Suntech hits record revenues, shipments in Q3; plans to acquire 375MW of solar wafering capacity

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 Suntech Power Holdings saw its revenues and shipments increase dramatically during the third quarter, with sales reaching an all-time high. The solar PV company also said it plans to enhance the vertical integration of its production assets by buying 375MW of silicon ingot and wafer-slicing capacity from Glory Silicon for approximately $127 million.

Net revenues for Q3 2010 were $743.7 million, compared to $625.1 million in the second quarter of 2010 and $473.1 million in Q3 2009, representing respective increases of 19% and 57.2%. Net earnings reached $33.1 million, compared to a net loss of $174.9 million in the previous period.

Consolidated gross margin for the quarter was 16.4%, down from the 18.2% seen in Q2. The company attributed the sequential decline in gross margin primarily to a small decrease of average selling price, and a marginal increase in the cost of silicon wafers used in production.

Shipments of PV modules rose significantly, going up 25.3% versus the previous quarter and 107.1% year-over-year. Combined cell and module production capacity stood at 1.6GW at the end of Q3 and should reach 1.8MW by year’s end, the company said. Capital expenditures are expected to be about $350 million for 2010.

In the fourth quarter, Suntech said it expects at least 10% sequential growth in shipments, with a target of shipping more than 1.5GW of solar products for the year, which would represent growth of at least 113% compared to 2009.

The China-based company has guided consolidated gross margin of approximately 17% for Q4, a figure based on an assumed exchange rate of US$1.35 to the Euro.

The Global Solar Fund initiative is in the process of constructing a further 140MW of projects, of which at least 80MW are expected to be completed in the fourth quarter, according to Suntech. As a result the company expects that the fair value of those projects will increase significantly, and it will recognize a related gain in earnings of affiliates in the fourth quarter.   

As for the Glory Silicon acquisition, the wafer manufacturing capacity is being spun off from a subsidiary of Glory Silicon Technology Investments (Hong Kong) Ltd. in which Suntech holds an equity investment. The company will buy the remaining 70% shares of the capacity for a total cash consideration of approximately $127 million, which is the total consideration after an offset of approximately $80 million of liabilities owed to Suntech.

After the acquisition, Suntech will own 100% of the 375MW of wafer manufacturing capacity in China. The company will take operational control in the fourth quarter; it is expected to be immediately accretive to earnings.

Zhengrong Shi, Suntech’s chairman/CEO, made the following statements in conjunction with the quarterly financial announcement.

“The third quarter was a highly productive period for Suntech. Shipments and revenues each hit new quarterly records, and we reached production capacity of 1.6GW. We are on track to achieve our goal of 1.8GW cell and module capacity by the end of this year.

“In the third quarter, we continued to diversify our sales globally and participated in high profile solar projects across Europe, the Americas, and Asia Pacific. In Europe, we supplied a 5MW project in Thiva, which is one of the largest grid connected solar projects in Greece. In Asia Pacific, we were selected for phase two of a 44MW project in Thailand.

“We recently opened our module manufacturing facility in Goodyear, Arizona, which will help us to service the accelerating demand in the Americas.  Indicative of our rapid market penetration, we sold more product in the Americas in the third quarter of 2010 than we did in the full year 2009.

“We are also pleased to announce we are in the process of extending our vertical integration into the wafer segment of the solar value chain. As we expand our internal wafer manufacturing capacity, we are confident we will have an improving earnings profile as we benefit from lower wafer cost. Upstream integration is in line with Suntech's strategy to continue to reduce the cost of solar energy and stimulate greater global adoption of clean, renewable energy,” Shi noted.

Regarding the pending acquisition of the Glory Silicon ingot/wafer operations, Shi said the following.
“The acquisition of wafer manufacturing capacity is the next step of our vertical integration, which will enable Suntech to balance dual goals of large scale and low cost. The proximity of the manufacturing facility, operating experience of the management team, and ample capacity make this an ideal acquisition for Suntech.

“Over the next 12 months, we intend to expand internal wafer capacity to 25% to 50% of our total cell and module capacity. This should enable us to significantly reduce wafer cost, and improve profitability. Going forward, we also plan to leverage Suntech's global R&D resources to drive innovation and efficiency improvements in ingot and wafer manufacturing processes,” he said.   

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