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Suntech Reports First Quarter 2008 Financial Results

SAN FRANCISCO and WUXI, China, May 22 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced first quarter 2008 financial results.

    First Quarter 2008 Highlights(1)

    -- First quarter 2008 total net revenues grew 76.1% year-over-year to
       $434.5 million.

    -- Consolidated gross margin increased to 22.2% for the first quarter 2008
       compared to 19.0% for the first quarter of 2007.  Non-GAAP(2) gross
       margin reached 22.5 % for the first quarter 2008, compared with 19.9%
       for the first quarter 2007.

    -- Net income for the first quarter 2008 was $55.8 million or $0.33 per
       diluted American Depository Share (ADS).  On a non-GAAP basis,
       Suntech's net income for the first quarter 2008 was $60.6 million or
       $0.35 per diluted ADS.  Each ADS represents one ordinary share.

    -- Suntech's PV cell production capacity was 540MW at the end of the first
       quarter of 2008.  The Company is on track to reach 1GW PV cell
       production capacity by the end of 2008.

"We executed extremely well during the first quarter, despite the impact of the snowstorm, to deliver stronger than expected growth in net revenues and solid financial results," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "A vigorous demand environment in the major solar markets in Germany and Spain as well as in the emerging markets including South Korea and Italy drove strong pricing during the quarter. We expect demand to remain robust through 2008 and are virtually sold out for the full year."

Commenting on Suntech's silicon outlook, Dr. Shi said, "During the first quarter we leveraged the funds raised through our convertible senior notes offering to enhance our long term cost competitiveness with new and expanded polysilicon supply agreements and strategic investment in key suppliers. Our ability to secure reasonably priced silicon reflects our competitive strengths with respect to our leading market position, financial strength, and close relationships with upstream suppliers. We are confident that this improved silicon outlook will help us to achieve our goal of providing grid parity solar solutions."

"During the first quarter, we continued to hire impressive talent in current and developing international markets including Germany, Spain, France, Greece, Italy, South Korea and Australia. This will lay the infrastructure for the continued rapid growth in our business, and provide the flexibility to respond to changing market dynamics. We are confident that our strategy of developing a broad portfolio of superior quality solar products, world-class manufacturing facilities and techniques, deep sales channels and improving cost efficiencies will differentiate Suntech as a clear leader in the solar industry," concluded Dr. Shi.

    Recent Business Highlights

    Products and Projects
    -- Suntech established a 4MW module supply agreement with Enerray, an
       Italian designer, developer and manager of photovoltaic systems.  The
       Suntech modules will be installed by Enerray in PV systems for the
       rooftops of large Italian industrial complexes.
    -- Subsequent to the close of the quarter, Suntech signed an agreement
       with Hanau Energies SAS to supply a 4.5MW building integrated PV system
       (BIPV) to a farm located in Alsace, France.  The project will be one of
       the largest BIPV installations ever built and will employ Suntech's
       'Just Roof' modules to form complete weatherproof roofs on five
       agricultural warehouses.

    Global Offices and Acquisitions
    -- Suntech Australia was opened in April 2008 to focus on sales and
       business development in Australia, New Zealand and the Pacific Islands.
    -- Suntech recently closed an acquisition of KSL-Kuttler Automation
       Systems GmbH ("KSL-Kuttler"), a leading manufacturer of automation
       systems for the Printed Circuit Board (PCB) industry.  KSL-Kuttler will
       design, develop and supply primarily automation equipment employed in
       Suntech's manufacturing process.  KSL-Kuttler will continue to
       manufacture and supply equipment for the PCB industry.

    Silicon Procurement and Investment
    -- Suntech announced the second phase of a strategic cooperative agreement
       with Nitol Solar, an independent polysilicon producer.  Suntech will
       acquire a minority interest in Nitol Solar for a total consideration of
       up to $100 million.  In addition, in an amendment to the original 7-
       year silicon supply contract, Nitol Solar has agreed to substantially
       increase the aggregate committed volumes to be supplied between 2009
       and 2015.
    -- An eight-year polysilicon supply agreement was established with DC
       Chemical Co. Ltd. to supply Suntech polysilicon with a total value of
       approximately $631 million from 2009 to 2016.
    -- Suntech strengthened its relationship with Hoku Scientific, Inc.
       through an investment of approximately $20 million in a private
       placement offering, which included an amendment to the existing supply
       agreement that accelerated the delivery time and increased volume to be
       delivered under the agreement.

    Financing
    -- On March 17, 2008, Suntech completed an offering of $575 million of
       3.00% Convertible Senior Notes due 2013.  In the first quarter of 2008,
       Suntech leveraged the funds to improve long-term silicon prospects with
       new and expanded polysilicon supply agreements with Nitol Solar, DC
       Chemical and Hoku Materials and strategic investments in Nitol Solar
       and Hoku.  Suntech expects to continue utilizing these funds to secure
       long term supply of favorably priced silicon to support future
       development.

    Industry Recognition
    -- Suntech was named Frost & Sullivan's 2008 Solar Energy Development
       Company of the Year in recognition of unparalleled excellence in design
       and delivery of high-quality PV cells and modules and customization of
       energy solutions catering to a global client base.


    First Quarter 2008 Results
                                                     Non-GAAP     Non-GAAP
                          Net Revenues             Gross Profit    Gross
                             (in $       % of Net     (in $        Margin
                            millions)    Revenues    millions)      (%)
    Standard PV Modules       $432.9       99.6%       $98.2        22.7%
        - Wafer to Modules     414.7       95.4%        96.6        23.3%
        - Cell to Modules       18.2        4.2%         1.6         8.5%
    Others                       1.6        0.4%        (0.3)      (16.6%)
    Total Net Revenues        $434.5        100%       $97.9        22.5%

Total net revenues for the first quarter of 2008 were $434.5 million, representing an increase of 76.1% from the corresponding period in 2007.

Non-GAAP gross profit for the first quarter of 2008 was $97.9 million, an increase of 98.9% year-over-year. Non-GAAP gross margin for the Company's core wafer-to-module business was 23.3% and non-GAAP consolidated gross margin was 22.5%. The gross margin increased from the fourth quarter of 2007 primarily due to an increase in the average selling price driven by strong demand for Suntech's solar products, which was partly offset by increased silicon wafer costs.

Non-GAAP operating expenses in the first quarter of 2008 totaled $31.0 million or 7.1% of total net revenues. Operating expenses increased from the fourth quarter of 2007 primarily due to an increase in expenses associated with the expansion of Suntech's global sales network, marketing associated expenses, bank service charges due to increased financing costs and bank commission charges in China, and bad debt provision on certain long-aging receivables.

Non-GAAP income from operations for the first quarter of 2008 was $66.9 million, an increase of 86.5% year-over-year. Non-GAAP operating margin was 15.4%.

Net interest expense was $4.0 million in the first quarter of 2008 compared to net interest income of $1.1 million in the fourth quarter of 2007. The sequential increase in net interest expenses was primarily due to an increase in the short-term borrowing balance to facilitate daily operations, a decrease in interest income resulting from the reduction of the interest rate by the U.S. Federal Reserve Bank, and an increase in average borrowing costs due to the worsening global credit market.

Foreign currency exchange gain was $2.9 million in the first quarter of 2008 compared to a foreign currency exchange loss of $3.7 million in the fourth quarter of 2007. The foreign currency exchange gain in the first quarter of 2008 was primarily due to the appreciation of the Euro against the USD coupled with an increase in Euro-denominated sales.

Non-GAAP net income for the first quarter of 2008 was $60.6 million, an increase of 85.2% year-over-year, or $0.35 per non-GAAP diluted ADS.

On a GAAP basis, for the first quarter of 2008 gross profit was $96.4 million, an increase of 105.2% year-over-year. Gross margin for the core wafer to module business was 23.0% and consolidated gross margin was 22.2% for the first quarter of 2008.

On a GAAP basis, operating expenses for the first quarter of 2008 were $34.6 million or 8.0% of total net revenues. Income from operations was $61.8 million for the first quarter of 2008, an increase of 116.7% year-over-year. Operating margin was 14.2%. Net income was $55.8 million, an increase of 113.8% year-over-year, or $0.33 per diluted ADS.

In the first quarter of 2008, capital expenditures, which were primarily related to production capacity expansion and the construction of Suntech's new production facilities, totaled $63.2 million and depreciation and amortization expenses totaled $7.7 million.

As of March 31, 2008, Suntech had cash and cash equivalents of $1.0 billion, compared to $521.0 million as of December 31, 2007. The increase was primarily due to the completion of a $575 million convertible notes offering in March 2008. Inventory totaled $178.3 million as of March 31, 2008 compared to $176.2 million as of December 31, 2007.

Business Outlook

Based on current operating conditions, Suntech expects revenues for the second quarter of 2008 to be in the range of $430 million to $440 million. Suntech expects minimal revenue contribution from KSL-Kuttler in the second quarter of 2008. Non-GAAP consolidated gross margin in the second quarter of 2008 is expected to be relatively consistent with the first quarter of 2008.

For the full year 2008, Suntech reiterates its expectation for total PV module shipments of 530MW and revenues in the range of $1.9 billion to $2.1 billion. Within 2008, Suntech believes that approximately 40% of this will be achieved in the first half of 2008 and 60% in the second half of 2008. Suntech expects that greater quantities of reasonably priced silicon will become increasingly available from mid-2008. Suntech targets to reach 1GW of installed PV cell production capacity by year-end 2008.

Senior Management Hires

Mr. Boxun Zhang has been promoted to Director of Business and Financial Analysis, reporting directly to Chief Financial Officer Ms. Amy Yi Zhang. Mr. Zhang joined in Suntech in February 2006 as Financial Controller. He previously worked for Credit Suisse and was an underwriter for Suntech's IPO in December 2005. Earlier, Mr. Zhang was a Senior Auditor and Senior Consultant with PricewaterhouseCoopers. Mr. Zhang received an MBA degree from Cass Business School in London, UK.

Mr. Andrew Wang joined Suntech to assume Mr. Zhang's former role as Corporate Financial Controller. Mr. Wang brings over 15 years of experience in accounting and finance primarily with multinational companies operating in China. Key career experiences include increasing levels of managerial responsibility beginning at Deloitte Touche Tohmatsu Shanghai CPA, Avery Dennison Corporation, and most recently at OTIS China (Holding) Ltd. as leader of accounting, internal controls and Sarbanes-Oxley compliance. Mr. Wang holds an MBA from Washington University in St. Louis, Missouri, USA.

First Quarter 2008 Conference Call Information

Suntech management will host a conference call today, Thursday, May 22, 2008 at 8:00a.m. Eastern Time (which corresponds to May 22, 2008 at 8:00p.m. Beijing/Hong Kong time) to discuss the Company's results.

To access the conference call, please dial +1-617-786-4501 (for U.S. callers) or +852-3002-1672 (for international callers) and ask to be connected to the Suntech earnings conference call. A live and archived webcast of the conference call will be available on Suntech's website at http://www.suntech-power.com under Investor Center: Financial Events.

A telephonic replay of the conference call will be available until June 5, 2008 by dialing +1-617-801-6888 (passcode: 53270665).

About Suntech

Suntech Power Holdings Co., Ltd. is a world leading solar energy company as measured by both production output and capacity of solar cells and modules. Suntech is passionate about improving the environment we live in and dedicated to developing advanced solar solutions that enable sustainable development. Suntech designs, develops, manufactures, and markets a variety of high quality, cost effective and environmentally friendly solar products for electric power applications in the residential, commercial, industrial, and public utility sectors. Suntech offers one of the broadest ranges of building integrated photovoltaic (BIPV) products under the MSK Solar Design Line(TM). Suntech has sales offices worldwide and is a market share leader in key global solar markets. For more information, please visit http://www.suntech-power.com .

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. In particular, the projected second quarter and full year 2008 data regarding sales volume, capacity, revenues, gross margin and the business outlook and quotations from management in this announcement, as well as Suntech's strategic and operational plans, are forward-looking statements. Forward- looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Suntech's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F. Suntech does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, Suntech uses the following non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to share-based compensation, restructuring expenses and amortization expenses incurred from the purchase price allocation effect related to the MSK Corporation acquisition. Suntech believes that non-GAAP information is useful for analysts and investors to evaluate Suntech's future on-going performance because they enable a more meaningful comparison of Suntech's projected cash earnings and performance with its historical results from prior periods. This information is not intended to represent funds available for Suntech's discretionary use and are not intended to represent or to be used as a substitute for gross profit/margin, operating expenses, operating income or net income as measured under GAAP. Many analysts covering Suntech use the non-GAAP measures as well. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release and which shall be read together with the preceding financial statements prepared under GAAP.

    (1) Selected highlights of the Company's first quarter 2008 results are
        set forth in the text of the release and should be read together with
        the detailed financial statements at the end of this release.

    (2) All non-GAAP measures exclude share-based compensation expenses,
        restructuring expenses and amortization expenses incurred from
        purchase price allocation related to the acquisition of MSK
        Corporation.  For further details on non-GAAP measures, please refer
        to the reconciliation table and a detailed discussion of management's
        use of non-GAAP information set forth in this press release.




    Note: The quarterly and full year consolidated income statements are
          unaudited.  The condensed consolidated balance sheets are derived
          from Suntech's unaudited consolidated financial statements.


                         SUNTECH POWER HOLDINGS CO., LTD.
                       CONDENSED CONSOLIDATED BALANCE SHEET
                                    (In $'000)
                                                  As of             As of
                                                December 31,       March 31,
                                                   2007              2008

    ASSETS
    Current assets:
      Cash and cash equivalents                    520,966         1,020,259
      Restricted cash                               94,685            97,646
      Inventories                                  176,173           178,262
      Accounts receivable                          237,614           271,382
      Value-added tax recoverable                   72,061           108,650
      Advances to suppliers                         61,875            82,400
      Other current assets                          94,105           150,750
    Total current assets                         1,257,479         1,909,349

    Property, plant and equipment, net             292,987           329,108
    Intangible assets, net                          85,967           107,076
    Goodwill                                        29,793            33,973
    Investments in affiliates                        1,027                --
    Long-term prepayments                          161,661           184,797
    Long-term loan to a supplier                   103,308            83,144
    Other non-current assets                        24,825            94,530
    TOTAL ASSETS                                 1,957,047         2,741,977

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 321,163           442,612
       Accounts payable                             58,906            73,102
       Other current liabilities                    98,055            96,679
    Total current liabilities                      478,124           612,393

    Long-term bank borrowings                       20,672            12,965
    Convertible notes                              500,000         1,075,000
    Accrued warranty costs                          22,506            27,074
    Other long-term liabilities                     29,794            31,026
    Total liabilities                            1,051,096         1,758,458

    Minority interest                               17,901            18,335

    Total shareholders' equity                     888,050           965,184

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                      1,957,047         2,741,977



                         SUNTECH POWER HOLDINGS CO., LTD.
                          CONSOLIDATED INCOME STATEMENT
              (In $'000, except share, per share, and per ADS data)

                                            Three        Three        Three
                                           months       months       months
                                            ended        ended        ended
                                           March 31    December 31   March 31
                                             2007         2007         2008


    Total net revenues                      246,696      397,538      434,514
    Total cost of revenues                  199,713      314,823      338,107

    Gross profit                             46,983       82,715       96,407

    Selling expenses                          5,686        9,586       15,273
    General and administrative expenses       9,103       13,096       16,499
    Research and development expenses         3,659        3,132        2,792
    Total operating expenses                 18,448       25,814       34,564

    Income from operations                   28,535       56,901       61,843

    Interest expenses                        (4,419)      (7,058)      (9,008)
    Interest income                           6,203        8,122        5,041
    Foreign exchange gain(loss)              (2,103)      (3,733)       2,906
    Other income (expense)                   (1,749)       1,657         (803)

    Income before income taxes               26,467       55,889       59,979
    Tax provision                            (2,091)      (5,186)      (5,523)

    Net income after taxes before
     minority interest and equity in
     earnings of affiliates                  24,376       50,703       54,456
    Minority interest                         1,536          936        1,346
    Equity in (loss) earnings of
     affiliates                                 182       (1,020)          --

    Net income                               26,094       50,619       55,802

    Net income per share and per ADS:
    - Basic                                    0.17         0.33         0.36
    - Diluted                                  0.16         0.29         0.33

    Shares and ADSs used in computation:
    - Basic                             150,487,272  152,945,989  153,124,488
    - Diluted                           164,087,838  172,725,334  173,770,151

    Each ADS represents one ordinary share



          Reconciliations of non-GAAP results of operations measures
                 to the nearest comparable GAAP measures (*)
                (in $ millions, except margin data, per share
                         and per ADS data, unaudited)

                                  Three months ended March 31, 2007

                     Suntech                 Effect of                Suntech
                      Group                   Purchase                 Group
                      GAAP     Share-based     Price   Restructuring  Non-GAAP
                     Results   Compensation  Allocation  Expenses     Results
    Gross profit      47.0         2.2           --          --         49.2
    Gross margin      19.0%                                             19.9%

    Income from
     operations       28.5         6.5          0.5         0.3         35.8
    Income from
     operations
     margin           11.6%                                             14.5%

    Net income
     attributable
     to holders
     of ordinary
     shares           26.1         6.5         (0.2)        0.3         32.7
    Net income
     margin           10.6%                                             13.3%

    Net income per
     share and per
     ADS
      - Basic         0.17                                              0.22
      - Diluted       0.16                                              0.20



                              Three months ended December 31, 2007

                                             Effect of
                                              Purchase
                      GAAP     Share-based     Price   Restructuring  Non-GAAP
                     Results   Compensation  Allocation  Expenses     Results
    Gross profit      82.7          3.1          --          --         85.8
    Gross margin      20.8%                                             21.6%

    Income from
     operations       56.9          6.6         0.8         0.5         64.8
    Income from
     operations
     margin           14.3%                                             16.3%

    Net income        50.6          6.6         0.5         0.5         58.2
    Net income
     margin           12.7%                                             14.7%

    Net income per
     share and per
     ADS
      - Basic         0.33                                              0.38
      - Diluted       0.29                                              0.34



                               Three months ended March 31, 2008

                                             Effect of
                                              Purchase
                      GAAP     Share-based     Price   Restructuring  Non-GAAP
                     Results   Compensation  Allocation  Expenses     Results
    Gross profit      96.4          1.5          --          --         97.9
    Gross margin      22.2%                                             22.5%

    Income from
     operations       61.8          4.3         0.8          --         66.9
    Income from
     operations
     margin           14.2%                                             15.4%

    Net income        55.8          4.3         0.5          --         60.6
    Net income
     margin           12.8%                                             13.9%

    Net income per
     share and per
     ADS
      - Basic         0.36                                              0.40
      - Diluted       0.33                                              0.35

    (*) The adjustment is for share-based compensation, restructuring expenses
        and the amortization expenses incurred from purchase price allocation
        related to the acquisition of MSK Corporation.




    For more information, please contact:

    In China:
     Rory Macpherson
     Investor Relations Manager
     Suntech Power Holdings Co., Ltd.
     Tel:   +86-510-8531-8922
     Email: rory@suntech-power.com

    In the United States:
     Sanjay M. Hurry
     Vice President
     The Piacente Group, Inc.
     Tel:   +1-212-481-2050
     Email: suntech@tpg-ir.com