Contract chip maker Chartered Semiconductor Manufacturing swung to a quarterly profit after a tax credit, but forecast a third-quarter net loss on higher costs, sending its stock down as much as 6.5 percent.
Singapore-based Chartered forecast a net loss of $24-$34 million for July-September, citing increased electricity charges and rising prices for supplies like chemicals and process gases.
"Though we have not seen any broad-based reduction in our customer demand, we continue to be cautious about the worsening economic situation as we manage our business," chief executive Chia Song Hwee told analysts on a conference call on Friday.
"We expect gross margins to decline significantly in the third quarter. We have initiated discussions with our customers to share the cost increases," he added.
Chartered's shares sank as much as 6.5 percent to a morning low of S$0.645, its lowest since mid-March, following its results and after the firm said it was not considering any specific takeover bids at the moment.
The stock had risen recently on market speculation that Chartered might have received bids from interested parties.
The firm ranks alongside China's Semiconductor Manufacturing International Corp (SMIC) in the market for custom-built microchips, which is dominated by larger rivals Taiwan Semiconductor Manufacturing and United Microelectronics.
In contrast, TSMC, which reports April-June results on Thursday, is seen posting stronger profits on rising sales of chips for PCs and consumer gadgets.
TSMC has forecast its July-September sales will rise from the second quarter.
Chartered, 59 percent-owned by state investor Temasek Holdings, posted April-June net profit of $40.9 million, which included a tax benefit of $49.5 million. This compares with a net loss of $27.7 million in the year-ago period.
Second-quarter revenues, including its share of a joint venture factory, rose 37 percent to $482.5 million. It used about 88 percent of its factory capacity in the quarter, up from 79 percent in the year-ago period.
Chartered warned that growth would moderate in the third quarter, with revenues expected to rise 2-4 percent from the previous quarter to $490-$504 million.
About an average 84 percent of its factory capacity is expected to be used in the third quarter.
Despite the uncertain outlook, the company said it would raise capital spending to $750 million from an earlier estimate of $590 million to boost its advanced chip-making technologies.
Chartered reiterated it is open to considering takeover and merger offers or a strategic investor, but was not evaluating any bids.
According to investment bankers, Chartered held talks with SMIC late last year on a possible investment by the latter.
"In general, we are always open to considering inorganic growth, in whatever form it may take," CEO Chia told Reuters in a telephone interview, but declined to be specific.
When asked if the company was evaluating any bids, Chia said: "There's nothing specific at the moment that we are working on."