STMicroelectronics reported U.S. GAAP financial results for the second quarter ended June 29, 2019. The company posted second-quarter net revenues of $2.17 billion. ST also reported a gross margin of 38.2% and operating margin of 9.0%. The company achieved a net income of $160 million or $0.18 diluted earnings per share.
Jean-Marc Chery, STMicroelectronics President & CEO, commented, “As planned, in the second quarter we returned to sequential revenue growth. In fact, revenues increased 4.7%, above the mid-point of our guidance of 2.4%, driven by specialized imaging sensors, RF products for front end modules, silicon carbide MOSFETs and digital automotive, partially offset by general-purpose analog, microcontrollers, and legacy automotive products. We delivered an operating margin of 9.0%.”
“During the first half of 2019 we delivered sales and profitability results in line with our quarterly guidance and we continued to advance our strategic investments.”
“Looking at the third quarter, we expect strong sequential revenue growth of about 15.3% at the midpoint. This growth will be driven by engaged customer programs and new products in a softer than expected legacy automotive and industrial market. Gross margin is expected to be about 37.5% at the mid-point, including about 140 basis points of unsaturation charges.”
“For the full year 2019, we now expect net revenues to be in the range of about $9.35 to $9.65 billion. We confirm our investment plan of $1.1 to $1.2 billion,” Chery said.
Revenues increased 4.7% sequentially, 230 basis points above the mid-point of the ST’s guidance.
On a year-over-year basis, second-quarter net revenues declined 4.2% as the company listed lower sales in Analog, Microcontrollers, and Digital ICs, which were partially offset by growth in Automotive and Power Discrete, MEMS, and Sensors.
On a year-over-year basis, sales to OEMs rose by 10.3%, while distribution diminished by 27.0% due to the ongoing inventory correction. Gross profit totaled $830 million, a year-over-year decrease of 8.9%. The gross margin of 38.2% decreased 200 basis points year-over-year, mainly from the usual sales price pressure, an unfavorable product mix, and unsaturation charges.
Second-quarter gross margin was 30 basis points lower than the mid-point of the ST’s guidance, primarily due to an unfavorable product mix. The Second-quarter gross margin includes 80 basis points of unsaturation charges. Operating income dropped 32.0% to $196 million, compared to $289 million in the year-ago quarter.
The operating margin decreased 370 basis points on a year-over-year basis to 9.0% of net revenues, compared to 12.7% in the second quarter of 2018.
By product group, compared with the year-ago quarter:
Automotive and Discrete Group (ADG):
- For the Automotive and Discrete Group (ADG), revenue grew in both Automotive and Power Discrete.
- Operating profit declined by 13.1% to $73 million.
- Operating margin was 8.2% compared to 9.7%.
Analog, MEMS and Sensors Group (AMS):
- Revenue increased in MEMS and Sensors while Analog decreased.
- Operating profit increased by 15.6% to $74 million.
- Operating margin was 10.7% compared to 10.5%.
Microcontrollers and Digital ICs Group (MDG):
- Revenue decreased in both Digital IC and Microcontrollers.
- Operating profit fell by 71.7% to $45 million.
- Operating margin was 7.6% compared to 20.3%.
Net income and diluted earnings per share fell to $160 million and $0.18, respectively, compared to $261 million and $0.29, respectively, in the second quarter of 2018.
Cash Flow and Balance Sheet Highlights
The company’s forecast for 2019 third-quarter ending September 28, 2019, is:
- Net revenues are projected to grow about 15.3% sequentially, plus or minus 350 basis points;
- Gross margin is expected to be about 37.5%, plus or minus 200 basis points;
- This forecast is based on an assumed effective currency exchange rate of about $1.15 = €1.00 for the 2019 third quarter and includes the impact of existing hedging contracts.