Suntech Power Holdings (Suntech), a China-based vertically integrated maker of solar products, has announced preliminary financial results for the second quarter ended June 30, 2012.
Preliminary results indicate that Suntech's shipments of solar products for the second quarter of 2012 increased by approximately 33% from the first quarter of 2012, higher than previous guidance of a 20% increase in solar shipments. According to the firm, revenues in the second quarter of 2012 were approximately US$471 million, a sequential increase of 15%. The firm indicated that approximately 93% of revenues were generated from the sale of solar modules, and 7% of revenues were generated from the sale of solar PV systems, cells, silicon wafers and production equipment.
Suntech reported gross margin in the second quarter of 2012 was approximately negative 10%. Gross margin was impacted by a non-cash inventory provision of US$76 million, said Suntech. The impact of the non-cash inventory provision on gross margin was 16%, added Suntech.
In the second quarter of 2012, Suntech's operating expenses were approximately US$133 million. Operating expenses were impacted by a US$56 million non-cash provision related to a prepayment for a long-term supply contract, which Suntech is currently disputing, said the firm. Suntech generated positive operating cash flow of approximately US$5 million during the quarter.
David King, Suntech's CEO, said, "In the second quarter, greater demand from markets in Europe, China, Japan and Australia drove sequential shipment growth. However, the global imbalance between supply and demand, and the challenging price environment continue to impede profitability. In the second half of this year, the firm will continue to drive down cost, negotiate better terms with our suppliers, and stringently manage working capital," continued King. "Suntech will also manage the balance between price and volume in order to improve margins. For that reason, the firm has decided to reduce our annual shipment target to the range of 1.8-2.0GW."
"While the current climate is very challenging for solar manufacturers, there has never been a better time to be a solar customer and Suntech is optimistic about the long-term growth potential of the solar industry," added King.
Suntech expects shipments of solar products in the third quarter of 2012 to be relatively flat with the second quarter of 2012. The gross margin in the third quarter of 2012 is expected to be in the low single digits. Suntech now expects 2012 annual solar shipments to be in the range of 1.8-2.0GW, compared to previous guidance of 2.1-2.5GW.
King noted, "Suntech is continuing to pursue a number of options to refinance our 2013 convertible notes and intend to address this issue in the near future. In addition, the firm is making good progress with our due diligence of Global Solar Fund (GSF) assets and will provide an update when the firm obtains new developments."
In July, Suntech announced that it is conducting an investigation into a security interest the firm received in connection with its investment in GSF. Suntech is currently assessing the potential impact of the GSF investigation and its dispute with a supplier on its consolidated financial statements and is not in a position to provide additional financial data at this time. The firm intends to publish its consolidated financial statements once the financial assessment is complete later in 2012, according to Suntech.
Article translated by Jackie Chang
