Module shipments up, revenues flat in Q3, as China Sunergy warns of weak Q4

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Upon the disclosure of its third quarter 2011 financial results, China Sunergy noted that its results were direct reflections of lackluster market demand, coupled with faster than expected average selling price (ASP) declines and inventory write-downs. The Q3 2011 revenues saw no significant change with revenues being finalized at US$145.8 million, a 1.3% increase over Q2 2011 results and a 15.9% year-over-year surge.

China Sunergy advised that the slight 1.3% increase quarter-over-quarter in its revenues was mainly due to an increase in quarterly shipments, but went on to note that corresponding revenues were offset by falling ASPs.
Shipments for the third quarter totaled 116.2MW, of which module shipments accounted for 115.6MW, the highest quarterly shipment volume for the company to date.

Although the shipment results showed a 30.1% increase over Q2 2011 shipments, actual shipments fell below the company’s previously stated guidance of 140MW to 160MW. The company also stated that sales decreased in Q3 from the European market, but increased in new market segments. Revenue from module sales was US$145.5 million, making up 99.7% of the quarter’s total revenue.

Gross margin for Q3 2011 was -13.7%, lower than the 4% to 5% range China Sunergy originally forecasted. The company commented that its gross margin results were affected by the added US$26.8 million in inventory provisions stemming from falling ASPs. The average selling price per watt for China Sunergy’s modules was US$1.26 per watt, a 23.2% dip over Q2’s US$1.64 per watt results.

Stephen Cai, CEO of China Sunergy, commented, “Our third quarter results were disappointing, and we foresee more difficulties in the fourth quarter and winter months. The whole industry is experiencing pain at the moment. Rapidly falling prices have disrupted demand temporarily, as customers delay purchases while waiting for prices to stabilize. But solar power prices are getting closer to grid parity in comparison to the cost of electricity generated by fossil fuels, and the long term future for survivors in this industry is bright. Companies like China Sunergy, which can move quickly to cut spending and output, while maintaining strong cash reserves and financing arrangements, are in a good position to ride out the storm. Moreover, our efficient and cost-competitive Quasar technology is the crucial factor that will allow China Sunergy to persevere and ultimately thrive.” 

In the outlook for the fourth quarter and full year guidance, China Sunergy acknowledged that a continuously weak demand in the market and an industry oversupply would continue to affect its results. The company is expecting shipments in Q4 2011 to reach between 95MW and 110MW. Gross margin levels are anticipated to break even in the quarter while a net loss is projected during Q4.  The full 2011 year has China Sunergy predicting total shipments to be between 395MW and 410MW.

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