Qimonda AG has announced its results for its fourth quarter and 2006 financial year (FY) 2006, which ended September 30, 2006. Qimonda achieved record net sales of $1.58 billion in the fourth quarter of the FY 2006, an increase of 26% quarter-on-quarter and 60% year-on-year. Fourth quarter EBIT improved to $215 million compared to an EBIT of $100 million in the third quarter of FY 2006 and an EBIT of $37 million in the fourth quarter of FY 2005. Net income increased significantly to $200.01 million or earnings per share of $0.62 compared to $69.24 million in the prior quarter and earnings per share of $0.23 and compared to a net income of $46.16 million in the fourth quarter of FY 2005 or earnings per share of $0.15.
For the 2006 FY Qimonda achieved net sales of $4.88 billion, a strong increase of 35% compared to the previous financial year. Full financial year EBIT improved to $273.10 million compared to an EBIT of $142.32 million in FY 2005. Thus Qimonda achieved a positive EBIT for the fourth financial year in a row. Net income increased to $94.88 million or earnings per share of $0.31 compared to a net income of $23.08 million or earnings per share of $0.08 in the previous financial year.
"We achieved a record performance in the last quarter and made much stronger progress in our diversification towards higher margin products than originally planned and also benefited from a seasonally strong demand," said Kin Wah Loh, President and CEO of Qimonda. "With our continued shift towards DRAM for infrastructure, graphics and mobile and consumer applications, we improved the share of bit-shipments into non-PC applications to significantly above 50% in the last quarter."
Net sales were driven by higher bit shipments and higher average selling prices based largely on Qimonda's continued successful product diversification. Diversification was driven mostly by graphics DRAM, followed by infrastructure and consumer applications. Overall bit-shipments increased by 17% in the fourth quarter compared to the previous quarter and by almost 80% for FY 2006 compared to FY 2005. 42% of Qimonda's net sales in FY 2006 were generated in North America, 19% in $pe, 31% in Asia Pacific and 7% in Japan.
Qimonda's improvement of its gross margin and net income was mainly due to improved average selling prices in the fourth quarter, which helped to limit the overall decline of average selling prices to 20% year-on-year. Earnings improvement during the financial year was also driven by further productivity gains due to the transition of more than 70% of Qimonda's capacity to 300mm wafer manufacturing as well as the conversion of about 40% of the company's capacities to 90 nanometer production. Fourth quarter and FY 2006 earnings included dilution gains of $53.85 million and $92.31 million respectively related to Inotera's IPO and GDR offering in 2006. Fourth Quarter earnings also include operating expenses of $60.26 million, mainly related to the IP settlement with Tessera and an impairment on Qimonda's Flash business.
Qimonda's improved performance also strengthened the company's balance sheet. With cash flow from operations of $380.80 million during FY 2006, the net cash position at the end of the FY 2006 was $737.23 million. The company had capital expenditures of $879.55 million, mainly for the further expansion of its 300mm wafer manufacturing facility in Richmond, the introduction of the next DRAM technology generations and the strengthening of its production capabilities for consumer and communication applications.
Outlook first quarter and financial year 2007
Qimonda expects its bit production to grow by approximately 10 to 15% in the first quarter of the 2007 financial year. The company expects this bit growth to be based on additional capacity, mainly from foundry partners, and improved productivity as a result of the continued conversion of capacities to 90nm technology. Qimonda also expects to maintain a share of bit-shipments to non PC applications significantly above 50% after the seasonally strong customer demand for consumer and gaming applications in the last quarter.
For the full year Qimonda expects bit demand to be driven in part by the introduction of the Windows Vista operating system and the continued strong growth for DRAM in consumer and communication applications. The company expects the market measured in bits to grow between 55 and 65%. Qimonda intends to increase bit production in line with overall market growth based on its investment in additional capacities in its Richmond 300mm manufacturing facility as well as the ramp-up of the second 300mm module at Inotera. In addition, Qimonda expects productivity improvements in manufacturing during 2007 as it converts further production to 90nm technology and begins the transition to next generation 80nm and 75nm technologies.
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