News Article
MEMC release reduced returns
MEMC reports at least 20% reduction in profit and sales.
MEMC Electronic Materials has reported financial results for the quarter and year ended December 31, 2008.
The company reported fourth quarter 2008 net sales of $425.7 million, which represents a decrease of 22.0% from third quarter 2008 net sales of $546.0 million, and a decrease of 20.6% from fourth quarter 2007 net sales of $535.9 million. The sequential and year-over-year decrease in sales was primarily the result of lower wafer volumes for semiconductor applications and lower prices associated with short-term sales of solar products, partially offset by higher volumes of wafers for solar applications.
Gross profit in the quarter was $193.0 million, or 45.3% of net sales, compared to $269.7 million, or 49.4% of net sales, in the 2008 third quarter and $293.6 million, or 54.8% of net sales, in the 2007 fourth quarter. The decline in gross profit was primarily the result of the lower prices, reduced semiconductor product volumes and partial offset from solar product volumes mentioned above.
The company reported operating income during the quarter of $169.3 million, or 39.8% of net sales. This compares to $227.5 million, or 41.7% of net sales, for the 2008 third quarter and $254.8 million, or 47.5% of net sales, for the 2007 fourth quarter. Operating expenses were $23.7 million, or 5.6% of sales, compared to $42.2 million, or 7.7% of sales, in the 2008 third quarter, and $38.8 million, or 7.2% of sales, in the 2007 fourth quarter. The sequential decrease in operating expenses was primarily due to the decrease in stock compensation expense resulting from the resignation of our former CEO.
"The fourth quarter of 2008 saw deteriorating semiconductor and solar market conditions, amid the rapidly weakening global macroeconomic environment," said Marshall Turner, MEMC's Interim Chief Executive Officer. "While this led to one of the steepest declines of semiconductor industry unit sales on record, and a significant reduction in our quarterly sales, MEMC was able to continue to achieve very strong profitability with gross and operating margins of approximately 45% and 40%, respectively, and continue its consistently high levels of free cash flow generation, at approximately 15% of sales. In addition, the company continued its focus on wafers, with 90% of the company's fourth quarter revenue coming from wafer sales, and 10% from sales of polysilicon and other products. MEMC's cost-efficient structure should continue to differentiate MEMC and our results from that of our competition."
First Quarter 2009 Outlook
"End market weakness and low order visibility across both semiconductor and solar applications continues in the first quarter, as reduced consumer spending, limited access to credit and other results of the macroeconomic environment weigh on both markets," continued Turner. "This environment is exacerbated by continued inventory reductions at semiconductor customers, the combination of which is resulting in a significant sequential reduction in semiconductor wafer demand which is, in turn, leading to the diversion of some polysilicon output from semiconductor to solar markets. This is having the effect of reducing pricing for polysilicon and wafers in the solar market. The unusually low levels of visibility that many of our customers have in the current environment reduces our ability to provide meaningful quarterly, annual or long term guidance at this time. Our current view of the markets we serve indicates that first quarter 2009 revenue could decline by as much as 50% from the fourth quarter of 2008. The reduced pricing and significantly lower factory utilization assumed in this view, the latter of which would result in significant underutilization charges, could result in gross margins declining to the 20 percent range."
The company reported fourth quarter 2008 net sales of $425.7 million, which represents a decrease of 22.0% from third quarter 2008 net sales of $546.0 million, and a decrease of 20.6% from fourth quarter 2007 net sales of $535.9 million. The sequential and year-over-year decrease in sales was primarily the result of lower wafer volumes for semiconductor applications and lower prices associated with short-term sales of solar products, partially offset by higher volumes of wafers for solar applications.
Gross profit in the quarter was $193.0 million, or 45.3% of net sales, compared to $269.7 million, or 49.4% of net sales, in the 2008 third quarter and $293.6 million, or 54.8% of net sales, in the 2007 fourth quarter. The decline in gross profit was primarily the result of the lower prices, reduced semiconductor product volumes and partial offset from solar product volumes mentioned above.
The company reported operating income during the quarter of $169.3 million, or 39.8% of net sales. This compares to $227.5 million, or 41.7% of net sales, for the 2008 third quarter and $254.8 million, or 47.5% of net sales, for the 2007 fourth quarter. Operating expenses were $23.7 million, or 5.6% of sales, compared to $42.2 million, or 7.7% of sales, in the 2008 third quarter, and $38.8 million, or 7.2% of sales, in the 2007 fourth quarter. The sequential decrease in operating expenses was primarily due to the decrease in stock compensation expense resulting from the resignation of our former CEO.
"The fourth quarter of 2008 saw deteriorating semiconductor and solar market conditions, amid the rapidly weakening global macroeconomic environment," said Marshall Turner, MEMC's Interim Chief Executive Officer. "While this led to one of the steepest declines of semiconductor industry unit sales on record, and a significant reduction in our quarterly sales, MEMC was able to continue to achieve very strong profitability with gross and operating margins of approximately 45% and 40%, respectively, and continue its consistently high levels of free cash flow generation, at approximately 15% of sales. In addition, the company continued its focus on wafers, with 90% of the company's fourth quarter revenue coming from wafer sales, and 10% from sales of polysilicon and other products. MEMC's cost-efficient structure should continue to differentiate MEMC and our results from that of our competition."
First Quarter 2009 Outlook
"End market weakness and low order visibility across both semiconductor and solar applications continues in the first quarter, as reduced consumer spending, limited access to credit and other results of the macroeconomic environment weigh on both markets," continued Turner. "This environment is exacerbated by continued inventory reductions at semiconductor customers, the combination of which is resulting in a significant sequential reduction in semiconductor wafer demand which is, in turn, leading to the diversion of some polysilicon output from semiconductor to solar markets. This is having the effect of reducing pricing for polysilicon and wafers in the solar market. The unusually low levels of visibility that many of our customers have in the current environment reduces our ability to provide meaningful quarterly, annual or long term guidance at this time. Our current view of the markets we serve indicates that first quarter 2009 revenue could decline by as much as 50% from the fourth quarter of 2008. The reduced pricing and significantly lower factory utilization assumed in this view, the latter of which would result in significant underutilization charges, could result in gross margins declining to the 20 percent range."
