North Coast Solar Stocks

March 19, 2009

China Sunergy posts loss; sees positive margins in Q2

Filed under: CSIQ, CSUN, LDK — Tags: , , , , — Jason @ 11:26 am

Thu Mar 19, 2009 11:26am EDT

* Q4 loss wider-than-expected, rev drops 40 pct

* Sees negative gross margin in Q1, positive margins in Q2

* Sees gross margins of 15-20 pct in 2nd half of ’09

* Sees shipments of 150MW to 200MW for ’09

* Shares rise 11 percent

By Adveith Nair

BANGALORE, March 19 (Reuters) – China Sunergy Co Ltd (CSUN) posted a wider-than-expected quarterly loss, as it found few takers for its solar cells in a market hit by oversupply and a credit crunch.

On a conference call with analysts, the company, however, said it expects margins to be “definitively” positive in the second quarter and sees it in the range of 15 percent to 20 percent for the second half of the year.

Shares of the company jumped 11 percent to $1.88 Thursday morning on Nasdaq.

“I think expectations were pretty low,” Jefferies’ analyst Paul Clegg told Reuters. “There have been so many negative results this quarter, I don’t think investors are going to be deeply disappointed relative to expectation.”

For the first quarter, the solar cell maker warned that the difficult conditions would likely continue, hurting prices and demand more than previously expected.

A pullback in solar subsidies in Germany and Spain and a strengthening U.S. dollar against the euro has sent prices of solar products tumbling.

Weak demand and prices hit gross margins, which came in at negative 33.1 percent for the quarter.

Prices fell to $2.97 per watt for the latest quarter from $3.48 in the prior quarter and from $3.02 a year earlier.

Clegg said while the company guided towards a near 20 percent decline on average selling prices in the first quarter, he had not modelled for such rapid declines during the period.

The company reported a fourth-quarter net loss of $26.3 million, or 66 cents per American depository share (ADS), including a $10.6 million inventory provision.

China’s Canadian Solar Inc (CSIQ) and LDK Solar Co Ltd (LDK) were among other companies that got squeezed by a drop in inventory value, forcing them to take write-downs in the fourth quarter.

Excluding items, China Sunergy reported an adjusted loss of 42 cents per ADS, wider than analysts’ estimates of a loss of 32 cents. Revenue fell nearly 40 percent to $43.2 million.

China Sunergy said it had been experiencing cancellation and postponement of orders, even as it slashed the prices in response to market conditions.

Shipments for the quarter were down about 39 percent at 14.1 megawatts (MW). However, shipments of high efficiency cells as a percentage of total shipments rose sequentially, and the company said it will continue to focus on these products to benefit from increased margins.

The company currently expects shipments of between 150 MW to 200 MW for 2009.

Jefferies analyst Clegg said there was a lot of uncertainty on when demand in the end markets would recover and investors “would be well served to take a conservative outlook in 2009.”

Share of the company were trading up nearly 7 percent at $1.80 in morning trade. Excluding Thursday’s gains, the stock is down as much as 89 percent from its peak last May, mirroring other solar stocks which have also been in free fall since the start of the year.

(Editing by Anil D’Silva)

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