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Suntech Reports Second Quarter 2009 Financial Results

SAN FRANCISCO and WUXI, China, Aug. 20 /PRNewswire-Asia/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), the world's largest crystalline silicon photovoltaic (PV) module manufacturer, today announced financial results for its second fiscal quarter ended June 30, 2009.

    Second Quarter 2009 Highlights

    -- Total net revenues were $321.0 million in the second quarter of 2009

    -- Gross margin improved to 18.6% for the second quarter of 2009, compared
       with 17.8% for the first quarter of 2009

    -- Net income attributable to holders of ordinary shares was $10.0 million
       or $0.06 per diluted American Depositary Share (ADS); each ADS
       represents one ordinary share

    -- Suntech's multi-crystalline Pluto powered module achieved world record
       conversion efficiency of 15.6%

    -- Suntech maintained PV cell production capacity of 1GW at the end of the
       second quarter of 2009

"During the second quarter, we continued to demonstrate Suntech's ability to adapt to fluid market conditions and improve competitiveness," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "A seasonal pick up in demand combined with a gradual thawing of global financial markets and improving project returns led to sequential shipment growth in most of our major markets. In addition, despite pricing pressure, our continued reduction of silicon costs enabled us to improve gross margin in the second quarter."

"We are confident that the strategies that we are implementing today will position Suntech for strong growth over the next several years. For example, in China we are building relationships with regional governments and key development partners in anticipation of a national feed-in tariff program. In Japan, we have established a relationship with Yamada Denki that will expand our distribution reach and improve brand recognition. And we are gaining traction in emerging markets such as the Middle East through partnerships with regional players."

"In addition to our market expansion initiatives, we are making significant progress in technology development. Suntech's multi-crystalline Pluto module was recently accepted by the scientific journal Progress in Photovoltaics as the world's highest conversion efficiency multi-crystalline module with 15.6% conversion efficiency. In addition, our new state-of-the- art PV module testing facility, which is the largest in China, will help to enhance our efforts to deliver the most reliable and premium quality solar products in the market."

"We remain confident that these initiatives will help us gain access to the end consumer, improve our brand recognition, and increase our ability to compete in a volatile macro-economy. Suntech, as a leader in both low cost manufacturing and research and development, is well positioned to be among the first to reach grid parity in many markets. As a result of Suntech's competitive advantages and our downstream initiatives, we will continue to gain market share and further our position as a leader in the rapidly evolving PV industry."

    RECENT BUSINESS HIGHLIGHTS

    China Market
    -- Suntech signed framework agreements with several provincial and city
       governments in China to develop an aggregate of 1.8GW of photovoltaic
       projects over the next several years.

    -- Suntech has signed strategic framework agreements with China Energy
       Conservation Investment Corporation (CECIC) and China Huadian New
       Energy Development Co., Ltd (HNE) to develop solar projects in China.
       Through these partnerships, CECIC and HNE will be primarily responsible
       for project investment and development of solar projects, and Suntech
       will be responsible for supplying turnkey solar solutions.

    -- Suntech has established one of China's largest system integration and
       project development teams with around 200 people. Suntech expects to
       develop approximately 30MW of projects in the full year 2009, with the
       majority in the second half.

    U.S. Market
    -- Suntech signed a contract with Recurrent Energy to deliver 5MW of
       modules in Q4 2009 for California's largest photovoltaic system to date.
       The project will more than triple San Francisco's total municipal solar
       power output from 2MW today to 7MW upon completion in 2010.

    -- Suntech has narrowed the search for a U.S. production and distribution
       center site to two locations and expects to make a decision within the
       next few months.  The new facility demonstrates Suntech's commitment to
       the long term growth of the North American market.

    Global Markets
    -- Suntech recently established an agreement with Yamada Denki Co., Ltd.,
       Japan's most popular consumer electronics and home appliance chain, to
       sell systems incorporating Suntech modules through all of its 450
       retail outlets across Japan.

    -- Suntech continued to gain traction in the Middle East and was selected
       by Aldar Properties PJSC to supply over 1,120 solar panels for a 292 kW
       solar system for The Shams Tower, an iconic building on Yas Marina
       Circuit in Abu Dhabi.

    Technology
    -- Suntech achieved a new world record conversion efficiency of 15.6% on a
       commercial grade multi-crystalline silicon PV module.  The world record
       conversion efficiency was accepted by the scientific journal Progress
       in Photovoltaics.

    -- Suntech's Pluto modules recently passed all the tests for the IEC 61215
       certificate.  Suntech has initiated commercial shipments of Pluto-
       powered modules and currently expects to ship 10MW to 15MW of Pluto
       products in 2009.

    -- Suntech initiated production of amorphous silicon thin film solar
       panels at its facility in Shanghai.  The initial panels are exhibiting
       a conversion efficiency of approximately 7%.

    -- Suntech opened a world-class PV module testing facility in
       collaboration with Underwriters Laboratories.  Through UL's Witness
       Testing Data Program, PV module tests may be conducted under the
       supervision of highly experienced UL personnel and subsequently awarded
       certification, enabling Suntech to bring solar products to market
       faster.

    Financing Activities
     -- Suntech received a $50 million convertible loan from International
        Finance Corporation with a conversion price of $18.00 per ADS in July
        2009.  The loan has a fixed rate coupon of 5.0% per annum payable on
        June 15 and December 15 in each year.  If not converted, the loan will
        be repayable in full 7 years after the date of drawdown.

    -- Suntech closed a follow-on public offering of 23,000,000 ADSs.  The
       aggregate amount of ADSs sold reflects the exercise in full by the
       underwriters of their option to purchase up to 3,000,000 additional
       ADSs to cover over-allotments.  The Company received aggregate net
       proceeds of $277.7 million, after the deduction of related expenses.

    -- Suntech secured a $200 million syndicated loan facility from the China
       Development Bank.  $120 million of this facility was drawn down in the
       second quarter of 2009.

    -- In the second quarter of 2009 Suntech repurchased an aggregate of $30.8
       million principal amount of its 0.25% Convertible Senior Notes due 2012
       for a total consideration of $29.1 million.  As of June 30, 2009,
       Suntech had $225.0 million principal amount of 2012 convertible notes
       outstanding.

Second Quarter 2009 Results

Total net revenues for the second quarter of 2009 were $321.0 million, an increase of 1.7% from $315.7 million in the first quarter of 2009.

Total net revenues from the investee companies of GSF were $15.3 million in the second quarter of 2009 compared with $100.5 million in the first quarter. Sales to the investee companies of GSF were conducted under terms comparable to those with unrelated parties, and the revenue and profit related to the sales activities during the second quarter of 2009 were fully recognized during the same period.

For the second quarter of 2009, gross profit was $59.7 million and gross margin was 18.6% compared to gross profit of $56.3 million and gross margin of 17.8% in the first quarter of 2009. The increase in gross profit was primarily due to Suntech's silicon wafer cost and total cost structure falling faster than sales price in the second quarter of 2009.

Operating expenses for the second quarter of 2009 were $38.6 million compared to $35.1 million in the first quarter of 2009. The increase was primarily due to additional hires to improve sales and marketing efforts and a bad debt provision.

Income from operations was $21.1 million for the second quarter of 2009, which was flat with the first quarter of 2009.

Net interest expense was $24.3 million in the second quarter of 2009 compared to net interest expense of $21.6 million in the first quarter of 2009. Net interest expense in the second quarter of 2009 includes $11.6 million of non-cash interest expenses of which $10.3 million was related to the adoption of FASB Staff Position No APB14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB14-1").

Foreign currency exchange gain was $17.5 million in the second quarter of 2009 compared to a loss of $6.2 million in the first quarter of 2009. The foreign currency gain in the second quarter was primarily related to the appreciation of the Euro versus the USD.

Net other expense was $2.5 million in the second quarter of 2009, compared with $12.6 million of net other income in the first quarter of 2009. The net other income in the first quarter of 2009 was mainly due to $9.3 million in gains from repurchases of the 2012 convertible senior notes and $3.2 million in gains from mark-to-market valuation of foreign exchange forward contracts. The net other expense in the second quarter was primarily due to a loss from mark-to-market valuation of foreign exchange forward contracts.

Net income attributable to holders of ordinary shares for the second quarter of 2009 was $10.0 million, or $0.06 per diluted ADS compared to a net income of $1.8 million, or $0.01 per diluted ADS, in the first quarter of 2009.

In the second quarter of 2009, the major non-cash related expenses were share-based compensation charges of $4.2 million; $11.6 million of non-cash interest expenses; and depreciation and amortization expenses of $14.4 million.

In the second quarter of 2009, capital expenditures, which were primarily for the construction of the thin film production facilities in Shanghai, and to retrofit existing production capacity to enable production of PV modules based on our high efficiency Pluto technology, totaled $20.9 million.

Cash and cash equivalents increased to $760.5 million as of June 30, 2009 from $406.0 million as of March 31, 2009. The increase was primarily due to the follow-on public offering of 23 million ADSs during the quarter from which we received aggregate net proceeds of $277.7 million and an increase in long term bank borrowings due to a syndicated loan of $120 million from the China Development Bank.

Accounts receivable was $292.1 million as of June 30, 2009, compared with $265.4 million as of March 31, 2009. The increase was primarily due to an increase in credit terms in line with industry trends.

Accounts receivable due from investee companies of GSF was $108.4 million as of June 30, 2009, compared with $104.9 million as of March 31, 2009. Suntech has been closely monitoring the settlement on this account receivable and expects full collection on this account receivable will be made no later than the end of 2009.

Business Outlook

Suntech expects third quarter 2009 shipments to be more than 50% above the second quarter 2009. Gross margin in the third quarter of 2009 is expected to be relatively flat compared to the second quarter of 2009.

Suntech expects shipments in the fourth quarter of 2009 to be slightly lower than the third quarter of 2009 due to seasonality. As a result, Suntech has revised full-year 2009 shipment expectations to approximately 600MW. Suntech intends to hold PV cell production capacity at 1GW in 2009 until demand visibility improves. Suntech expects capital expenditures to be in the range of $100 million to $120 million in 2009.

Second Quarter 2009 Conference Call Information

Suntech management will host a conference call today, Thursday, August 20, 2009 at 8:00a.m. U.S. Eastern Time (which corresponds to 8:00p.m. Beijing/Hong Kong time and 12:00p.m. Greenwich Mean Time on August 20, 2009) to discuss the Company's results.

To enhance presentation of information and data during the conference call, Suntech has provided a set of PowerPoint slides which are posted on the main page of the Investor Center of Suntech's website at http://www.suntech-power.com .

To access the conference call, please dial +1-617-597-5310 (for U.S. callers/ international callers) or +852-3002-1672 (for HK 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 September 3, 2009 by dialing +1-617-801-6888 (passcode: 15504914).

About Suntech

Suntech Power Holdings Co., Ltd. (NYSE: STP) is the world's leading solar energy company as measured by production output of crystalline silicon solar modules. Suntech designs, develops, manufactures, and markets premium-quality, high-output, cost-effective and environmentally friendly solar products for electric power applications in the residential, commercial, industrial, and public utility sectors. Suntech's patent-pending Pluto technology for crystalline silicon solar cells improves power output by up to 12% compared to conventional production methods.

Suntech also offers one of the broadest ranges of building-integrated solar products under the MSK Solar Design Line(TM). Suntech designs and delivers commercial and utility scale solar power systems through its wholly owned subsidiary Suntech Energy Engineering and will own and operate projects greater than 10 megawatts in the United States through Gemini Solar Development Company, a joint venture with Renewable Ventures, a Fotowatio company. With regional headquarters in China, Switzerland and San Francisco and sales offices worldwide, Suntech is passionate about improving the environment we live in and dedicated to developing advanced solar solutions that enable sustainable development. 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, and includes our ability to ensure our initiatives help us to gain access to the end consumer, improve our brand recognition and improve our ability to compete; our ability to reach grid parity; our ability to develop PV projects based upon our signed framework agreements with various governments, CECIC and HNE; our ability to bring products faster to market under the UL Witness Testing Data Program; our expected Pluto production capacity and volume of Pluto shipments in 2009; our ability to collect receivables from GSF investee companies by the of 2009; and our outlook for Q3 revenue and gross margin and full year shipments and capital expenditures. Such 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.

Note: The quarterly consolidated income statements are unaudited. The condensed consolidated balance sheets are derived from Suntech's unaudited consolidated financial statements. Effective January 1, 2009, as a result of the adoption of Statement of Financial Accounting Standards, or SFAS 160, Non-controlling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51.and FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement), our condensed consolidated income statement for the three months ended June 30, 2008 has been re-casted for comparable purpose. The following tables set forth the unaudited condensed consolidated balance sheet as of March 31, 2009 and June 30, 2009, the adjusted unaudited condensed consolidated income statement for the three months ended June 30, 2008, and the unaudited condensed consolidated income statements for the three months ended March 31, 2009 and June 30, 2009.


                         SUNTECH POWER HOLDINGS CO., LTD.
                       CONDENSED CONSOLIDATED BALANCE SHEET
                                    (In $'000)

                                                   As of             As of
                                                  March 31,         June 30,
                                                    2009              2009
    ASSETS
    Current assets:
      Cash and cash equivalents                    405,995           760,544
      Restricted cash                              179,134           180,369
      Inventories                                  242,690           269,705
      Accounts receivable - Investee
       companies of GSF                            104,940           108,410
      Accounts receivable - Others                 160,414           183,735
      Value-added tax recoverable                   87,099            78,433
      Advances to suppliers                         70,513            53,824
      Other current assets                         255,477           200,790
    Total current assets                         1,506,262         1,835,810

    Property, plant and equipment, net             720,821           733,684
    Intangible assets, net                         163,619           165,221
    Goodwill                                        80,930            83,566
    Investments in affiliates                      225,358           229,080
    Long-term prepayments                          195,346           181,992
    Long-term loan to suppliers                     56,150            55,882
    Amount due from related parties                216,387           203,636
    Other non-current assets                       104,112           102,642
    TOTAL ASSETS                                 3,268,985         3,591,513

    LIABILITIES AND EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 791,706           806,833
       Accounts payable                            153,382           120,130
        Convertible notes-current                  239,341           214,781
       Other current liabilities                   228,893           178,607
    Total current liabilities                    1,413,322         1,320,351

    Long-term bank borrowings                       17,486           136,174
    Convertible notes-non-current                  446,964           453,746
    Accrued warranty costs                          43,025            45,630
    Other long-term liabilities                    119,861           115,435
    Total liabilities                            2,040,658         2,071,336

    Total equity                                 1,228,327         1,520,177

    TOTAL LIABILITIES AND EQUITY                 3,268,985         3,591,513



                         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
                                          June 30,     March 31,     June 30,
                                            2008          2009         2009
                                         As adjusted

    Total net revenues                      480,179      315,656      320,959
        - Investee companies of GSF              --      100,547       15,298
        - Others                            480,179      215,109      305,661

    Total cost of revenues                  364,382      259,369      261,263

    Gross profit                            115,797       56,287       59,696

    Selling expenses                         14,751       11,401       11,501
    General and administrative expenses      20,318       18,820       22,808
    Research and development expenses         3,310        4,923        4,322
    Total operating expenses                 38,379       35,144       38,631

    Income from operations                   77,418       21,143       21,065

    Interest expenses                       (26,825)     (26,743)     (25,884)
    Interest income                           8,653        5,098        1,577
    Foreign exchange gain/(loss)              2,493       (6,191)      17,530
    Other (expense) income                   (6,329)      12,567       (2,546)

    Income before income taxes               55,410        5,874       11,742
    Tax (provision)/benefit                  (3,517)          78          168

    Net income after taxes before
     noncontrolling interest and equity
     in earnings of affiliates               51,893        5,952       11,910
    Equity in loss of affiliates                 --       (3,874)      (2,293)

    Net income                               51,893        2,078        9,617
    Add: Net loss (income) attributable
     to non-controlling interest                356         (292)         357

    Net income attributable to holders
     of ordinary shares                      52,249        1,786        9,974

    Net income attributable to ordinary
     shareholders  per share and per
     ADS:
    - Basic                                    0.34         0.01         0.06
    - Diluted                                  0.31         0.01         0.06

    Shares and ADSs used in
     computation:
    - Basic                             153,935,960  155,881,265  164,483,191
    - Diluted                           185,244,933  156,794,603  172,611,156


    Each ADS represents one ordinary share




    For further information, please contact:

    In China:
     Rory Macpherson
     Investor Relations Director
     Tel:   +86-21-6288-5574
     Email: rory@suntech-power.com

    In the United States:
     Kristen McNally
     Executive Vice President
     The Piacente Group, Inc. (Investor Relations Counsel, Suntech)
     Tel:   +1-212-481-2050
     Email: suntech@tpg-ir.com