Seoul, October 26, 2006
hynix Semiconductor Inc. (‘hynix’, ‘the Company’, www.hynix.com) today announced the earnings results for its third quarter 2006, ended September 30, 2006.
The Company recorded the consolidated (which is the consolidation of the Company and its overseas subsidiaries) revenues of 1.97 trillion won which is an 18% increase compared to the previous quarter’s 1.67 trillion won, and a 23% increase from 1.6 trillion won in the same period last year. During the third quarter, a favorable market condition continued for DRAM.
Demand was especially strong from PCs as more Vista-ready PCs are sold, while supply was tight, due to technology migration issues at some suppliers. Meanwhile, NAND flash market showed signs of improvements from August on the back of the launch of new MP3 players and increasing densities for flash cards and USBs.
Under such environment, the Company’s weighted average selling price for DRAM in the third quarter increased by 9% sequentially, and bit growth increased by 14% based on the smooth ramp up of 80nm technology and accelerated volume production of 8” fab in Wuxi, China. For NAND flash, average selling price fell by 24% sequentially, and bit growth increased 46% quarter-on-quarter, attributable to the expansion of 70nm technology and MLC products.
The Company recorded operating profit of 453 billion won in the third quarter, a 17% increase from previous quarter’s 387 billion won which resulted in the operating margin of 23%, same as previous quarter. As a result, the Company’s EBITDA in the third quarter recorded 833 billion won, with EBITDA margin of 42%, which is an increase by 12% from 742 billion won in the previous quarter.
Net income for the third quarter of 2006 increased by 17% to 390 billion won from 334 billion won in the previous quarter. Despite of the revenue increase of 18% sequentially in the third quarter, the Company’s profits did not improve as much, mainly due to the rapid ramp-up of the China fabs, which incurred significant initial ramp-up cost, and thus had negative impact on the Company’s margins.
Nevertheless, due to the successful ramp-up of these fabs, the Company’s overseas production increased significantly, which minimized the impact of the countervailing duties that are imposed in the US, Europe and Japan, and at the same time, enabled the Company to serve the customers better in those areas.
In the third quarter, hynix-ST Semiconductor Ltd, a joint venture of hynix and ST Micro for manufacturing of memory chips, signed a syndication loan of $750 million. The Company also raised US$471 million through issuance of zero coupon convertible bonds due 2011. As a result of these financing activities, cash and short-term financial instruments at the end of the third quarter recorded 1.72 trillion won, which is an increase by 361 billion won from previous quarter’s 1.36 trillion won. Meanwhile, debt level at the end of the quarter also increased by 825 billion won, from 1.85 trillion won at the end of previous quarter to 2.68 trillion won at the end of third quarter of 2006, bringing debt to equity ratio and net debt to equity ratio to 34% and 12%, respectively. As a supplement to the consolidated financial results, non-consolidated sales in the third quarter recorded 1.82 trillion won, which is a 16% increase from previous quarter.
Operating profits declined by 10% quarter-on-quarter to 292 billion won, resulting 16% of operating profit margin. Such a big difference in the revenues and the operating profits between the consolidated and the non-consolidated was mainly due to the deviation of the market price and the internal transfer price. Nevertheless, the Company’s net profit recorded 384 billion won with 21% of net profit margin, which is same as previous quarter, due to gain on valuation of overseas affiliates using the equity method and other non-operating items.
Please note that the financial results discussed herein are preliminary and speak only as of June 30, 2006. Readers should not assume that this information remains operative at a later time. In addition, this information may include forward-looking statements that involve a variety of risks and uncertainties that could cause actual results to differ materially. For further discussion of these risks and uncertainties, readers should refer to hynix Semiconductor Inc.’s filings with the Korea Exchange. This document is neither an offer to sell nor a solicitation of an offer to sell any security of hynix. hynix securities may not be sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended.
About hynix Semiconductor Inc.
hynix Semiconductor Inc. (HSI) of Icheon, Korea, is the world’s top tier memory semiconductor supplier offering various Dynamic Random Access Memory chips (“DRAMs”) and Flash memory chips to a wide range of established international customers. The Company’s shares are traded on the Korea Stock Exchange, and the Global Depository shares are listed on the Luxemburg Stock Exchange. Further information about hynix is available at www.hynix.com.
