TAIPEI (XFN-ASIA) - United Microelectronics Corp (2303.TW) announced better-than-expected earnings for the second quarter to June on a big improvement on the operating front and a lower-than-feared fall in non-operating income.
The world's second-largest wafer foundry saw its parent net profit for the quarter fall to 6.05 bln twd from 12.29 bln in the first quarter, but rise from 299 mln a year earlier.
Analysts polled by XFN-Asia had expected the company's second-quarter net profit to come in within a range of 3.10-3.87 bln twd.
For the three months to June, UMC reported operating income of 1.63 bln twd, up from 85 mln in the first. Non-operating income fell to 5.08 bln twd from 12.90 bln.
Gross margins for the second quarter rose to 20.1 pct from 13.3 pct in the preceding quarter.
'Our second-quarter results largely conformed to our original expectations,' UMC chairman and CEO Jackson Hu said.
He said UMC detected an inventory problem among its clients in the second quarter, but the level varied from segment to segment.
More time might be needed to bring down the inventory of chips meant for LCD panels and televisions arising from excessive optimism over the 2006 World Cup soccer tournament in Germany, he said.
After having waded through a seasonally-weaker second quarter, the PC market is now confronted with an uncertain third quarter due to deferred purchases because of price cuts for processors and the upcoming launch of Microsoft's Vista operating system, he said.
On the communications front, leading vendors of cellular handsets maintained normal inventory levels, he said, adding that suppliers without their own brand names faced heavier pressure.
Given factory use of 80 pct, the company delivered 786,000 8-inch-equivalent wafers during the second quarter.
UMC expects further growth in sales and profits in the third quarter to September.
Wafer shipments in the July-September period are expected to grow 0-2 pct sequentially, while its average selling price (ASP) in US dollars is expected to rise by 6-8 pct, it said.
'We are upbeat about our ASP going forward, thanks to advanced process technologies contributing increasingly more to our sales,' Hu said.
The company expects 90-nanometer process technology to account for 20 pct of its sales in the third quarter, up from 16 pct in the first, he said.
The company sees operating margins of 10 pct for the third quarter, up from 6.3 pct in the second, it said.
The capacity utilization rate during the period is seen as largely flat at about 80 pct.
Separately, the company said it is keeping unchanged its capital expenditure plans for 2006 at 1.0 bln usd.
Of its plans for this year, some one-third was spent in the first half.
When asked to comment on news of UMC's buying into ProMOS Technologies Inc (5387.TW) recently, Hu said it was purely a financial exercise given its upbeat assessment of DRAM pricing prospects.
Between July 24 and July 28, UMC bought 66.99 mln ProMOS shares, representing a 1.32 pct stake, at an average price of 12.04 twd per share.
UMC closed up 0.35 twd at 17.60.
(1 usd = 32.90 twd)
philip.wang@afxasia.com
© 2006 AFX News
