China Sunergy forced to increase OEM sales business

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Due to previously announced working capital constraints, China Sunergy (CSUN) was forced to increase its exposure to providing PV modules under OEM agreements in the third quarter of 2013.

The company reported third quarter revenue of US$57.1 million, a 20.6% decline from US$71.9 million in the second quarter. Module ASPs, excluding those processed under OEM arrangements was US$0.62 per watt, a decrease of 1.6% from US$0.63 in the second quarter of 2013.

CSUN reported a gross profit of US$1.7 million, and gross margin of 3.0%, compared with gross profit of US$6.7 million and gross margin of 9.3% in the second quarter of 2013.

However, the company reported a loss from operations that increased to US$13.1 million in the third quarter, compared to US$4.6 million in the second quarter of 2013.

Cash, cash equivalents and restricted cash totalled US$216.4 million.

Finlay Colville, vice president at NPD Solarbuzz told PV Tech that Sunergy does not have the same global brand or marketing status as Yingli Green or Trina Solar, which in part had forced Sunergy to increase its OEM module processing, which would have lowered margins further in spite of many rivals seeing improved margins as ASPs increased.

“The fact that Sunergy is now relying on OEM module processing highlights once again that outsourcing of key components in the PV industry is not limited to lower tier players in China,” noted Colville.”OEM deals are becoming an essential part of any diversified working strategy, especially for manufacturers that lack a strong global market presence and want to keep utilisation rates at respectable levels.”

CSUN reported that Asia contributed 63.2% of the total shipment in the quarter, with India, China and Japan accounting for 24.0%, 23.1%, and 16.1% of total revenue, respectively.

“Sunergy has diversified its PV operations over the past 12-18 months,” added Colville. “This includes high-spec c-Si cell manufacturing, in-house branded modules, OEM module services, downstream project development, and having both domestic and overseas cell and module capacity. It remains unclear whether having such a wide range of options will turn out to be an advantage or a hindrance as the PV industry develops during 2014.”

CSUN management noted that recent positive Chinese Government policies and incentives for the solar industry enacted had boosted local banks' confidence and support for the PV sector, which had meant the company had been able to secure additional working capital for operations. 

“China Sunergy is progressively moving back on track, as we secure additional working capital and further enhance operations through higher production efficiency and more disciplined cost and expense controls. As such, we are optimistic that China Sunergy will capture additional market opportunities and gain greater operational scale,” said Stephen Cai, CEO of China Sunergy.

Shipment guidance

The company said that the easing of working capital issues and stronger-than-expected OEM shipments for the fourth quarter meant that shipments in the fourth quarter would be in the range from 158MW to 168MW, including approximately 40MW of solar module processed under OEM arrangements. Gross margin for the fourth quarter of 2013 is expected to be in the ‘mid-single digit’ range                             

CSUN also raised its full-year 2013 total shipment guidance to be the range of 500MW to 510MW, up from the prior range of 440MW to 480MW.

However, according to Colville, CSUN’s results highlight that module pricing improvements in Europe after the anti-dumping case was settled continue to cause problems for companies manufacturing in Europe.

“Any positive impact from higher ASPs in the European market are yet to be seen in Sunergy’s results, given that China-made module shipments have been set at €0.56/W, noted the NPD Solarbuzz analyst. “There is also the risk that modules leaving the factory in Turkey may have to be priced below the China pricing floor, to compete with other non-Chinese modules being sold into Europe today. The situation will become clearer in a few months, once European PV inventory stabilises and Sunergy starts producing greater volumes from Turkey.”

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