INTEGRATED Microelectronics Inc. (IMI), the manufacturing subsidiary of Ayala Corp., will launch an equity call in the second half of the year to raise additional capital for its expansion program.

IMI is evaluating variety of opportunities to expand its geographic footprint and enhance its capabilities organically or through acquisitions. However, the company did not disclose the amount required for expansion. 

Ayala owns 68 percent of the company, while the other shareholders are Resins Inc., which owns 17 percent of the company, and some employees via the stock-option plan.

IMI maintains manufacturing operations in the Philippines, China and Singapore, and a prototyping facility in Tustin, California.

“We are prepared to subscribe to more than our proportionate share in the equity call as part of our desire to support the company in its growth initiatives, irrespective of the unfortunate currency position loss,” said Ayala chairman Jaime Zobel de Ayala.

IMI has booked $23.2 million in realized losses and provided $10.3 million in mark-to-market losses as of June 4 arising from currency hedging contracts. The company operates in different countries and is exposed to different currencies but its functional currency is the US dollar. IMI executed a program to hedge its peso expenses starting in 2007, when the Philippine currency begun its uptrend.

“The change in the macroeconomic environment and the peso volatility has unfortunately affected the hedging position made by IMI. This is an unfortunate turn of events but we believe that this step helps put an end to any risk exposure the company faces from its past position,” Zobel added.  

IMI has agreed to put in place a short-term program to correct such position by June 30. 

Ayala treasurer Ramon Opulencia said the impact of IMI’s losses will be reflected in the second quarter financial statements of the parent firm. 

“The impact could be significant but there are so many things we can still do at Ayala level to counteract any negative impact,” Opulencia said.

IMI’s revenues grew 15 percent in the first five months of 2008 compared with the same period last year on the back of increases in sales volume and average selling prices to key customers. Excluding the hedging losses, IMI’s net income as of May 2008 improved 48 percent year-on-year. 

If the peso continues to depreciate until the end of the year, IMI’s profitability will further improve, partially offsetting the hedging losses. Total assets were reported at $325 million while total debt is at $67 million as of May 31.

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