Updated: There were no obvious surprises in Suntech’s first-quarter financial results. Total net revenues were US$877.0 million, a decline of 7.2%, while shipments were only down 3.1% sequentially, but increased 62.9% year-over-year. In line with other major PV module manufacturers, Suntech noted the weak demand scenario in Italy due to the FiT review and overall challenging environment and pricing pressure. Suntech reiterated that it expected to ship 2.2GW of modules in 2011, but due to pricing pressure, the top end of its revenue guidance was reduced by US$100 million to a range of US$3.3 billion to US$3.5 billion.
“The first quarter of 2011 was a solid quarter that demonstrated the resilience of Suntech's business model under challenging market conditions,” commented Dr. Zhengrong Shi, chairman and CEO. “Despite a slight sequential decline in our shipments related to policy uncertainty in Italy, a long winter in Germany and first-quarter seasonality, we improved our gross margin from the fourth quarter and continued to diversify our sales across global markets. These outcomes reflect our ongoing efforts to enhance our competitiveness, mitigate policy risk, and position Suntech to increase our share in high-growth emerging markets. In particular, we were pleased to see greater demand in the Chinese solar market during the first quarter.”
Suntech reported gross profit of US$166.9 million and gross margin of 19.0%, one percentage point below previous guidance. Gross profit in the fourth quarter was US$153.4 million, with a gross margin of 16.2%. The company noted that the sequential increase in gross margin was primarily due to the lower cost of in-house silicon wafers used in production.
Income from operations was US$94.5 million for the first quarter of 2011, compared to US$90.2 million in the fourth quarter of 2010 and US$63.5 million in the first quarter of 2010.
Suntech also noted that it had reached 2.2GW of PV cell and module capacity by the end of the first quarter. Silicon ingot and wafer capacity had reached 1GW at the end of the first quarter.
Guidance for the second quarter sees shipments increasing only in the low single-digit range; some of Suntech's rivals have guided shipments to pick up strongly.
Suntech expects cell and module production capacity to reach 2.4GW by the end of the second-quarter 2011, of which 600MW of PV cell capacity will be owned and operated by a joint venture.
The company also noted that it expected to reach 1.2GW of installed wafer capacity by the end of 2011. Capital expenditure targets are to be maintained in the range of US$250 million to US$270 million.
A spike in production costs were attributed to the rising price of silver paste and exchange rate fluctuations.
Shi also noted that polysilicon costs in the quarter were US$60/kg, and that a further decline in prices was expected going forward, though he did not provide a price cost range for the decline. Suntech has many long-term contracts for polysilicon. Wafer prices have dropped even faster, according to the company head. These cost reductions are expected to support margins despite ASP pressure.