ASE Technology Holding Co., Ltd. - Q3 2013 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports the unaudited consolidated financial results for Advanced Semiconductor Engineering, Inc. (ASE) for the third quarter ended September 30, 2013. ASE is the world's largest independent provider of semiconductor packaging and testing services. The results are prepared in accordance with Taiwan-IFRS.
Key Financial Metrics
| Metric | Q3 2013 | Q2 2013 | Q3 2012 |
|---|---|---|---|
| Net Revenue | NT$56,748 million | NT$50,760 million | NT$48,991 million |
| Net Income (Parent) | NT$4,430 million | NT$3,820 million | NT$3,451 million |
| Diluted EPS | NT$0.57 (US$0.096/ADS) | NT$0.50 | NT$0.46 |
| Gross Margin | 20.4% | 20.6% | 19.6% |
| Operating Margin | 10.7% | 10.6% | 9.8% |
| Cash & Current Assets | NT$43,529 million | NT$30,316 million | N/A |
| Total Bank Debt | NT$100,154 million | NT$83,582 million | N/A |
| Current Ratio | 1.29 | 1.14 | N/A |
| Net Debt to Equity | 0.47 | 0.47 | N/A |
Material Changes vs. Prior Periods
- Revenue Growth: Consolidated net revenue increased 16% year-over-year (YoY) and 12% sequentially. This was driven primarily by the EMS segment, which grew 38% sequentially and 29% YoY.
- Segment Performance:
- IC ATM (Assembly, Testing, Material): Revenue grew 12% YoY and 4% sequentially. Gross margin improved to 25.5% from 24.0% in Q2.
- EMS: Revenue surged 38% sequentially, but gross margin declined to 9.7% from 11.4% due to higher raw material costs (80% of revenue vs. 78% prior quarter).
- Packaging: Revenue grew 13% YoY. Advanced packaging mix increased to 28% of total packaging revenue.
- Cost Structure: Cost of revenue rose 15% YoY. Raw material costs increased to 45% of total net revenue (up from 42% in Q2). Operating expenses increased to NT$5,488 million, remaining at 10% of revenue.
- Liquidity: Cash and current financial assets increased significantly to NT$43.5 billion. However, total bank debt also rose to NT$100.2 billion, with unused credit lines at NT$107.8 billion.
Guidance, Outlook, and Risks
- Q4 2013 Outlook: Management projects IC-ATM revenue to decline 0% to 3% sequentially, while EMS revenue is expected to grow in excess of 25%. Consolidated gross profit margin is forecast between 18% and 19%.
- Capital Expenditures: Full-year 2013 CapEx is projected at approximately US$700 million. Q3 CapEx was US$233 million.
- Management Commentary: CEO Jason Chang noted strong execution but highlighted global economic volatility and geopolitical concerns. The company is focusing on innovation to meet demand in sophisticated electronics.
- Risks: Key risks include semiconductor industry cyclicality, intense competition, integration of M&A, geopolitical tensions (specifically between ROC and PRC), and foreign currency exchange rate fluctuations.
Investor Verification Checklist
- EMS Margin Compression: Verify the sustainability of the EMS segment's growth given the sequential decline in gross margin to 9.7% and rising raw material costs.
- Debt Levels: Confirm the impact of the increased total bank debt (up ~20% sequentially) on future interest expenses and liquidity.
- Customer Concentration: Note that the top 5 EMS customers accounted for 74% of EMS revenue, indicating high concentration risk in that segment.
- Q4 Guidance: Monitor the projected flat-to-declining revenue for the core IC-ATM business in Q4 against the strong EMS growth.
- Exchange Rate Sensitivity: Assess the impact of the NT dollar depreciation against the US dollar, which contributed a NT$305 million foreign exchange gain in Q3.