China Sunergy lowers shipment and revenue forecast on tightened credit from Chinese banks

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Despite increased shipments and sales reported in its second quarter (FY) results, China Sunergy has been forced to lower quarterly and full-year guidance due Chinese banks tightening credit facilities, restricting the company’s ability to purchase materials and products for production.

Stephen Cai, CEO of China Sunergy said in a statement, “There were many positive takeaways for China Sunergy in the second quarter, in terms of our operations and the improving market environment.  However, during the second quarter, Chinese banks significantly tightened credit facilities to solar companies, which caused us to face a constrained working capital and reduced our ability to procure adequate inventory for subsequent production.  As such, we anticipate lower shipment volume and profitability for the third quarter of 2013, and correspondingly, we also anticipate lower total shipment for full year 2013.”

For the third quarter of 2013, China Sunergy guided total shipments would be approximately 110MW including approximately 20MW of solar module processed under OEM arrangement.

However, the scale of the impact of tightening credit facilities from Chinese banks is highlighted in China Sunergy’s FY 2Q shipments, which included 25.7MW of module shipments processed under OEM arrangements and total module shipments of 125.1MW.

The situation is not expected to improve significantly in its FY Q4 as full-year shipment guidance was revised down to between 440MW to 480MW, from the prior range of 500MW to 550MW. Shipments are to remain flat at around 110MW for the next two quarters.

FY 2Q financials

China Sunergy reported total revenue of US$71.9 million, an increase of 16.5% from US$61.7 million in the first quarter of FY2013.

Gross profit was US$6.7 million, and gross margin was 9.3%, compared with gross profit of US$0.3 million and gross margin of 0.4% in the first quarter of 2013.

Net loss attributable to ordinary shareholders fell to US$1.4 million, from US$22.9 million in the preceding quarter. Net loss attributable to ordinary shareholders per ADS improved to US$0.11, compared to net loss per ADS of US$1.71 in the first quarter of FY2013.

Operating cash inflow was reported at US$6.3million, compared to net cash outflow of US$41.7 million in the first quarter of FY2013.

Cash, cash equivalents and restricted cash totalled US$219.8 million, as of June 30, 2013.

Sales

On a regional basis, Germany became the largest market, accounting for 29.1% of total revenue in the quarter, while France, accounted to 28.4% of total revenue. China and Japan, contributed 10.3% and 7.7% of total revenue, respectively.

The company noted that PV module ASP for the second quarter was US$0.63 per watt, which increased by 6.8% compared with that of the last quarter. The higher ASP was said to have due to an improvement in imbalance of supply and demand due to the anti-dumping legislation in the European Union, as well as increased shipments to high pricing regions, such as Australia and US.

Management noted in a conference call to discuss quarterly results that the company was is in discussions with a number of banks to establish new lines of credit as in September banks were feeling less concerned about financial risks of solar companies after the EU anti-dumping case was settled. However, management noted that banks were checking on the financial performance of companies such as China Sunergy on a monthly basis. 

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