STMicroelectronics NV has reported financial results for the second quarter and first half ended June 28, 2014. Second quarter net revenues totaled $1.86 billion and gross margin was 34.0%. Net income was $38 million and included Nano2017 R&D program funding. Second quarter gross profit was $634 million and gross margin was 34.0%, 40 basis points above the midpoint of ST’s outlook range. Gross margin improved 120 basis points sequentially, mostly reflecting manufacturing efficiencies and favorable product mix. On a year-over-year basis, gross margin improved 120 basis points.
Gross margin improved to 33.4% of net revenues, compared to 32.1% of net revenues for the 2013 first half. The expansion in the first half 2014 gross margin compared to the prior period principally reflected manufacturing efficiencies and product mix partially offset by pressure on prices and volumes as well as negative currency effects .
"During the second quarter we made positive business and financial progress in key areas: from revenue and gross margin improvement as a result of our product, marketing and manufacturing initiatives, to a further strengthened capital structure," commented ST President and CEO Carlo Bozotti.
"Our performance benefited from the combination of favorable macro-economic and market dynamics, especially in Industrial and Automotive, and from the traction of our innovative portfolio and mass-market initiatives. In our Sense & Power and Automotive segment, both Industrial & Power Discrete and Automotive delivered sequential growth and strong operating margin improvements. In total, SP&A's operating margin reached double-digits. In our Embedded Processing Solutions segment, our leadership in microcontrollers continues to be a key driver of improvement as our general-purpose microcontroller business enjoyed its fifth consecutive quarter of record revenues. Also, as anticipated, our digital consumer and ASIC business started to grow sequentially after reaching an inflection point in the first quarter.
"To strengthen our capital structure and significantly enhance our financial flexibility, we took advantage of very favorable terms and raised $1 billion in July through a convertible bond offering. Proceeds from the issuance of the bonds will be used for general corporate purposes to boost growth. Additionally, by strengthening our capital structure we reinforce our objective to return capital to shareholders through dividends," Bozotti concluded.
ST's second quarter net revenues increased 2.1% on a sequential basis to $1.86 billion and excluding legacy ST-Ericsson products and one-time licensing, increased by 4.7%. By region of shipment, sequential growth was led by EMEA with an 8.3% increase driven by automotive and industrial customers while Greater China & South Asia increased 2.0%. The Americas decreased by 0.7%. Japan & Korea was lower by 5.3%, reflecting lower sales of legacy ST-Ericsson products. On a year-over-year basis, net revenues decreased 8.9% mainly due to the phase-out of legacy ST-Ericsson products.