STMicroelectronics Reports 4Q 2016, Full Year Financial Results

STMicroelectronics reported financial results for the fourth quarter and full year ended Dec. 31, 2016.
 
Fourth quarter net revenues totaled $1.86 billion, gross margin was 37.5%, and net earnings were $112 million or $0.13 per share.
 
“In the fourth quarter we continued to see sustained demand, resulting in revenues and gross margin better than the midpoint of our guidance. Net revenues grew 3.5% sequentially and 11.5% year-over-year; our gross margin of 37.5% increased substantially both sequentially and yearover-year,” said Carlo Bozotti, STMicroelectronics president and CEO.
 
“In 2016, revenues grew 1.1% compared to 2015,” Bozotti added. “After a weak start to the year, reflecting both market and specific product transitions, revenues grew 6.5% in the second half of 2016 compared to the same period one year earlier. Importantly, by leveraging our strategic focus on Smart Driving and Internet of Things, we recorded year-over-year sales growth in the second half of 2016 across all of our product groups excluding discontinued businesses. Throughout 2016 we also further strengthened our technology and product portfolio, accelerating innovation and time-to-market to reinforce our leadership. Overall, we have improved our operating profitability through the combination of revenue growth, gross margin expansion and operating expense control.”
 
Fourth quarter net revenues increased 3.5% sequentially to $1.86 billion, 30 basis points above the midpoint of the company’s guidance. Analog and MEMS Group (AMG) revenues increased 8.2% sequentially driven by MEMS and analog products. Microcontrollers and Digital ICs Group (MDG) revenues increased 3.8% on a sequential basis driven by microcontrollers, memories and digital products. Automotive and Discrete Group (ADG) revenues increased 1.7% on a sequential basis driven by automotive microcontrollers and power discrete products.
 
On a year-over-year basis, fourth quarter net revenues increased 11.5% on strong growth across most product families. Analog and MEMS Group (AMG) revenues increased 17.8% compared to the year-ago period driven by both strong growth in MEMS and recovery in Analog. Automotive and Discrete Group (ADG) revenues increased 12.5% compared to the year-ago period driven by double-digit growth for both automotive and power discrete products. Microcontrollers and Digital ICs Group (MDG) revenues decreased 0.8% mainly due to lower sales of secure microcontrollers and discontinued businesses.
 
Fourth quarter gross profit was $698 million. The gross margin was 37.5%, 50 basis points above the midpoint of the company’s guidance, and included about 20 basis points of unused capacity charges. Fourth quarter operating income was $129 million compared to $90 million and $25 million in the prior
quarter and year-ago quarter.
 
On a year-over-year basis, operating income before impairment and restructuring charges improved by $124 million mainly due to higher revenues, improved product mix, manufacturing efficiencies and fab loading. Fourth quarter net income was $112 million, equivalent to $0.13 per share, compared to net income of $71 million in the prior quarter and net income of $2 million in the year-ago quarter.
 
Net revenues for the full year 2016 increased 1.1% to $6.97 billion from $6.90 billion in 2015. Net revenues, excluding businesses undergoing a phase-out (mobile legacy products, camera modules and set-top box), increased 2.4% with strong growth in specialized image sensors and solid growth in automotive and microcontrollers partially offset by market softness earlier in the year in both analog and power discrete sales for the computer peripheral market, and in MEMS sales for the smartphone market.
 
Full year 2016 gross margin improved 140 basis points to 35.2% from 33.8% in 2015 mainly benefiting from manufacturing efficiencies, favorable currency effects, net of hedging, lower unused capacity charges and improved product mix partially offset by normal price pressure.
 
Operating income increased substantially in 2016 to $214 million from $109 million in 2015. Full year 2016 net income increased 58% to $165 million, equivalent to $0.19 per share, compared to net income of $104 million, or $0.12 per share for the full year 2015.
 
Net cash from operating activities was $378 million and $1.04 billion for the fourth quarter and full year 2016, respectively. Full year 2015 net cash from operating activities was $842 million. Free cash flowwas $135 million and $312 million (or $390 million before the NFC and RFID reader assets acquisition of $78 million) during the fourth quarter and full year of 2016, respectively. Full year 2015 free cash flow was $327 million.
 
First Quarter 2017 Business Outlook
 
“Based on market forecasts, a positive booking trend, and a strong point-of-sales performance at our distributors, we see the momentum of the second half of 2016 to continue entering 2017,” Bozotti reported. “Based on these factors, we expect our first quarter to reflect better than normal seasonality, with a sequential net revenues decline of about 2.4% at the midpoint. On a year-over year basis, this would translate into a net revenues growth of about 12.5% at the mid-point. We expect a gross margin of about 37.0% at the midpoint.
 
“In order to support ST’s innovative product portfolio and to fuel significant revenue growth in 2017 and beyond, particularly from new specialized technologies and products, we expect to invest approximately $1 billion to $1.1 billion in 2017,” he added. “Specifically, the company is investing in 300mm front-end manufacturing and in back-end assembly and test to support new products. In particular, we anticipate a newly won program to ramp with substantial revenues in the second half of 2017.”