Suntech sees record Q2 revenues, shipments, but posts loss due to thin-film closure, Shunda problems

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Suntech saw revenues and shipments grow to record levels during the second quarter, but the Chinese solar manufacturer experienced a net loss for the period because of impairment charges related to the shutdown of its thin-film PV efforts and prepayment provisions as part of its stake in the Shunda solar-wafer venture. Because of continuing strong demand, the company has raised its PV module shipment guidance for 2010 by 200MW and has increased its targeted production capacity to meet the larger shipment number.

Net revenues for the second quarter ended June 30 reached $625.1 million, an increase of 6.3% from $588 million in Q1 2010 and 94.8% from $321 million in Q2 2009. Gross margin slipped to 18.2% during the period, compared to 19.5% in the previous quarter; the reduced margin was attributed to a lower average sales price resulting from depreciation of the Euro versus the US dollar.

Operating expenses for the just-completed quarter grew to $132.9 million, compared to $51 million in the first quarter, an increase caused by the noncash impairment of thin-film equipment of $54.6 million and special prepayment provision of $25 million to account for credit risks associated with the delivery of silicon wafers from Shunda (which is undergoing a “significant reorganization”).

A loss from operations of $19.1 million was also incurred during Q2, compared to the income of $63.5 million seen in the previous period—a decline also attributed to the stoppage of thin-film efforts and the situation at Shunda.

A net loss of $174.9 million was seen in the second quarter—again largely due to the thin-film and Shunda actions—compared to net income of $20.7 million for the first quarter of the year.

Capital expenditures during Q2 2010 amounted to $92.6 million and were mainly used to add new production equipment.

Manufacturing capacity reached 1.4GW, fueled by an 11.9% increase in total PV shipments. Suntech cut its nonsilicon-related manufacturing costs to 52 cents/Wp in the quarter, while silicon wafer costs were flat sequentially.

The company also said that monthly production of its high-efficiency Pluto modules grew to 6MW.

Suntech expects shipments to increase by 15% to 20% sequentially in the third quarter, with gross margin expected to be in the mid- to high teens during the period.

The company has bumped up its shipment target for 2010 from 1.3GW to 1.5GW, and is looking to increase its cell production capacity to 1.8GW by year’s end. Because of the projected capacity expansion, capex of $300 million to $350 million will be incurred in 2010, a significant rise from the previously guided $200 million.

Chairman/CEO Zhengrong Shi made the following statement in conjunction with the earnings announcement.

“The second quarter was another period of robust multimarket demand. Strong operational execution ensured that we achieved our 1.4GW capacity target, which drove higher-than-expected shipment and net revenue growth.

“We delivered greater shipments to valued customers across Germany and other European markets including Italy, France, Benelux, and the Czech Republic. Our investments into our North American expansion continued to bear fruit as we broadened market share and prepared for US-based manufacturing that will commence in the fourth quarter. We also secured supply agreements to several large, high-profile projects in emerging markets, including Thailand, India, and Israel, where our globally respected brand, reliable product performance, and deep sales channels have provided a solid foundation to form new partnerships.

“Despite successful sales expansion and strong execution during the second quarter, our financial results bear the significant impact of our Shanghai facility restructuring and Shunda Holdings investment impairments. These were necessary adjustments to make, and they have no impact on our core manufacturing operations. Now that they are behind us, we are in a better position to address the growth we are expecting in our core business.

“With an outlook of ongoing growth in solar demand, we have decided to accelerate the next phase of capacity expansion and now target to achieve 1.8GW of cell and module capacity by the end of 2010. This will enable us to increase our 2010 shipment target from 1.3GW to 1.5GW to help support our growing global portfolio of Suntech customers and drive market share expansion,” he concluded.

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