SK hynix might reduce dividends due to worsening cash flow

SK hynix is considering revising its dividend policy for shareholders due to depleting cash flow, the company said Thursday, amid a downturn in the memory chip market.

“As the cash flow has worsened this year, it may be difficult to maintain the current dividend policy,” said Sk Hynix CFO Cha Jin-seok. “The company is currently reviewing the plan.”

The plan was announced during a conference call with investors on its third-quarter earnings. 

The world’s second-largest memory chip provider said it posted 6.84 trillion won ($5.8 billion) in sales and operating profit of 472.6 billion during the July-September period.

It was the first time in 13 quarters that the company has recorded a quarterly operating profit of below the 500 billion won mark.

Compared to the same quarter last year, the third-quarter operating profit was reduced to a tenth.

DRAM shipments increased by 23 percent from the previous quarter as the company responded to the new products in the mobile market and purchases from some data center customers also increased, it said.

But prices remained weak during the quarter, leading to a 16 percent drop in the average selling price.

SK hynix has set the dividend per share at between 30 and 50 percent of its cash flow since 2014.

The chipmaker didn’t specify when it would make the change in the dividend ratio.

“The company will come up with a comprehensive plan for dividends considering the market, cash flow changes and the financial structure,” the executive said.

SK hynix also said it will scale back the amount of facility investments for next year.

“Considering the external uncertainties, we are maintaining a conservative stance (regarding facility investments),” the company official said.

By Song Su-hyun (song@heraldcorp.com)