-4.5%

 

Note:

(1)

Mainly contain financial products sold by bank.

(2)

Mainly contain bank deposits over 3 months.

(3)

Total debt minus cash and cash equivalent, financial assets at fair value through profit or loss – current and financial assets at amortized cost.

(4)

Total debt divided by equity.

(5)

Net debt divided by equity.

 

Cash Flow

Amounts in US$ thousands

1Q19

4Q18

Net cash from operating activities

166,103

377,486

Net cash used in investing activities

(816,708)

(499,552)

Net cash from financing activities

216,590

1,100,194

Effect of exchange rate changes

18,645

227

Cash and cash equivalent of
   disposal group held for sale

(1,009)

(14,554)

Net change in cash and cash equivalent

(416,379)

963,801

 

Capex Summary

 

n Capital expenditures were $439.6 million in 1Q19, compared to $404.8 million in 4Q18.

 

n The planned 2019 capital expenditures for foundry operations are approximately $2.1 billion, which are mainly for the equipment and facility in our majority-owned Shanghai 300mm fab and FinFET R&D line. The planned 2019 capital expenditures for non-foundry operations are approximately $105.8 million, mainly for the construction of employee’s living quarters.

 


- 13 -

 


 

 

Recent Highlights and Announcements

 

Notification Letter and Request Form for Non-registered Shareholders (2019-4-29)

Notification Letter for Registered Shareholders (2019-4-29)

Notification Letter and Change Request Form to registered holders (2019-4-29)

Letter and Reply Form to New Registered Shareholders - Election of Means of Receipt and Language of Corporate Communication (2019-4-29)

2018 Annual Report (2019-4-29)

Notification of Board Meeting (2019-4-10)

Discloseable Transaction Disposal of Subsidiary (2019-3-31)

Announcement of 2018 Annual Results (2019-3-29)

Continuing Connected Transactions - Revision of Existing Internal Deposit Services Annual Caps of Centralised Fund Management Agreements of SMSC and SMNC (2019-3-19)

Notification of Approval of the Publication of 2018 Annual Results by the Board (2019-3-11)

SMIC Reports Unaudited Results for the Three Months Ended December 31, 2018 (2019-2-14)

Continuing Connected Transactions in relation to Framework Agreement (2019-1-23)

Poll Results of Extraordinary General Meeting Held on 11 January 2019 (2019-1-11)

Notification of Board Meeting (2019-1-11)

 

Please visit SMIC’s website at

http://www.smics.com/en/site/news and http://www.smics.com/en/site/comapny_statutoryDocuments

for further details regarding the recent announcements.

 

 

- 14 -

 


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(In US$ thousands except share data )

 

 

 

 

For the three months ended

 

 

March 31, 2019

 

December 31, 2018

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Revenue

 

668,899

 

787,565

Cost of sales

 

(546,829)

 

(653,440)

  Gross profit

 

122,070

 

134,125

Research and development expenses, net

 

(77,175)

 

(134,970)

General and administration expenses

 

(43,148)

 

(50,003)

Sales and marketing expenses

 

(6,811)

 

(7,701)

Net impairment losses (recognized) reversal on financial assets

 

(1,078)

 

90

Other operating income, net

 

30,587

 

17,529

  Operating expenses

 

(97,625)

 

(175,055)

Loss from operations

 

24,445

 

(40,930)

Other income, net

 

6,055

 

43,473

Profit before tax

 

30,500

 

2,543

Income tax (expense) benefit

 

(6,123)

 

8,332

Profit for the period

 

24,377

 

10,875

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

Item that may be reclassified subsequently to profit or loss

 

 

 

 

  Exchange differences on translating foreign operations

 

10,378

 

(7,601)

  Cash flow hedges

 

(12,572)

 

461

Items that will not be reclassified to profit or loss

 

 

 

 

  Actuarial gains and losses on defined benefit plans

 

(757)

 

(758)

Total comprehensive income for the period

 

21,426

 

2,977

 

 

 

 

 

Profit (loss) for the period attributable to:

 

 

 

 

  Owners of the Company

 

12,272

 

26,520

  Non-controlling interests

 

12,105

 

(15,645)

 

 

24,377

 

10,875

Total comprehensive income (loss) for the period
  attributable to:

 

 

 

 

  Owners of the Company

 

9,195

 

18,609

  Non-controlling interests

 

12,231

 

(15,632)

 

 

21,426

 

2,977

 

 

 

 

 

Earnings per ordinary share

 

 

 

 

  Basic

 

$0.00*

 

$0.00*

  Diluted

 

$0.00*

 

$0.00*

Earnings per ADS

 

 

 

 

  Basic

 

$0.01

 

$0.02

  Diluted

 

$0.01

 

$0.02

 

 

 

 

 

Shares used in calculating basic earnings per share

 

5,040,946,334

 

5,038,852,986

Shares used in calculating diluted earnings per share

 

5,059,764,787

 

5,058,243,650

 

 

 

 

 

Reconciliations of Non-GAAP Financial Measures to
  Comparable GAAP Measures

 

 

 

 

Non-GAAP operating expenses (1)

 

(201,601)

 

(242,912)

EBITDA (2)

 

323,092

 

264,153

EBITDA margin (2)

 

48.3%

 

33.5%

 

 

 

 

 

 

 

*

Earnings per share were $0.0019 (basic) and $0.0019 (diluted) in 1Q19, and $0.0045 (basic) and $0.0045 (diluted) in 4Q18


- 15 -

 


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(In US$ thousands except share data)

 

Note :

 

(1)

Non-GAAP operating expenses are defined as operating expenses adjusted to exclude the effect of employee bonus accrual, government funding, impairment loss of tangible and intangible assets, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. SMIC reviews non-GAAP operating expenses together with operating expenses to understand, manage and evaluate its business and make financial and operational decisions. The Group also believes it is useful supplemental information for investors and analysts to assess its operating performance. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact our net profit for the period. In addition, because non-GAAP financial measures are not calculated in the same manner by all companies, they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider the non-GAAP operating expenses in isolation from or as an alternative to operating expenses prepared in accordance with IFRS.

 

 

The following table sets forth the reconciliation of the non-GAAP operating expenses to its most directly comparable financial measure presented in accordance with IFRS, for the periods indicated.

 

 

 

For the three months ended

 

 

March 31, 2019

 

December 31, 2018

 

March 31, 2018

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Operating expenses

 

(97,625)

 

(175,055)

 

(177,914)

Employee bonus accrued

 

-

 

720

 

4,665

Government funding

 

( 101,554)

 

(57,469)

 

(21,561)

Impairment loss of tangible and
  intangible assets

 

-

 

8,789

 

-

(Gain) loss on the disposal of
  machinery and equipment

 

(1,530)

 

(19,150)

 

497

Gain on the disposal of
  living quarters

 

(892)

 

(747)

 

(1,680)

Non-GAAP operating expenses

 

(201,601 )

 

(242,912)

 

(195,993)

 

 

 

 

(2)


 

- 16 -

 


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(In US$ thousands except share data)

 

 

EBITDA is defined as p rofit for the period excluding the impact of the finance cost , depreciation and amortization, and income tax benefit and expense. EBITDA margin is defined as EBITDA divided by revenue . SMIC uses EBITDA margin as a measure of operating performance; for planning purposes, including the preparation of the Group’s annua l operating budget; to allocate resources to enhance the financial performance of the Group’s business; to evaluate the effectiveness of the Group’s business strategies; and in communications with SMIC’s board of directors concerning the Group’s financial performance. Although EBITDA is widely used by investors to measure a company’s operating performance without regard to items, such as net finance cost , income tax benefit and expense and depreciation and amortization that can vary substantially from company to company depending upon their respective financing structures and accounting policies, the book values of their assets, their capital structures a nd the methods by which their assets were acquired, EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Group’s results of operations as reported under IFRS. Some of these limitat ions are: it does not reflect the Group’s capital expenditures or future requirements for capital expenditures or other contractual commitments; it does not reflect changes in, or cash requirements for, the Group’s working capital needs; it does not reflec t finance cost ; it does not reflect cash requirements for income taxes; that, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and these measures do not ref lect any cash requirements for these replacements; and that other companies in SMIC’s industry may calculate these measures differently than SMIC does, limiting their usefulness as comparative measures .

 

 

The following table sets forth the reconciliation of EBITDA and EBITDA margin to their most directly comparable financial measures presented in accordance with IFRS, for the periods indicated.

 

 

 

For the three months ended

 

 

March 31, 2019

 

December 31, 2018

 

March 31, 2018

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Profit for the period

 

24,377

 

10,875

 

27,080

Finance costs

 

14,819

 

8,320

 

13,525

Depreciation and amortization

 

277,773

 

253,290

 

268,516

Income tax expense (benefit)

 

6,123

 

(8,332)

 

15,958

EBITDA

 

323,092

 

264,153

 

325,079

Profit margin

 

3.6%

 

1.4%

 

3.3%

EBITDA margin

 

48.3%

 

33.5%

 

39.1%

 

 

- 17 -

 


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(In US$ thousands)

 

 

 

As of

 

 

March 31, 2019

 

December 31, 2018

 

 

(Unaudited)

 

(Unaudited)

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

  Property, plant and equipment (1)

 

7,260,531

 

6,777,970

  Land use right

 

129,970

 

105,436

  Intangible assets

 

115,285

 

122,854

  Investments in associates

 

1,114,668

 

1,135,442

  Investments in joint ventures

 

15,914

 

15,687

  Deferred tax assets

 

46,102

 

45,426

  Financial assets at fair value through profit or loss

 

56,514

 

55,472

  Derivative financial instruments

 

5,708

 

5,266

  Other assets

 

7,325

 

11,176

Total non-current assets

 

8,752,017

 

8,274,729

 

 

 

 

 

Current assets

 

 

 

 

  Inventories

 

661,633

 

593,009

  Prepayment and prepaid operating expenses

 

56,614

 

28,161

  Trade and other receivables

 

739,882

 

837,828

  Financial assets at fair value through profit or loss

 

46,951

 

41,685

  Financial assets at amortized cost

 

2,510,503

 

1,996,808

  Derivative financial instruments

 

10,362

 

2,583

  Restricted cash

 

685,598

 

592,290

  Cash and cash equivalent

 

1,370,041

 

1,786,420

 

 

6,081,584

 

5,878,784

Assets classified as held-for-sale

 

267,264

 

270,807

Total current assets

 

6,348,848

 

6,149,591

TOTAL ASSETS

 

15,100,865

 

14,424,320

 


- 18 -


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In US$ thousands)

 

 

 

As of

 

 

March 31, 2019

 

December 31, 2018

 

 

(Unaudited)

 

(Unaudited)

EQUITY AND LIABILITIES

 

 

 

 

Capital and reserves

 

 

 

 

  Ordinary shares

 

 

 

 

$0.004 par value, 10,000,000,000 shares authorized, 5,046,671,661 and 5,039,819,199 shares outstanding at March 31, 2019 and December 31, 2018, respectively

 

20,187

 

20,159

  Share premium

 

5,000,280

 

4,993,163

  Reserves

 

101,375

 

109,346

  Retained earnings

 

343,570

 

331,298

Equity attributable to owners of the Company

 

5,465,412

 

5,453,966

Perpetual subordinated convertible securities

 

563,848

 

563,848

Non-controlling interests

 

2,918,415

 

2,905,766

Total equity

 

8,947,675

 

8,923,580

 

 

 

 

 

Non-current liabilities

 

 

 

 

  Borrowings

 

1,907,211

 

1,760,763

  Convertible bonds

 

422,479

 

418,592

  Medium-term notes

 

221,814

 

-

  Deferred tax liabilities

 

2,694

 

1,639

  Deferred government funding

 

372,232

 

393,902

  Derivative financial instruments

 

14,144

 

15,540

  Other financial liabilities

 

12,178

 

11,948

  Other liabilities ( 1)

 

243,334

 

39,128

Total non-current liabilities

 

3,196,086

 

2,641,512

 

 

 

 

 

Current liabilities

 

 

 

 

  Trade and other payables

 

1,126,129

 

964,860

  Contract liabilities

 

56,367

 

44,130

  Borrowings

 

416,311

 

530,005

  Bonds payable

 

499,027

 

498,551

  Medium-term notes

 

222,640

 

218,247

  Deferred government funding

 

239,909

 

244,708

  Accrued liabilities

 

118,307

 

164,604

  Derivative financial instruments

 

18,285

 

15,806

  Current tax liabilities

 

5,653

 

2,607

  Other liabilities ( 1)

 

110,573

 

32,263

 

 

2,813,201

 

2,715,781

Liabilities directly associated with assets
  classified as held for sale

 

143,903

 

143,447

Total current liabilities

 

2,957,104

 

2,859,228

Total liabilities

 

6,153,190

 

5,500,740

TOTAL EQUITY AND LIABILITIES

 

15,100,865

 

14,424,320

 

 

- 19 -


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(In US$ thousands)

 

Note :

 

(1)

The new IFRS 16 standard resulted in almost all leases being recognized on the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term and low-value leases.

 

As the adoption of IFRS 16 since January 1, 2019, the Group recognized $279.7 million right-of-use assets and $279.7 million leased liabilities in p roperty, plant and equipment and other liabilities, respectively.

 


- 20 -


Semiconductor Manufacturing International Corporation

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In US$ thousands)

 

 

For the three months ended

 

March 31, 2019

 

December 31, 2018

 

(Unaudited)

 

(Unaudited)

Cash flow from operating activities:

 

 

 

  Profit for the period

24,377

 

10,875

  Depreciation and amortization

277,773

 

253,290

  Share of loss (gain) of investment accounted for using
    equity method

26,160

 

(21,381)

  Changes in working capital and others

(162,207)

 

134,702

Net cash from operating activities

166,103

 

377,486

 

 

 

 

Cash flow from investing activities:

 

 

 

  Payments to acquire financial assets at fair value through
    profit or loss

(8,176)

 

(237,702)

  Proceeds from sale of financial assets at fair value through
    profit or loss

6,419

 

326,249

  Payments to acquire financial assets at amortized cost

(1,561,888)

 

(540,552)

  Proceeds from maturity of financial assets at amortized cost

1,001,787

 

532,254

  Payments for property, plant and equipment

(328,961)

 

(425,093)

  Net proceeds after netting off land appreciation tax from disposal
    of property, plant and equipment and assets classified as held for sale

3,290

 

60,992

  Payments for intangible assets

(254)

 

-

  Payments for land use right

(1,402)

 

(14,425)

  Deposit paid for investing activities

-

 

(45,503)

  Deposit received from disposal of subsidiaries

72,324

 

-

  Proceeds from release of restricted cash relating to investing
    activities

-

 

49,941

  Payments to acquire joint ventures and associates

-

 

(209,869)

  Distributions received from joint ventures and associates

153

 

4,156

Net cash used in investing activities

(816,708)

 

(499,552)

 

 

 

 

Cash flow from financing activities:

 

 

 

  Proceeds from borrowings

255,393

 

326,969

  Repayment of borrowings

(263,760)

 

(188,725)

  Payments for issuance of shares

-

 

(31)

  Payments for issuance of perpetual subordinated convertible securities

-

 

(225)

  Distribution paid to perpetual subordinated convertible securities holders

-

 

(5,650)

  Proceeds from exercise of employee stock options

933

 

2,923

  Proceeds from issuance of medium-term notes

224,024

 

-

  Proceeds from non-controlling interest – capital contribution

-

 

964,950

  Payments to acquire treasury shares

-

 

(17)

Net cash from financing activities

216,590

 

1,100,194

 

 

 

 

Effects of exchange rate changes on the balance of cash held in
  foreign currencies

18,645

 

227

Cash and cash equivalent of disposal group held for sale

(1,009)

 

(14,554)

 

 

 

 

Net (decrease) increase in cash and cash equivalent

(416,379)

 

963,801

Cash and cash equivalent, beginning of period

1,786,420

 

822,619

Cash and cash equivalent, end of period

1,370,041

 

1,786,420

 

- 21 -


 

By order of the Board

Semiconductor Manufacturing International Corporation

Dr. Gao Yonggang

Executive Director, Chief Financial Officer and Joint Company Secretary

 

Shanghai, May 8, 2019

 

As at the date of this announcement, the directors of the Company are:

 

Executive Directors

ZHOU Zixue (Chairman)

ZHAO Haijun (Co-Chief Executive Officer)

LIANG Mong Song (Co-Chief Executive Officer)

GAO Yonggang (Chief Financial Officer and Joint Company Secretary)

 

Non-executive Directors

CHEN Shanzhi

ZHOU Jie

REN Kai

LU Jun

TONG Guohua

 

Independent Non-executive Directors

William Tudor BROWN

CHIANG Shang-Yi

CONG Jingsheng Jason

LAU Lawrence Juen-Yee

FAN Ren Da Anthony

 

* For identification purposes only

 

 

 

- 22 -

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