North Coast Solar Stocks

May 21, 2009

Suntech Reports First Quarter 2009 Financial Results

Filed under: STP — Tags: , , , , , , , — Jason @ 6:00 am

Thursday May 21, 2009, 6:00 am EDT

SAN FRANCISCO and WUXI, China, May 21 /PRNewswire-Asia/ — Suntech Power Holdings Co., Ltd. (STP), the world’s largest crystalline silicon photovoltaic (PV) module manufacturer, today announced financial results for its first fiscal quarter ended March 31, 2009.

First Quarter 2009 Highlights
— Total net revenues were $315.7 million in the first quarter of 2009
— Gross margin improved to 17.8% for the first quarter of 2009, compared with 0.6% for the fourth quarter of 2008.
— Operating expenses were reduced by 24% to $35.1 million in the first quarter of 2009 from $46.2 million in the fourth quarter of 2008.
— Net income attributable to holders of ordinary shares was $1.8 million or $0.01 per diluted American Depository Share (ADS). Each ADS represents one ordinary share.
— Suntech submitted 179MW of rooftop solar project applications for China’s national rooftop solar subsidy.
— 100MW of Pluto production capacity commissioned with expected conversion efficiencies of approximately 19% on mono-crystalline PV cells and 17% on multi-crystalline PV cells.
— Suntech maintained PV cell production capacity of 1GW at the end of the first quarter of 2009.

“Considering the impact of seasonality, global economic headwinds, a contraction in PV project financing and falling sales prices, which greatly affected companies throughout the solar industry, we are pleased to have achieved revenues only 24% below the fourth quarter of 2008. This indicates the flexibility of Suntech’s business model and customer preference for Suntech products,” said Dr. Zhengrong Shi, Suntech’s Chairman and CEO. “We are also pleased to have delivered a substantial sequential improvement in our gross margin, which demonstrates the success of our initiatives to reduce raw material costs and improve our non-silicon cost structure.”

Dr. Shi added, “Europe continued to be the greatest source of solar demand in the first quarter. Going forward we expect further market diversification due to recently introduced stimulus initiatives in high potential markets. China’s recently announced national solar subsidy; Japan’s reintroduction of solar subsidies in 2009; and state incentive programs and the federal stimulus package in the U.S. should provide a strong foundation for mid-term growth. Suntech is uniquely positioned to address growth opportunities in all three of these markets through our 100-strong systems integration team in China, our Japanese subsidiary, and our multi-pronged downstream strategy in the U.S. We are already seeing the benefits of these initiatives with a 30MW utility scale solar project for Austin Energy in the U.S and our 30MW agreement to supply House Care with solar products in Japan.”

“We are also making excellent progress with our global project development initiatives that will drive long term demand for Suntech solar projects. The Global Solar Fund has invested in companies that currently have 240MW of projects fully permitted and is targeting to finalize permits for at least another 360MW by the end of 2009. In addition, Gemini Solar is pursuing a pipeline of approximately 1.1GW of projects in the U.S. that we have either bid on, or are preparing bids for, and which are scheduled to be developed over the next 3 or 4 years.”

“In this challenging economic environment, customers have an even greater focus on quality and track record – two areas where Suntech excels. We have now shipped more than 1,200MW of product since our inception and adhere to industry leading quality standards. With our mature sales channels, premium brand, high quality modules, and record of successful projects, we believe Suntech is a supplier of choice and best positioned to grow market share in this challenging market,” concluded Dr. Shi.

RECENT BUSINESS HIGHLIGHTS

Project Development Initiatives
— Suntech made significant progress with its strategic project development initiatives. Suntech’s equity method investment, the Global Solar Fund (GSF), a European based investment fund, which qualifies for investment company fair value accounting under AICPA investment company guide, was created to make investments in private companies that own or develop projects in the solar energy sector. GSF has invested in companies that currently have 240MW of projects fully permitted and is targeting to finalize permits for another 360MW by the end of 2009.
— Gemini Solar, a Suntech joint venture with Renewable Ventures, a Fotowatio company, is pursuing a pipeline of approximately 1.1GW of projects in the U.S. that we have either bid on, or are preparing bids for, and which are scheduled to be developed over the next 3 or 4 years.

China Market
— Suntech recently submitted 179MW of rooftop solar project applications for China’s national rooftop solar subsidy.
— Suntech announced the ground breaking of a 1.5MW rooftop solar project in HuaiAn City, Jiangsu Province, China. This is expected to be the first one megawatt plus rooftop solar system in Jiangsu Province. Suntech is currently implementing a 3MW project for the Shanghai World Expo.

Global Market Penetration
— Suntech has shipped a total of more than 1.2GW of solar products since inception of the Company.
— Suntech intends to double its sales and marketing team in Europe over the next three to six months to enhance localized service and support for existing and prospective customers. Europe continues to drive global solar demand accounting for over 80% of Suntech revenues in the first quarter of 2009.
— Suntech entered into an agreement with House Care Co. Ltd. under which House Care will be an authorized distributor of Suntech in Japan and distribute 30MW of Suntech solar products in 2009. Suntech targets over 40MW of sales into Japan in 2009.

U.S. Market
— Gemini Solar was awarded a contract by Austin Energy, the municipal electric utility in Austin, Texas, to build a 30MW PV power plant in 2010.
— Suntech continued to expand its national dealer network in the U.S to expand market share in the residential and small commercial rooftop segment. Currently, Suntech’s network includes over 200 dealers, up from 40 at the end of 2008.
— Suntech recently announced plans to establish a manufacturing base in the U.S. as part of its strategy to create a long-term presence within
the U.S.

Technology
— The Fraunhofer Institute recently tested a mono-crystalline Pluto PV cell with a conversion efficiency of 18.8% and a multi-crystalline Pluto PV cell with a conversion efficiency of 17.2%. Both were produced using standard grade silicon solar wafers on Suntech’s commercial scale production line.
— Suntech is collaborating with the Swinburne University of Technology in Australia to develop nanoplasmonic solar cells that are twice as efficient and run at half the cost of those currently available.

Convertible Senior Note Repurchase
— Through March 31, 2009, Suntech repurchased an aggregate of $244.2 million principal amount of its 0.25% Convertible Senior Notes due 2012 for a total consideration of $190.9 million. Suntech currently has $255.8 million principal amount of 2012 convertible notes outstanding.

First Quarter 2009 Results

Total net revenues for the first quarter of 2009 were $315.7 million, a decrease of 23.8% from $414.4 million in the fourth quarter of 2008. The sequential decrease in revenues was primarily due to a decrease in the average selling price of PV products and a decline of shipments.

Total net revenues to the investee companies of GSF were $100.5 million in the first quarter of 2009. It mainly reflected the sales of PV products to two investment projects held by the GSF. Sales to the investee companies of GSF were conducted under terms comparable to those with unrelated parties; and the revenue and profit related to the sales activities during the first quarter of 2009 were fully recognized during the same period.

For the first quarter of 2009 gross profit was $56.3 million and gross margin was 17.8% compared to gross profit of $2.3 million and gross margin of 0.6% in the fourth quarter of 2008. The increase in gross profit was primarily due to a decrease in silicon wafer cost, non-silicon wafer production costs, and a reduction in inventory provision.

Operating expenses for the first quarter of 2009 were $35.1 million compared to $46.2 million in the fourth quarter of 2008. The decrease in operating expenses was primarily due to improved cost controls, enhanced operating efficiency and a reversal of provision for doubtful debts.

Income from operations was $21.1 million for the first quarter of 2009 compared to a loss from operations of $43.8 million in the fourth quarter of 2008.

Net interest expense was $21.6 million in the first quarter of 2009 compared to net interest expense of $21.1 million in the fourth quarter of 2008. Addition of non-cash interest expense resulted from the adoption of FASB Staff Position No APB14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB14-1”), and amounted to $11.7 million and $13.1 million in the first quarter of 2009 and the fourth quarter of 2008, respectively.

Foreign currency exchange loss was $6.2 million in the first quarter of 2009 compared to a loss of $3.2 million in the fourth quarter of 2008.

Net other income was $12.6 million in the first quarter of 2009, compared with $52.0 million of net other expense in the fourth quarter of 2008. The net other income in the first quarter of 2009 was mainly due to $9.3 million in gains from the convertible senior notes repurchase and $3.2 million in gains from mark-to-market valuation of foreign exchange forward contracts. The net other expense during the fourth quarter of 2008 was primarily due to investment impairments in Suntech’s upstream investments.

Net income attributable to holders of ordinary shares for the first quarter of 2009 was $1.8 million, or $0.01 per diluted ADS compared to a net loss of $109.1 million, or negative $0.70 per diluted ADS, in the fourth quarter of 2008.

In the first quarter of 2009, the major non-cash related expenses were share-based compensation charges of $4.0 million; additional $11.7 million of non-cash interest expenses related to the adoption of FSP APB 14-1; and depreciation and amortization expenses of $15.3 million.

In the first quarter of 2009, capital expenditures, which were primarily mainly for the construction of our thin film production facilities in Shanghai, and to retrofit our existing production capacity to enable production of PV modules based on our high efficiency Pluto technology, totaled $60.9 million.

Cash and cash equivalents decreased to $406.0 million as of March 31, 2009 from $507.8 million as of December 31, 2008. The decrease was primarily due to repurchases of Suntech’s 0.25% Convertible Senior Notes due 2012.

Restricted cash increased to $179.1 million as of March 31, 2009 from $70.7 million as of December 31, 2008. The increase was mainly due to the pledges of cash in order to obtain bank notes facilities and loan borrowings.

Account receivable due from investee companies of GSF was $104.9 million as of March 31, 2009, compared with nil as of December 31, 2008.

Business Outlook

Suntech expects moderate revenue growth in the second quarter of 2009. Suntech expects full-year 2009 shipments to be in the range of 600MW to 700MW reflecting a constrained project financing environment and the resultant limited demand visibility. Suntech intends to hold PV cell production capacity at 1GW in 2009 until demand visibility improves. Suntech expects capital expenditures of approximately $100 million in 2009.

Recent Management Hires

Mr. Wei-Tai Kwok joined Suntech in the role of Vice President of Marketing, Suntech America. Mr. Kwok brings over 20 years of experience in global marketing to Suntech America, where he will be responsible for field marketing, marketing communications, product marketing and strategic alliances. Previously, Mr. Kwok was responsible for new business development and client management as San Francisco Managing Director at Molecular, the ebusiness solutions division of Isobar, one of the largest digital marketing networks in the world and a wholly owned subsidiary of Aegis Group PLC. Reflective of Mr. Kwok’s commitment to environmental issues and corporate social responsibility, he is a founding board member of the U.S.-China Green Energy Council, a non- governmental think tank established to search for global solutions for combating global warming, energy security, and environmental pollution.

Mr. Kent Huang joined Suntech as Regional General Counsel, Asia Pacific, and is responsible for all operational legal issues in that region. With a legal career spanning almost two decades, Mr. Huang has spent the last 12 years managing the legal infrastructure supporting the Greater China operations of Unilever PLC. Mr. Huang received his law degree from the East China University of Political Science and Law in Shanghai and is currently undertaking an EMBA with the China European International Business School.

First Quarter 2009 Conference Call Information

Suntech management will host a conference call today, Thursday, May 21, 2009 at 8:00 a.m. Eastern Time (which corresponds to 8:00 p.m. Beijing/Hong Kong time and 12:00 p.m. Greenwich Mean Time on May 22, 2009) to discuss the Company’s results.

To access the conference call, please dial +1-617-213-8845 (for U.S. callers) or +852-3002-1672 (for international callers) and ask to be connected to the Suntech earnings conference call. A live and archived webcast of the conference call will be available on Suntech’s website at http://www.suntech-power.com under Investor Center: Financial Events.

A telephonic replay of the conference call will be available until June 11, 2009 by dialing +1-617-801-6888 (passcode: 70540414).

    Note: The quarterly consolidated income statements are unaudited. The
    condensed consolidated balance sheets are derived from Suntech's
    unaudited consolidated financial statements. Effective January 1, 2009,
    as a result of the adoption of Statement of Financial Accounting
    Standards, or SFAS 160, Non-controlling Interests in Consolidated
    Financial Statements - An Amendment of ARB No. 51.and FASB Staff Position
    No. APB 14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash upon Conversion (Including Partial Cash Settlement), our
    condensed consolidated balance sheet as of December 31, 2008 has been re-
    casted for comparable purpose. The following tables set forth the
    adjusted unaudited condensed consolidated balance sheet as of December
    31, 2008, the unaudited condensed consolidated balance sheet as of March
    31, 2009, the adjusted unaudited condensed consolidated income statements
    for the three months ended March 31, 2008 and December 31, 2008 and the
    unaudited condensed consolidated income

                       SUNTECH POWER HOLDINGS CO., LTD.
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                  (In $'000)

                                              As of       As of       As of
                                            March 31,  December 31,December 31,
                                              2009        2008        2008
                                                      As adjusted As reported
    ASSETS
    Current assets:
      Cash and cash equivalents              405,995     507,789     507,789
      Restricted cash                        179,134      70,710      70,710
      Inventories                            242,690     231,874     231,874
      Accounts receivable - Investee
       companies of GSF                      104,940          --          --
      Accounts receivable - Others           160,414     213,118     213,118
      Value-added tax recoverable             87,099      75,667      75,667
      Advances to suppliers                   70,513      56,873      56,873
      Other current assets                   255,477     165,887     165,887
    Total current assets                   1,506,262   1,321,918   1,321,918

    Property, plant and equipment, net       720,821     684,497     684,497
    Intangible assets, net                   163,619     176,677     176,677
    Goodwill                                  80,930      87,595      87,595
    Investments in affiliates                225,358     221,106     221,106
    Long-term prepayments                    195,346     248,807     248,807
    Long-term loan to suppliers               56,150      83,972      83,972
    Amount due from related parties          216,387     277,991     277,991
    Other non-current assets                 104,112     104,365     121,214
    TOTAL ASSETS                           3,268,985   3,206,928   3,223,777

    LIABILITIES AND EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                           791,706     638,426     638,426
       Accounts payable                      153,382     117,499     117,499
        Convertible notes-current            239,341          --          --
       Other current liabilities             228,893     220,810     220,810
    Total current liabilities              1,413,322     976,735     976,735

    Long-term bank borrowings                 17,486       5,894       5,894
    Convertible notes-non-current            446,964     812,874     981,236
    Accrued warranty costs                    43,025      41,430      41,430
    Other long-term liabilities              119,861     135,655     135,654
    Total liabilities                      2,040,658   1,972,588   2,140,949

    Minority interest                             --          --       8,478

    Total equity                           1,228,327   1,234,340   1,074,350

    TOTAL LIABILITIES AND EQUITY           3,268,985   3,206,928   3,223,777

                         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
                                           March 31,   December 31,  March 31,
                                             2008         2008         2009
                                          As adjusted  As adjusted

    Total net revenues                      434,514      414,413      315,656
        - Investee companies of GSF              --           --      100,547
        - Others                            434,514      414,413      215,109

    Total cost of revenues                  338,107      412,068      259,369

    Gross profit                             96,407        2,345       56,287

    Selling expenses                         15,273       14,531       11,401
    General and administrative expenses      16,499       27,112       18,820
    Research and development expenses         2,792        4,529        4,923
    Total operating expenses                 34,564       46,172       35,144

    Income/(loss) from operations            61,843      (43,827)      21,143

    Interest expenses                       (18,120)     (31,136)     (26,743)
    Interest income                           5,041       10,073        5,098
    Foreign exchange gain/(loss)              2,906       (3,190)      (6,191)
    Other (expense) income                     (804)     (52,000)      12,567

    Income/(loss) before income taxes        50,866     (120,080)       5,874
    Tax provision                            (5,523)      11,073           78

    Net income/(loss) after taxes
     before noncontrolling interest and
     equity in earnings of affiliates        45,343     (109,007)       5,952
    Equity in (loss) earnings of
     affiliates                                  --          287       (3,874)

    Net income/(loss)                        45,343     (108,720)       2,078
    Add: Net loss (income) attributable
     to non-controlling interest              1,346         (401)        (292)

    Net income/(loss) attributable to
     holders of ordinary shares              46,690     (109,121)       1,786

    Net income/(loss) attributable to
     ordinary shareholders  per share
     and per ADS:
    - Basic                                    0.30        (0.70)        0.01
    - Diluted                                  0.27        (0.70)        0.01

    Shares and ADSs used in
     computation:
    - Basic                             153,124,488  155,880,532  155,881,265
    - Diluted                           173,770,151  155,880,532  156,794,603

    Each ADS represents one ordinary share

    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:
     Sanjay M. Hurry
     Vice President
     The Piacente Group, Inc.
     Tel:   +1-212-481-2050
     Email: suntech@tpg-ir.com
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