China Sunergy shipments hold up but income crashes in first quarter



With its shift from cell producer to module producer virtually complete, China Sunergy produced first-quarter 2011 results in line with the fourth quarter of 2010, except in relation to higher inventory and falling module prices. Net income crashed 77.3% to US$3.5 million compared to the previous quarter net income of US$15.4 million. Revenue increased to US$165.7 million, a 58.9% increase year-on-year over Q1 2010 but a slight decrease of 2.3% over the fourth quarter of 2010.

Shipments in the first quarter totaled 98.0MW, compared to shipments of 97.9MW for the fourth quarter. Gross profit increased to US$17.8 million, an increase of 5.3% over Q1 2010 but decreasing 34.3% over Q4 2010.

Gross margin was 10.7%, higher than the company's previous guidance of 9.0-10.5%; gross margin in the fourth quarter was 16.0%. 

“We take a long-term view of the industry. Although European demand was soft in the first quarter, there are many untapped and developing markets abroad, not to mention China's eventual emergence as an end market,” commented Stephen Cai, CEO of China Sunergy. “We are preparing for the long-term by increasing in-house cell and module capacities, advancing our efficient-cell technology, and reducing our costs.  Despite current end demand softness and margin pressure faced by us and all our competitors, we are holding to our stated course of capacity expansion for high-efficiency, low-cost solar products.”

China Sunergy reported solar module average selling price per watt of US$1.74 per watt versus guidance of $1.70 per watt. ASP declined from US$1.93 per watt in the fourth quarter.

The company noted that revenues were held back primarily by uncertainty over feed-in tariffs in Italy and winter weather installation difficulties in other European markets. Inventories at the end of the first quarter reached US$124.1 million, a 71.6% increase over the end of 2010.

The company noted that its blended wafer costs were US$0.92 per watt, representing a sequential decrease of 7.1% as both polysilicon and wafers prices fell. China Sunergy noted that they expect prices to continue to decline in the second quarter.  Nonsilicon costs for cells and modules for the first quarter of 2011 were US$0.22 and US$0.31 per watt, respectively.

Like many of its competitors, China Sunergy expects second-quarter shipments to improve. The company guided shipments of between 120-130 MW, however, gross margin is expected to make further declines to between 7.5% and 8.5%, with an in-house margin of 12-13%.

The company reiterated previous guidance that it expected product shipments of between 670 – 690MW in 2011.

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