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Suntech Reports Second Quarter 2010 Financial Results

SAN FRANCISCO and WUXI, China, Aug 18, 2010 /PRNewswire via COMTEX/ --

Suntech Power Holdings Co., Ltd. (NYSE: STP), the world's largest manufacturer of crystalline silicon solar panels, today announced financial results for its second fiscal quarter ended June 30, 2010.

    Second Quarter 2010 Highlights

    -- Total net revenues were $625.1 million in the second quarter of 2010,
       representing 6.3% growth sequentially and 94.8% year-over-year

    -- Total PV shipments increased 11.9% sequentially and 181.7% year-over-
       year

    -- Gross profit margin for the core wafer to module business was 20.4% in
       the second quarter of 2010

    -- Consolidated gross profit margin was 18.2% in the second quarter of
       2010

    -- GAAP net loss attributable to holders of ordinary shares was $174.9
       million, or $0.97 per American Depositary Share (ADS). Each ADS
       represents one ordinary share. The non-cash impairment charges and
       provisions related to thin film and Shunda had a negative impact of
       $1.00 per diluted ADS

    -- Achieved 1.4GW of PV cell and module production capacity at the end of
       the second quarter of 2010. Suntech announced new capacity expansion to
       reach 1.8GW of PV cell and module production capacity by the end of
       2010

    -- Increased 2010 annual shipment target from 1.3GW to 1.5GW, which
       represents over 113% year-over-year shipment growth


"The second quarter was another period of robust multi-market demand," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "Strong operational execution ensured that we achieved our 1.4GW capacity target, which drove higher than expected shipment and net revenue growth."

"We delivered greater shipments to valued customers across Germany and other European markets including Italy, France, Benelux and the Czech Republic. Our investments into our North American expansion continued to bear fruit as we broadened market share and prepared for US-based manufacturing that will commence in the fourth quarter. We also secured supply agreements to several large, high profile projects in emerging markets including Thailand, India and Israel where our globally respected brand, reliable product performance and deep sales channels have provided a solid foundation to form new partnerships."

"Despite successful sales expansion and strong execution during the second quarter, our financial results bear the significant impact of our Shanghai facility restructuring and Shunda Holdings investment impairments. These were necessary adjustments to make, and they have no impact on our core manufacturing operations. Now that they are behind us, we are in a better position to address the growth we are expecting in our core business," Dr. Shi continued.

"With an outlook of ongoing growth in solar demand, we have decided to accelerate the next phase of capacity expansion and now target to achieve 1.8GW of cell and module capacity by the end of 2010. This will enable us to increase our 2010 shipment target from 1.3GW to 1.5GW to help support our growing global portfolio of Suntech customers and drive market share expansion."

    Recent Business Highlights

    Markets
    -- Suntech opened a representative office in Montbonnot, near Grenoble in
       France, to better serve its local partners throughout the region's
       growing solar industry. Since Suntech established its presence in
       France in 2008, the French solar market has become one of Suntech's top
       three markets in Europe.

    -- Suntech expanded its North American dealer network to nearly 400 in the
       second quarter. This growing number of dealers appreciate Suntech's
       leading combination of performance, price and reliability that is
       backed by one of the best track records in the industry.

    -- Suntech was selected to supply 34.5MW of solar panels for the first
       phase of the largest solar power plant in Thailand and Southeast Asia.
       Owned and operated by Bangchak Petroleum Public Co., Ltd., and
       integrated by Solartron Public Co. Ltd., the solar plant will be 44MW
       once completed.

    -- Suntech signed agreements to supply Azure Power, India's leading
       independent solar power producer, with several megawatts of industry-
       leading solar panels to develop utility-scale solar projects across
       several states in India in 2010 and 2011.

    Technology

    -- Suntech recently increased production of its cutting-edge Pluto modules
       to 6MW per month. The superior conversion efficiency of Pluto products
       increases power output relative to conventional screen-printed modules,
       improves space utilization and reduces installation and other balance
       of system costs.

    Capacity

    -- With booming demand for Suntech solar products, Suntech intends to
       expand capacity from 1.4GW to 1.8GW by the end of 2010.

    -- Suntech recently announced plans to restructure operations at its
       Shanghai facility to focus on the manufacture of crystalline silicon PV
       cells.  As part of the restructuring, Suntech ceased the trial
       production of amorphous silicon thin film solar panels in the second
       quarter.


Second Quarter 2010 Results

Total net revenues for the second quarter of 2010 were $625.1 million, an increase of 6.3% from $588.0 million in the first quarter of 2010 and an increase of 94.8% from $321.0 million in the second quarter of 2009.

For the second quarter of 2010, consolidated gross profit was $113.9 million and gross margin was 18.2% compared to consolidated gross profit of $114.5 million and gross margin of 19.5% in the first quarter of 2010. The sequential gross margin change was primarily due to a lower average sales price as a result of the depreciation of the Euro versus the U.S. Dollar.

Operating expenses for the second quarter of 2010 were $132.9 million compared to $51.0 million in the first quarter of 2010. The increase in operating expenses was primarily due to the non-cash impairment of thin film equipment of $54.6 million, as Suntech ceased the trial production of thin film, and the special prepayment provision of $25.0 million to account for credit risks associated with the delivery of silicon wafers from Shunda Holdings Co., Ltd. Due to debt obligations, Shunda is currently undergoing significant reorganization.

Loss from operations was $19.1 million for the second quarter of 2010 compared to income from operations of $63.5 million in the first quarter of 2010. The decline in income from operations was primarily due to the impairment of thin film equipment and the provision for prepayments to Shunda.

Net interest expense was $22.7 million in the second quarter of 2010 compared to net interest expense of $22.6 million in the first quarter of 2010. Net interest expense in the second quarter of 2010 included $8.8 million in non-cash expenses of which $7.5 million was related to our outstanding convertible senior notes. This compares to $8.6 million in non-cash net interest expense in the first quarter of 2010.

Foreign currency exchange loss was $61.4 million in the second quarter of 2010 compared to $24.5 million in the first quarter of 2010. The foreign currency loss in the second quarter was primarily related to the significant depreciation of the Euro versus the US Dollar.

Net other income was $24.1 million in the second quarter of 2010, compared with a net other income of $2.8 million in the first quarter of 2010. The net other income in the second quarter of 2010 was mainly due to gains from hedging activities. Foreign exchange loss net of hedging gains was approximately $37.3 million in the second quarter of 2010. Suntech targets to maintain at least 70% hedging coverage of Euro exposure in future quarters to minimize the impact of fluctuations in the Euro to US Dollar exchange rate.

Equity in loss of affiliates was $100.6 million in the second quarter of 2010 compared to equity in earnings of affiliates of $4.6 million in the first quarter of 2010. The equity in loss of affiliates in the second quarter was primarily related to an impairment of equity investments in Shunda Holdings of $101.1 million.

Net loss attributable to holders of ordinary shares was $174.9 million, or $0.97 per diluted ADS for the second quarter of 2010, compared to net income of $20.7 million, or $0.11 per diluted ADS, for the first quarter of 2010. The non-cash impairment charges and provisions related to thin film and Shunda had a negative impact of $1.00 per diluted ADS in the second quarter of 2010.

In the second quarter of 2010, the other major non-cash related expenses were share-based compensation charges of $6.0 million; non-cash interest expenses of $8.8 million, as mentioned above; and depreciation and amortization expenses of $20.5 million.

In the second quarter of 2010, capital expenditures, which were primarily for the addition of new production equipment, totaled $92.6 million.

Cash and cash equivalents totaled $765.6 million as of June 30, 2010, compared with $677.2 million as of March 31, 2010. The increase in cash and cash equivalents was mostly due to a reduction in restricted cash as a result of the release of funds used to guarantee credit lines.

Accounts receivable totaled $405.0 million as of June 30, 2010, compared with $467.7 million as of March 31, 2010. Days sales outstanding were 58 days in the second quarter of 2010, compared to 72 days in the first quarter of 2010. The quarterly improvement in accounts receivable and DSOs was primarily due to better collection efforts and working capital management in the second quarter of 2010.

Accounts receivable due from investee companies of GSF was $94.2 million as of June 30, 2010, compared with $104.0 million as of March 31, 2010. The sequential decrease in the related accounts receivable was due to the depreciation of the Euro versus the USD. In the third quarter of 2010, Suntech has collected EUR 27.7 million from GSF investee companies. A portion of this is to partially settle outstanding accounts receivable as of June 30, 2010, and the remainder is for recent shipments to GSF investee companies.

Inventory totaled $381.5 million as of June 30, 2010, compared with $314.1 million as of March 31, 2010. The increase in inventory was in line with production growth in the second quarter and anticipated sales growth in the second half of 2010.

Business Outlook

In the third quarter of 2010, Suntech expects shipments to increase by 15% to 20% sequentially. Consolidated gross margin in the third quarter of 2010 is expected to be in the mid to high teens, which is based on an assumed exchange rate of 1.29USD to the Euro.

Due to continuing strong demand, Suntech has increased its 2010 shipment target from 1.3GW to 1.5GW, which is more than double total shipments for 2009. Suntech targets to achieve 1.8GW PV cell production capacity by the end of 2010. Due to the capacity expansion, Suntech expects capital expenditures of approximately $300 to $350 million in 2010, compared to $200 million previously. Suntech intends to fund the additional capital expenditures with cash on hand, operating cash flow, and existing credit lines.

Senior Management Promotions

Suntech recently announced it has enhanced its global management team through the promotion of six senior-level executives:

    -- David Hogg, head of Suntech Europe, was appointed chief operating
       officer of Suntech;
    -- Andrew Beebe, vice president of global product strategy was named chief
       commercial officer of Suntech in charge of global sales;
    -- Hongkuan Jiang, vice president of human resources has been appointed
       chief human resources officer;
    -- Steven Chan, president, global sales and marketing and chief strategy
       officer has assumed the role of president of Suntech America;
    -- Jerry Stokes, vice president of business development and strategy, has
       been appointed president of Suntech Europe; and
    -- James Hu, vice president of APMEA (Asia Pacific, Middle East and
       Africa), has been appointed president of APMEA.


In their new roles, this team will be tasked with improving operational efficiency, advancing Suntech's industry-leading customer service, and implementing Suntech's long-term growth and development strategies.

Second Quarter 2010 Conference Call Information

Suntech management will host a conference call today, Wednesday, August 18, 2010, at 8:00a.m. U.S. Eastern Time (which corresponds to 8:00p.m.Beijing/Hong Kong time and 12:00p.m. Greenwich Mean Time on August 18, 2010) to discuss the company's results.

    Dial-in details for the earnings conference call are as follows:

    US Toll Free:             +1-866-804-6927
    US Toll/International:    +1-857-350-1673
    UK:                       +44-207-365-8426
    Hong Kong:                +852-3002-1672
    Passcode:                 Suntech


A live and archived webcast of the conference call will be available on Suntech's website at http://www.suntech-power.com under About: Investors: Financial Events.

    A telephonic replay of the conference call will be available until August
28, 2010 by dialing:

    US Toll Free:             +1-888-286-8010
    US Toll/International:    +1-617-801-6888
    Passcode:                 29125692


About Suntech

Suntech Power Holdings Co., Ltd. (NYSE:STP - News) produces industry-leading solar products for residential, commercial, industrial, and utility applications. With regional headquarters in China, Switzerland, and the United States, and gigawatt-scale manufacturing worldwide, Suntech has delivered more than 10,000,000 photovoltaic panels to over a thousand customers in more than 80 countries. Suntech's pioneering R&D creates customer-centric innovations that are driving solar to grid parity against fossil fuels. Our mission is to provide everyone with reliable access to nature's cleanest and most abundant energy source.

For more information about Suntech's people and products visit http://www.suntech-power.com

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements, and includes the ability to increase PV cell production capacity to 1.8GW by the end of 2010; expected Q3 2010 shipments and gross margin; full year 2010 shipment expectations; and 2010 capacity and capital expenditures. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Suntech's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. Suntech does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

    For further information, please contact:

    In China:
     Rory Macpherson
     Investor Relations Director
     Tel: +86-21-6288-5574
     Email: rory@suntech-power.com

    In the United States:
     Kristen McNally
     Executive Vice President
     The Piacente Group, Inc.
     Tel: +1-212-481-2050
     Email: suntech@tpg-ir.com




    Note: The quarterly consolidated income statements are unaudited. The
    condensed consolidated balance sheets are derived from Suntech's unaudited
    consolidated financial statements.


                          SUNTECH POWER HOLDINGS CO., LTD.
                        CONDENSED CONSOLIDATED BALANCE SHEET
                                     (In $'000)
                                                   As of             As of
                                                  June 30,          March 31,
                                                    2010              2010
    ASSETS
    Current assets:
      Cash and cash equivalents                    765,599           677,159
      Restricted cash                               82,209           162,762
      Inventories                                  381,548           314,119
      Accounts receivable                          404,968           467,677
          -----Investee companies of GSF            94,167           103,970
          -----from others                         310,801           363,707
      Value-added tax recoverable                   50,924            58,948
      Advances to suppliers                         68,361            50,195
      Other current assets                         275,032           268,391
    Total current assets                         2,028,641         1,999,251

    Property, plant and equipment, net             846,724           816,558
    Intangible assets, net                         171,836           162,692
    Goodwill                                        85,329            84,209
    Investments in affiliates                      234,281           330,958
    Long-term prepayments                          184,623           187,399
    Long-term loan to suppliers                     54,195            54,340
    Amount due from related parties                163,481           180,515
    Other non-current assets                       105,433           107,378
    TOTAL ASSETS                                 3,874,543         3,923,300

    LIABILITIES AND EQUITY
    Current liabilities:
      Short-term borrowings, including
       current portion of long-term
       bank borrowings                             939,154           835,541
      Accounts payable                             366,102           384,316
      Convertible notes-current                      4,179             4,218
      Other current liabilities                    229,487           213,263
    Total current liabilities                    1,538,922         1,437,338

    Long-term bank borrowings                      142,727           132,425
    Convertible notes-non-current                  531,755           524,242
    Accrued warranty costs                          65,091            60,116
    Other long-term liabilities                    124,215           138,724
    Total liabilities                            2,402,710         2,292,845

    Total Suntech Power Holding Co. Ltd.
     Equity                                      1,457,328         1,616,677
    Noncontrolling interest                         14,505            13,778
    Total equity                                 1,471,833         1,630,455

    TOTAL LIABILITIES AND EQUITY                 3,874,543         3,923,300



                           SUNTECH POWER HOLDINGS CO., LTD.
                            CONSOLIDATED INCOME STATEMENT
               (In $'000, except share, per share, and per ADS data)

                                        Three months Three months Three months
                                             ended        ended        ended
                                            June 30,    March 31,    June 30,
                                              2009         2010         2010


    Total net revenues                      320,959      588,034      625,142
       - Investee companies of GSF           15,298           --           --
       - Others                             305,661      588,034      625,142
    Total cost of revenues                  261,263      473,491      511,282

    Gross profit                             59,696      114,543      113,860

    Selling expenses                         11,501       19,984       17,440
    General and administrative expenses      22,808       21,477       27,047
    Research and development expenses         4,322        9,561        8,842
    Provision for prepayment to
     affiliates                                  --           --       25,000
    Impairment of long-lived assets              --           --       54,616
    Total operating expenses                 38,631       51,022      132,945

    Income (loss) from operations            21,065       63,521      -19,085

    Interest expense                        -25,884      -23,436      -23,873
    Interest income                           1,577          851        1,220
    Foreign exchange gain (loss)             17,530      -24,542      -61,435
    Other (expense) income, net              -2,544        2,776       24,076

    Income (loss) before income taxes        11,742       19,170      -79,097
    Tax provision (expense), net                168       -3,150        5,164

    Net income (loss) after taxes
     before noncontrolling interest and
     equity in (loss) earnings of
     affiliates                              11,910       16,020      -73,933
    Added Equity in (loss) earnings of
     affiliates, net of taxes                -2,293        4,622     -100,610

    Net income (loss)                         9,617       20,642     -174,543

    Net income (loss) attributable to
     the noncontrolling interest                357           63         -318

    Net income (loss) attributable to
     ordinary shareholders of Suntech
     Power Holdings Co., Ltd.                 9,974       20,705     -174,861


    Net income per share and per ADS:
    - Basic                                    0.06         0.12        -0.97
    - Diluted                                  0.06         0.11        -0.97

    Shares and ADSs used in
     computation:
    - Basic                             164,483,191  179,298,622  179,598,187
    - Diluted                           172,611,156  182,268,491  179,598,187


    Each ADS represents one ordinary share


SOURCE Suntech Power Holdings Co., Ltd.