Chartered lost US$39.4m in Q2

LOSS-MAKING chip-maker Chartered Semiconductor Manufacturing expects to staunch the bleeding by the end of the year.

For its second quarter ended June 30, Chartered lost US$39.4 million (S$56.8 million), reversing a profit of US$43.4 million a year earlier. Still, the results were better than expected - the company itself was bracing for a loss of about US$49 million just last month.

While it remains in the red, this was still a 'substantial improvement' over the first quarter, which saw a staggering US$98.8 million loss, said Chartered's chief financial officer George Thomas on Friday.

The Q2 earnings were boosted by a tax benefit of US$8.8 million, as well as lower sales and marketing expenses. Revenue was US$349 million, down 23.7 per cent. Utilisation, a measure of how heavily used its plants are, was 60 per cent, down from 88 per cent last year but up from 38 per cent in the first quarter of this year.

The company expects 'healthy sequential growth in our business' this current quarter, largely due to higher orders from customers in the communications and computer-related industries, said Mr Thomas. Revenue should rise by about 11 per cent to between US$382 and US$394 million, cutting losses by US$17 to US27 million.

Chartered chief executive Chia Song Hwee was upbeat about the rest of the year.

'While there are mixed signals in the marketplace and the global economy is, at best, in a stabilisation phase, it is encouraging to see double-digit shipment growth into the third quarter, following the roughly 60 per cent shipment growth we saw in the second quarter,' said Mr Chia.

Chartered, he added, expects to be able to hit the critical 75 per cent utilisation, which will allow it to break even [on a nett level], by the end of the year.

In light of the upturn, Chartered is also raising its annual capital expenditure from the $375 million it originally budgeted to to US$500 million, to raise the production capability of its most sophisticated plant by next March.

Research firm DMG & Partners Securities was also upbeat on Chartered's future. While 'we do not expect Chartered to turn profitable in these two years', said DMG analyst James Lim, 'several of Chartered major customers have reported results that exceeded analysts' estimates and have also issued positive guidance.

'Given the improving outlook for most of its major customers, we believe that Chartered would resultantly be positively impacted,' said Mr Lim, who had a 'buy' recommendation on Chartered with a target price of $2.77.

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