Number one in solar: Suntech tops $2.9 billion in revenues, 1.57GW in module shipments

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Suntech became the number-one solar company in the world, beating its guidance for the quarter and the year, as fourth-quarter net revenues hit a record-high $945 million and fiscal-year revenues totaled more than $2.9 billion. Annual shipments of PV modules also topped the target, reaching 1.572GW—more than double the amount shipped in the previous year—with fourth-quarter shipments reaching 7MW per day at the peak of the period, according to company executives.    

But Suntech’s margins remained in the teens, below those of most Tier One solar companies. Gross profit margins for the quarter slipped to 16.2%, largely because of higher-than-expected cost of silicon wafers, said CFO Amy Zhang during the earnings conference call. Consolidated annual margins ended at 17.4%, with the core wafer-to-module gross margin reaching 18.6%.

Net Q4 income after taxes before noncontrolling interest and equity in earnings of affiliates was $61.1 million, while net income attributable to holders of ordinary shares was $383.4 million. For the fiscal year, the net income to holders of ordinary shares was $262.3 million.

Suntech began to see financial benefits from both its recent acquisition of Rietech Solar and its participation in the Global Solar Fund (GSF) during the quarter.

The company recognized $24 million in equity income from earnings of the Rietech wafer business (which will be fully consolidated in Q1), while 95MW of PV projects of GSF projects were completed during the period (mostly in Italy), leading to a realization of equity income of $250 million.

Although Europe will continue to be the single biggest market for Suntech, the region will account for less of the company’s business in 2011, shrinking about 13% year over year.

The Italian market faces near-term uncertainty because of the looming change in policy, but is seen as a very healthy sector in the longer term, according to chief commercial officer Andrew Beebe. The company has modeled for a variety of scenarios and believes it will be able to move product to other markets within Europe should Italy experience a major drop-off in demand.

With more than 250MW of modules shipped, Suntech claimed to be the number-one supplier in the Americas, with its business in the region representing 20% of its Q4 revenues. Beebe said that demand is expected to at least double in the Americas in 2011.

Some 800,000 panels will be shipped over the next 18 months to the 150MW (AC) Mesquite Solar project starting construction later this year in the Arizona desert, he noted.

The Asia-Pacific, Middle East, and Africa region also accounted for about 20% of revenues in Q4, with China and Japan leading the way.

The company’s home market may be “waking up,” according to company chairman/CEO Zhengrong Shi, with about 500-600MW installed in 2010 and >1GW expected this year.

On the production front, Suntech achieved 1.8GW of PV cell/module capacity, with 500MW of silicon ingot/wafer capacity online as of Dec. 31.

Shi said during the call that the company is on track to have about 800MW of silicon capacity by the end of Q1 2011 as part of its vertical integration strategy, although it will use only 150MW of those internally produced wafers during the quarter.

As part of its 2011 guidance, the company said it will have 2.4GW of cell/module capacity available by the end of the year (including 600MW of joint-venture production in Wuxi coming up midyear), as well as 1.2GW of internal wafering capabilities.

Wafer-to-module nonsilicon production costs decreased by a penny to 51 cents per watt during Q4, but silicon wafer costs rose about 9% between Q3 and Q4. As more of the company’s internal wafering capacity comes online, the wafer costs are expected to fall 15% in Q1 2011;

The nonsilicon costs are targeted to drop to 45 cents or less in 2012, with the wafer costs going down from 25 cents (internal, fully loaded) to 22 cents or less within the year, according to Shi.

The average selling price of Suntech cells fell from $2.40/W in 2009 to $1.82/W in 2010. By the end of 2011, Beebe said the ASP should go down 17-20%.

CTO Stuart Wenham said that the company had enhanced its production technology and optimized certain processes, including introducing in-house automation equipment, which has led to a lower headcount per megawatt manufactured on the cellmaking line.

Some 50MW of modules incorporating the high-efficiency Pluto cells shipped in 2010, with that amount expected to be quadrupled by the end of 2011, according to the technology officer.

Noting that 450MW of Pluto capacity has become “fully functional,” he also cited “extremely strong demand” for the advanced product and added that the company would be ramping significant Pluto-enabled module capacity in the second half of the year.

During the call, Shi said Pluto’s monthly run rates should reach 40MW by year’s end. Wenham also explained that the new cell production capacity coming online via the Wuxi joint venture will be flexible and could be used as Pluto lines, if needed.  

For the full-year 2010, capital expenditures, which were mainly related to the construction of production facilities in Shanghai and other infrastructure projects to support expansion of Pluto high-efficiency cell capacity, totaled $335.6 million. The company is guiding capex of $250 million to $270 million for 2011.

For 2011, Suntech expects PV shipments to be relatively flat in Q1 compared with Q4 2010. Due to the integration of wafer manufacturing capacity, the company sees consolidated gross margin increasing several basis points, to approximately 20%.

For the full fiscal 2011, Suntech’s has not changed its guidance originally presented in December. It expects to ship at least 2.2GW of solar products and generate revenues of $3.4 billion to $3.6 billion (subject to changes in foreign exchange rates), with consolidated gross margin ranging from approximately 20% to 22%.

When asked about the overall global solar market for 2011, CCO Beebe said the company’s outlook has been adjusted upward from December estimates of 15-16GW to something more in the 17-20GW range.

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