ST Microelectronics, one of Malta’s leading exporters, reported a loss of $26 million (€23m) in 2014, a dramatic result for a company that reported a profit of $145 million (€127m) in 2011.
In 2012, the company’s profits fell to $129 million (€113m) but by 2013, the company reported a profit of just $13.5 million (€12m).
Revenues during that time also fell. In 2011, it reported an income of over $1.1 billion, but last year this had dropped to just $707 million (€620m).
The plight of ST was mentioned – albeit not by name – by Finance Minister Edward Scicluna in his pre-Budget launch. He said that manufacturing had been dragged down by a 40 per cent drop in the electronics sector, most of which is ST’s semiconductors.
ST Microelectronics was set up in Malta in 1981, and employs around 1,600 workers, according to its website. In 2011, its output accounted for 57 per cent of Malta’s exports (excluding fuels); by 2014, it had dropped to 47 per cent.
The board of directors gave little insight as to what was behind this sudden drop into loss-making territory. In the financial report, they said: “The pressure on selling prices continued throughout 2014, leading to a drop in the profitability of the manufacturing operation. Management is taking actions to reduce the cost of production and improve the pricing structure of the product portfolio.” They noted that the weak demand for digital products was expected to improve in the second half of 2015.
There is no danger that the company will pull out of Malta- Economy Ministry
The downturn in Malta was not reflected in the group’s global operations. Gross profit for the group, which employs over 43,600 people around the world, fell only slightly from $2.6 billion to $2.5 billion. The group said in its results for 2014 that the financial markets and global economic conditions were negatively impacted by the European economic crisis that began in 2010.
“We cannot exclude a potential further deterioration of economic conditions, which could have a material adverse effect on our results given our significant operations and assets in Europe, in particular, our manufacturing activities in France, Italy and Malta,” they said.
In 2013, the Maltese subsidiary paid a dividend of $129 million but this year, none was recommended.
Asked for its comments, Economy Ministry communications coordinator Jonathan Attard belittled the report, saying the figures had been public since June 4 and that ST was expected to weather this phase.
He said: “Competitiveness may be safeguarded by various means without necessarily resorting to downsizing. There is no danger that the company will pull out of Malta. The local plant is an important specialised site within the ST group and its role is highly valued.”
He added that in 2016 the local economy was expected to grow by an even faster rate than this year .