Published September 24, 2009

Chartered's forecast Q3 loss should be higher: KPMG

Outlook needs to include expected US$8.2m expenses linked to ATIC move

By JAMIE LEE

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CHARTERED Semiconductor Manufacturing, which expects an expense of US$8.2 million relating to the proposed acquisition of the Singapore chip foundry by Advanced Technology Investment Company (ATIC), should have recognised this expense in its recent third-quarter financial performance forecast.

Status quo: Despite the auditor's opinion, Chartered does not plan to issue another update on Q3 guidance

Independent external auditors KPMG said this in a letter dated Sept 22 to Chartered's directors.

This means that the projected range of quarterly net loss should be US$8.2 million to US$16.2 million, instead of a net loss of up to US$8 million as forecast in the updated third-quarter outlook issued on Sept 7.

'In our opinion, this amount (US$8.2 million) should be recognised as an expense in the outlook in accordance with accounting policies normally adopted by the group,' KPMG said after reviewing the outlook figures.

Correspondingly, the expected basic loss per American Depositary Share (ADS) for the quarter should range from 12 US cents to 20 US cents instead of three US cents to 11 US cents.

KPMG noted Chartered's basis for not including the US$8.2 million expenses for the outlook period. The company had assumed the acquisition would not be completed before Oct 1.

Moreover, the expenses are contingent on the acquisition completion, which itself is subject to customary conditions such as regulatory and shareholder approvals.

Except for the need to include the US$8.2 million expenses, Chartered's forecast has otherwise been properly prepared, KPMG added.

Despite the auditor's opinion, Chartered does not plan to issue another update on the third-quarter guidance, a spokeswoman told BT yesterday.

Following discussions with the directors and after reviewing the letter from KPMG, the independent financial adviser of the ATIC acquisition believes that the initial outlook from Chartered's board of director was made 'after due and careful enquiry'.

Adviser Deutsche Bank said in a letter that the outlook guidance is the sole responsibility of the directors as it did not independently verify the financial figures.

'We have relied upon and assumed the accuracy and completeness of all financial and other information provided to us by the directors and management of the company and have not independently verified the information,' said Deutsche Bank.

'We have also not undertaken any independent evaluation or appraisal of any of the assets or liabilities of the company.'

Abu Dhabi's ATIC put a S$2.5 billion privatisation offer - representing S$2.68 per share - on the table for Chartered early this month, which Deutsche Bank viewed to be a fair bid in its preliminary report.