North Coast Solar Stocks

November 19, 2009

Suntech Reports Third Quarter 2009 Financial Results

Filed under: STP — Tags: , , , , , , — Jason @ 6:30 am

Shipments Grow More Than 60% Sequentially
Full Year 2009 PV Shipment Target Increased from 600MW to a Range of 640MW to 660MW

6:30 am EST, Thursday November 19, 2009

SAN FRANCISCO and WUXI, China, Nov. 19 /PRNewswire-Asia/ — Suntech Power Holdings Co., Ltd. (STP), the world’s largest crystalline silicon photovoltaic (PV) module manufacturer, today announced financial results for its third fiscal quarter ended September 30, 2009.

Third Quarter 2009 Highlights
— Total net revenues increased 47.4% sequentially to $473.1 million in the third quarter of 2009

— Gross profit margin for the core wafer to module business was 20.0% in the third quarter of 2009, compared with 19.1% in the second quarter of 2009

— Consolidated gross profit margin was 17.8% in the third quarter of 2009, compared with 18.6% in the second quarter 2009

— Net income attributable to holders of ordinary shares was $29.8 million, or $0.16 per diluted American Depository Share (ADS). Each ADS represents one ordinary share

— Suntech’s multi-crystalline Pluto-powered module achieved world record conversion efficiency of 16.53%

— Full-year 2009 PV shipment target increased from 600MW to a range of 640MW to 660MW

— Suntech targets to increase total PV cell and module production capacity to 1.4GW by the middle of 2010, of which 450MW will be Pluto-enabled

“We are very pleased to announce strong revenue growth and a healthy bottom line for the third quarter of 2009,” said Dr. Zhengrong Shi, Suntech’s Chairman and CEO. “The significant pick up in demand was largely due to a seasonal rush before end-of-year policy adjustments and improving customer returns on investments in solar projects. It was also due to customer recognition of Suntech’s attractive value proposition of exceptional product performance at a reasonable price.

“Complementing strong growth in the German market, we are particularly pleased to see 100% sequential shipment growth in the U.S. market and the rapid development of a number of non-traditional PV markets such as the Czech Republic, Benelux, China. This demonstrates the ongoing diversification of the solar industry and Suntech’s ability to enter emerging markets.

“During the third quarter we continued to develop Suntech’s industry-leading sales and service infrastructure and to differentiate our products through innovation. In Europe, we strengthened our local team with the addition of four new senior executives; in the U.S. we launched our North American Partner Program; and in China we continued to build one of the nation’s most capable system installation and project development teams.

“On the technology front, our proprietary Pluto technology set another world record conversion efficiency of 16.53% for a commercial grade multi-crystalline silicon module. This record beat all previous records for multi-crystalline silicon modules made in the lab or on commercial production lines and reinforces our dedication to providing the most advanced and cost-effective solar solutions. In addition, we introduced Reliathon(TM), an industry-first integrated utility-scale solar platform combining product and business-term innovations to lower costs and accelerate the path to grid parity.

“Looking forward, we expect the sales momentum to carry into the new year and see potential for at least 75% shipment growth in 2010. To support the increased volume we have decided to move forward with expansion plans and target to reach 1.4GW of PV cell and module production capacity by the middle of 2010. With our commitment to delivering premium quality products at a reasonable price, expanding our global service platform and delivering world-class innovation, we believe we are extremely well positioned to continue to build market share and serve a growing base of solar customers,” concluded Dr. Shi.

RECENT BUSINESS HIGHLIGHTS

New Manufacturing and Service Initiatives

— Suntech selected the greater Phoenix, Arizona as the site for its first U.S. manufacturing plant. The plant will have an initial production capacity of 30 MW, provide employment for a minimum of 75 people, and is expected to begin production in the third quarter of 2010.

— Suntech’s new North American Partner Program will offer selected dealers a co-marketing fund, training and services, financing programs, and priority access to its innovative product line.

— Suntech recently broadened its European management team with the appointment of four new senior executives. The company has quadrupled employees of Suntech Europe in 2009 in order to enhance Suntech’s world-class customer sales and service platform.

Sales Agreements and Project Announcements

— Suntech entered into a sales agreement with enXco, an EDF Energies Nouvelles Company, to supply up to 115MW of photovoltaic modules in 2010.

— Suntech targets to develop approximately 20% of the 91MW of solar projects that were approved under China’s Solar Rooftop Program. Suntech has completed 4MW of its approved projects and plans to develop the remainder by mid-2010.

— Suntech dedicated the first 10MW utility-scale solar power project in Shizuishan, Ningxia Autonomous Region, China. Developed in conjunction with China Energy Conservation Investment Corporation, this project is the first phase of a 50MW solar plant targeted to be completed by 2011.

— Suntech started developing a 10MW solar power plant in Dongtai, Jiangsu Province in conjunction with Huadian New Energy Development Co., Ltd. Suntech will supply solar modules and design and manage the installation of the plant.

— Suntech entered into a memorandum of understanding with Pakistan’s Alternative Energy Development Board to develop solar energy applications that address the energy shortage in Pakistan.

Technology

— Suntech announced that it has set a new world record conversion efficiency (aperture area only) of 16.53% for a multi-crystalline silicon module. The module was tested by the Fraunhofer Institute for Solar Energy Systems ISE.

— Suntech launched Reliathon, an industry-first integrated solar platform for utility-scale solar plants. Reliathon reduces total system costs as much as 10% and offers increases in revenue potential, with 13.8% more power warranted over the lifetime of the system.

— Suntech targets to reach 450MW of Pluto-enabled PV production capacity by mid-2010. This will include both retrofitted Pluto production lines and the addition of new Pluto production lines.

Third Quarter 2009 Results

Total net revenues for the third quarter of 2009 were $473.1 million, an increase of 47.4% from $321.0 million in the second quarter of 2009.

Gross margin for the core wafer to module business was 20.0% in the third quarter of 2009, compared with 19.1% in the second quarter of 2009.

For the third quarter of 2009, consolidated gross profit was $84.1 million and gross margin was 17.8% compared to consolidated gross profit of $59.7 million and gross margin of 18.6% in the second quarter of 2009. The lower gross margins were primarily due to low profitability of the systems integration business in China that has been implementing some of China’s first utility scale solar projects.

Operating expenses for the third quarter of 2009 were $39.3 million compared to $38.6 million in the second quarter of 2009. Operating expenses in the third quarter included a net $3.5 million reversal of bad debt provision.

Income from operations was $44.8 million for the third quarter of 2009 compared to $21.1 million in the second quarter of 2009.

Net interest expense was $23.5 million in the third quarter of 2009 compared to net interest expense of $24.3 million in the second quarter of 2009. Net interest expense in the third quarter of 2009 includes $11.3 million non-cash expenses of which $10.6 million was related to the adoption of FASB Codification 470-20-65. This compares to $11.6 million non-cash net interest expense in the second quarter of 2009.

Foreign currency exchange gain was $10.5 million in the third quarter of 2009 compared to $17.5 million in the second quarter of 2009. The foreign currency gain in the third quarter was primarily related to the appreciation of the Euro versus the USD.

Net other expense was $3.8 million in the third quarter of 2009, compared with $2.5 million of net other expense in the second quarter of 2009. The net other expense in the third quarter was primarily due to losses from mark-to-market valuation of foreign exchange forward contracts.

Net income attributable to holders of ordinary shares was $29.8 million, or $0.16 per diluted ADS for the third quarter of 2009, compared to net income of $10.0 million, or $0.06 per diluted ADS, for the second quarter of 2009.

In the third quarter of 2009, the major non-cash related expenses were share-based compensation charges of $2.8 million; $11.3 million of non-cash interest expenses, as mentioned above; and depreciation and amortization expenses of $15.7 million.

In the third quarter of 2009, capital expenditures, which were primarily for the construction of the thin film production facilities in Shanghai and other infrastructure projects to support expansion of Pluto capacity, totaled $25.4 million.

Cash, cash equivalents and short-term principal guaranteed investment increased to $855.7 million as of September 30, 2009 from $760.5 million as of June 30, 2009.

Accounts receivable was $420.4 million as of September 30, 2009, compared with $292.1 million as of June 30, 2009. The increase was mainly due to strong revenue growth in the third quarter of 2009. Days sales outstanding were 80 days in the third quarter of 2009, compared to 82 days in the second quarter of 2009.

Accounts receivable due from investee companies of GSF was $112.1 million as of September 30, 2009, compared with $108.4 million as of June 30, 2009. The increase was due to the appreciation of the Euro versus the USD during the third quarter. Suntech expects to collect the outstanding accounts receivable from GSF investee companies before the end of 2009.

Inventory was $284.5 million as of September 30, 2009, compared with $269.7 million as of June 30, 2009. The increase in inventory was primarily due to the higher production rate and greater goods in transit to customers.

Accounts payable was $196.8 million as of September 30, 2009, compared with $120.1 million as of June 30, 2009. The increase in accounts payable was primarily due to extended credit terms with suppliers.

Business Outlook

Suntech expects fourth quarter 2009 shipments to be at least 10% higher than the third quarter of 2009. Gross margin in the fourth quarter of 2009 is expected to be relatively flat compared to the third quarter of 2009.

Suntech has increased full-year 2009 PV shipment target from 600MW to a range of 640MW to 660MW. Capital expenditures are expected to be approximately $120 million for the full year 2009.

Looking into next year, Suntech expects at least 75% shipment growth in 2010. The company targets to expand to 1.4GW of PV cell and module production capacity by the middle of 2010, of which 450MW will be Pluto-enabled. Accordingly, Suntech expects capital expenditures to be approximately $200 million in 2010.

Third Quarter 2009 Conference Call Information

Suntech management will host a conference call today, Thursday, November 19, 2009 at 8:00a.m. U.S. Eastern Time (which corresponds to 9:00p.m. Beijing/Hong Kong time and 1:00p.m. Greenwich Mean Time on November 19, 2009) to discuss the Company’s results.

To access the conference call, please dial +1-617-614-3523 (for U.S. callers/international callers) or +852-3002-1672 (for HK callers) and ask to be connected to the Suntech earnings conference call. To enhance the presentation of information and data during the conference call, Suntech has provided a set of PowerPoint slides which are posted on the main page of the Investor Center of Suntech’s website at http://www.suntech-power.com . 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 December 3, 2009 by dialing +1-617-801-6888 (passcode: 58674389).

    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. (Investor Relations Counsel, Suntech)
     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
                                                  Sept 30,          June 30,
                                                    2009              2009
    ASSETS
    Current assets:
      Cash and cash equivalents                    655,743           760,544
      Restricted cash                              158,414           180,369
      Inventories                                  284,548           269,705
      Accounts receivable                          420,385           292,145
        -----from GSF Investee Companies           112,114           108,410
        -----from others                           308,271           183,735
      Value-added tax recoverable                   52,532            78,433
      Advances to suppliers                         43,431            53,824
      Short-term investments                       200,000                --
      Other current assets                         280,869           200,790
    Total current assets                         2,095,922         1,835,810

    Property, plant and equipment, net             766,512           733,684
    Intangible assets, net                         172,376           165,221
    Goodwill                                        87,994            83,566
    Investments in affiliates                      240,366           229,080
    Long-term prepayments                          174,494           181,992
    Long-term loan to suppliers                     54,999            55,882
    Amount due from related parties                187,906           203,636
    Other non-current assets                       118,759           102,642
    TOTAL ASSETS                                 3,899,328         3,591,513

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 847,596           806,833
       Accounts payable                            196,782           120,130
       Convertible notes-current                   219,562           214,781
       Other current liabilities                   216,443           178,607
    Total current liabilities                    1,480,383         1,320,351

    Long-term bank borrowings                      136,281           136,174
    Convertible notes-non-current                  509,759           453,746
    Accrued warranty costs                          50,140            45,630
    Other long-term liabilities                    156,557           115,435
    Total liabilities                            2,333,120         2,071,336

    Total equity                                 1,566,208         1,520,177

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                      3,899,328         3,591,513



                        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
                                           Sept 30,     June 30,     Sept 30,
                                              2008         2009         2009
                                        As adjusted

    Total net revenues                      594,403      320,959      473,113
    Total cost of revenues                  466,065      261,263      389,036

    Gross profit                            128,338       59,696       84,077

    Selling expenses                         14,774       11,501       15,477
    General and administrative expenses      21,808       22,808       17,096
    Research and development expenses         4,682        4,322        6,753
    Total operating expenses                 41,264       38,631       39,326

    Income from operations                   87,074       21,065       44,751

    Interest expense                        -29,944      -25,884      -24,963
    Interest income                           8,805        1,577        1,430
    Foreign exchange (loss)/gain            -16,612       17,530       10,498
    Other expense                            -3,171       -2,546       -3,800

    Income before income taxes               46,152       11,742       27,916
    Tax (provision)/benefit                  -3,651          168         -122

    Net income after taxes before
     minority interest and equity in
     earnings of affiliates                  42,501       11,910       27,794
    Added Equity in (loss) earnings of
     affiliates                                  --       -2,293        2,377

    Net income                               42,501        9,617       30,171

    Earnings attributable to non-
     controlling interest                       141          357         -379

    Net income attributable to holders
     of ordinary shares                      42,642        9,974       29,792


    Net income per share and per ADS:
    - Basic                                    0.27         0.06         0.17
    - Diluted                                  0.25         0.06         0.16

    Shares and ADSs used in
     computation:
    - Basic                             155,835,915  164,483,191  178,916,675
    - Diluted                           185,490,716  172,611,156  182,138,633


    Each ADS represents one ordinary share

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