Hynix Semiconductor 2Q Revenues Down 24%

Hynix Semiconductor Inc. has announced the earnings results for its second quarter 2007, ended June 30, 2007. The company recorded the consolidated revenues of 1.87 trillion won which is a 24 percent decrease compared to the previous quarter's 2.45 trillion won, but an increase by 12 percent from 1.67 trillion won in the same period last year.

Sequential deterioration in sales was mainly due to the sharp erosion in DRAM price, which was caused by aggressive production growth in the industry. Although demand has also grown with price elasticity, the market experienced continued oversupply situation in the second quarter. On the other hand, NAND flash price increased primarily due to the constrained supply growth, which has resulted from the capacity shift to DRAM and technology migration issues. Under such market circumstances, Hynix's DRAM ASP dropped by 43 percent, which has been partially offset with 21 percent of bit growth that has been achieved through 12in capacity expansion and 80nm technology migration. Meanwhile, NAND flash ASP rose by 25 percent sequentially with slightly negative growth in bits. The cause of negative bit growth was largely due to capacity shift to DRAM despite the company's efforts to drive growth with 60nm technology migration.

Operating profits recorded 109 billion won, down by 76 percent quarter-on-quarter with 6 percent of operating margin, and a decrease by 72 percent from 387 billion won a year earlier. Despite the company's cost reduction efforts, severe price erosion of DRAM products have bigger negative impact on the operating profits. Adding the depreciation and amortization expenses to the operating profits, EBITDA came in at 680 billion won with EBITDA margin of 36 percent.

Net profits for the second quarter recorded 225 billion won with 12 percent of net profit margin, sustaining 16 consecutive quarters of profits since the third quarter of 2003. The difference between the operating profits and the net profits was primarily due to the gain on foreign currency translation and other items such as reversal of provision for some of litigations.

Meanwhile, consolidated cash and short-term financial instruments decreased by 271 billion won sequentially to 1.79 trillion won, and the interest-bearing debts increased by 622 billion won to 4.19 trillion won at the end of the second quarter. As a result, debt to equity ratio went up to 44 percent and net debt to equity ratio went up to 25 percent. The increased level of debts is temporary, which will be soon reduced down again once the proceeds from the refinancing transaction is used to pay down the existing debts in the third quarter.

Capital spending, including China JV, during the first half of the year represented approximately 70 percent of the planned capital spending of 4.4 trillion won for 2007. With the capex, the company has not only increased 12in wafer capacity, but also increased 80nm DRAM production and 60nm NAND flash production.

Hynix