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January 17, 2007 8:34 am

ASML fourth-quarter profits jump

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ASML, the Dutch chip-making equipment manufacturer, on Wednesday said sales would continue to rise this year as semiconductor demand showed no let-up and it moved towards a three-year goal of €5bn ($6.5bn) in annual revenues.

It added that it was readying a new share buy-back programme and would increase capital expenditure by €150m to €250m this year, mostly by expanding its Veldhoven factory in the Netherlands and recruiting "a few 100" additional engineers.

The upbeat results, which drove shares more than five per cent higher, came the day after Intel, the world's largest chip manufacturer, posted fourth-quarter revenues at the top of expectations but warned on margins.

ASML, which competes with Nikon and Canon of Japan, increased market share by revenue from 57 per cent in 2005 to 61 per cent at the end of last year, citing data from SEMI, the independent semiconductor organisation. It shipped 23 of its latest immersion systems to 17 customers.

Noting 42 per cent annual sales growth, to €3.6bn, Eric Meurice, chief executive, said it had out-stripped market growth by eight percentage points.

Confounding analysts concerns that the sector was close to peaking, sales in the fourth-quarter rose to a record [euro]1bn, 11 per cent up on the previous three months. ASML said it expected a "healthy order intake for the next few quarters".

Net income for 2006 was €625m, more than double 2005, and rose 20 per cent to €206m in the fourth-quarter compared to the previous three month period.

Its order book, which indicates industry utilisation rates and therefore end-user demand for items such as mobile phones and digital devices, included a backlog of 163 systems at the year-end with an average selling price of €13.2m.

The closely watched net bookings, a guide to future earnings, fell to 74 new machines but comfortably exceeded analysts' forecasts. It shipped 72 systems in the fourth-quarter, one more than in the third-quarter, but with an average selling price of €13.6m compared to €12.1m.

"We expect 2007 to be another year of increased sales, confirming the company's growth trajectory towards our goal of five billion euros in sales by 2010," Mr Meurice said.

Its gross margin rose 2.1 percentage points in the year to 40.6 per cent and reached 41.1 per cent in the fourth-quarter.

It ended the year with cash and equivalents of €1.66bn and has commited to return cash to shareholders above a €1bn threshold after weighing acquisition and investment opportunities.

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