Suntech Reports Fourth Quarter and Full Year 2006 Financial Results
Posted on 2007-03-12
WUXI, China, March 12 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced fourth quarter and full year 2006 financial results.Fourth Quarter and Full Year 2006 Highlights -- Fourth quarter 2006 total net revenues went up 144.8% year-over-year to $217.9 million. Non-GAAP(1) Suntech Group net income attributable to holders of ordinary shares grew 101.4% year-over-year to $35.5 million, or $0.23 per non-GAAP diluted American Depository Share (ADS). Each ADS represents one ordinary share. -- Fourth quarter 2006 production output was 55.3MW; full year 2006 production output was 160.1MW, representing 136.5% year-over-year growth. -- Full year 2006 total net revenues went up 165.0% year-over-year to $598.9 million. Suntech Group net income attributable to holders of ordinary shares grew 275.6% year-over-year to $106.0 million, or $0.68 per diluted ADS. -- Annual capacity grew from 150MW at the end of 2005 to 270MW at the end of 2006, representing an increase of 80%.''We exceeded our initial fourth quarter output and revenue guidance for our core business as we increased our sales of PV modules, achieved sequential average selling price increases throughout 2006 and ramped up recently installed production lines ahead of schedule,'' said Dr. Zhengrong Shi, Suntech's Chairman and CEO. ''Our operations are the healthiest they have been since our IPO as our low cost per watt strategy combined with our strong technology capabilities, expanding sales network and successful silicon procurement keep us on track to achieve industry leading growth.''''During the quarter, we cemented our silicon supply for 2007 and beyond by signing additional long term, fixed price silicon supply agreements. In fact, we have secured more silicon than we require to meet our upwardly revised projected 2007 PV cell and module output target,'' said Dr. Shi. ''This ability to secure silicon, despite the global shortage, is one of the key reasons we have been able to increase our 2007 production output target from 250 megawatts to 280 megawatts and our year-end capacity target from 390 megawatts to 420 megawatts.''Commenting on Suntech's international sales development, Dr. Shi said, ''In the fourth quarter, we continued to diversify our sales geographically and extended the reach of our global network. In addition to partnering with SunEdison, we continued to build momentum in the U.S. market and our current pipeline indicates that we will be able to more than triple our sales to this region in 2007. With the integration of MSK's sales network and the establishment of Suntech Europe, we have set the foundation to further expand our selling channels in key European markets such as Spain.'' Recent Business Highlights -- In February 2007, Suntech closed an offering of $500 million convertible senior notes, more than 60% above the original offering size. Suntech plans to use the net proceeds to expand production capacity, procure raw materials, repay a bridge loan related to the MSK acquisition and for other corporate purposes. -- Multi-year silicon supply agreements were entered into with REC, Comtec and Sunlight Group in the fourth quarter of 2006. Combined with existing agreements with MEMC and several leading China-based silicon suppliers, Suntech expects over two-thirds of silicon supply in 2007 needed for its projected output will come from long-term silicon supply agreements, which will ramp up over the year and have average wafer costs measurably below 2006 wafer purchase prices. -- After winning the contract to supply over 23MW of solar modules to the world's largest solar farm in Spain, Suntech continued to achieve steady sales wins in Spain. In the fourth quarter of 2006, Suntech sales to Spain increased four-fold above the nearly 10% of total revenues in the first nine months of 2006 and it is currently expected that it will grow to be approximately 20% of total revenues in 2007. -- In February 2007, Suntech made the strategic decision to halt MSK's module production activities in Japan and initiated immediate actions to focus MSK on its three strategic goals. MSK will concentrate efforts on BIPV product development and expanding BIPV sales into key geographies beyond Japan, growing Japan-based sales and utilizing MSK's sales organization to expand Suntech's customer base. -- Suntech recently entered into multiple sales agreements with Conergy AG, a leading global solar system integrator, to supply PV modules with a value of approximately $270 million in 2007. -- Suntech established Suntech Europe in January as part of a natural evolution to expand its customer base as well as to deepen the service and support offered to its customers in Europe, the Middle East and Africa (EMEA). The headquarters for Suntech Europe will be in London with sales offices expected to be opened in key cities in the region commencing in 2007. -- Suntech recently joined the Global Roundtable on Climate Change (GROCC) to raise the profile of solar energy and encourage governments worldwide to develop effective policies on climate change. Fourth Quarter 2006 Group Results Income Statement Summary (In millions, except for per ADS data) Suntech Group Suntech Group Suntech Non-GAAP GAAP Non-GAAP Excluding MSK Net revenues $217.9 $217.9 $190.3 Gross profit 48.5 49.1 49.9 Income from operations 29.7 34.2 38.6 Net income 31.4 35.5 37.8 Net income per diluted $0.20 $0.23 $0.24 ADS Suntech Group Results for the Fourth Quarter of 2006 Excluding MSKSuntech Group's net revenues excluding MSK for the fourth quarter of 2006 were $190.3 million, representing an increase of 28.2% sequentially and 113.8% year-over-year. Excluding MSK, Suntech recorded a non-GAAP gross profit of $49.9 million, representing an increase of 29.2% over the third quarter of 2006 and 100.8% over the fourth quarter of 2005. Non-GAAP gross margin excluding MSK, for the fourth quarter of 2006 was 26.2%, compared with 26.0% in the third quarter of 2006 and 27.9% in the fourth quarter of 2005. Gross margins excluding MSK in the fourth quarter 2006 increased slightly from the previous quarter. Excluding MSK, Suntech's non-GAAP income from operations for the fourth quarter of 2006 was $38.6 million and the operating margin for the quarter was 20.3%, compared with 21.3% in the third quarter of 2006 and 22.0% in the fourth quarter of 2005. The primary reasons for the higher operating expenses in the fourth quarter of 2006 were additional accounting expenses and bank fees due to the shift in sales to Letter of Credit-based payments and a foreign exchange mark-to-market loss. Excluding MSK, non-GAAP net income attributable to holders of ordinary shares for the fourth quarter of 2006 was $37.8 million, or $0.24 per non-GAAP diluted ADS. Breakdown of Fourth Quarter 2006 Net Revenues (Excluding MSK) Q4 2006 % of Q4 2006 Growth vs. Q4 Growth vs. Q3 (in millions) Net Revenues 2005 2006 % % PV Cells $9.5 5.0 (70.1) (76.2) Standard PV Modules 180.4 94.8 218.3 67.2 PV System 0.4 0.2 (27.0) (40.1) Integration, BIPV and Others Total $190.3 100 % 113.8 % 28.2 %Suntech excluding MSK shipped 48.7MW of PV cells and modules during the fourth quarter of 2006; average sales prices for PV modules were $3.91 per watt compared with $3.86 per watt in the third quarter of 2006 and $3.49 in the fourth quarter of 2005. In the fourth quarter of 2006, Suntech strategically moved towards selling a higher percentage of PV modules than PV cells to capture the incremental revenue and reduce PV cell sales to module making competitors. This was made possible by the increased silicon wafer supply, which reduced Suntech's need to rely on wafer exchange or tolling agreements.Suntech Group Consolidated Results for the Fourth Quarter of 2006 Including MSKSuntech Group's non-GAAP gross profit for the fourth quarter of 2006 was $49.1 million and the non-GAAP gross margin was 22.5%. Non-GAAP income from operations for the fourth quarter of 2006 was $34.2 million and the non-GAAP operating margin was 15.7%.Capital expenditures, which were primarily related to production capacity expansion, were $15.3 million in the fourth quarter of 2006. Depreciation and amortization expenses in the fourth quarter of 2006 were $4.9 million.Suntech Group Consolidated Results for the Full Year 2006 Including MSKSuntech Group's net revenues for the full year 2006 were $598.9 million, an increase of 165.0% year-over-year. For the full year 2006, Suntech Group derived approximately 20.8 % of total net revenues from sales of PV cells and 78.8% from PV modules.Gross profit for the full year 2006 was $148.9 million, an increase of 117.2% over the full year 2005. Gross margin decreased to 24.9% in 2006 from 30.3% in 2005. Suntech Group's income from operations for the full year 2006 was $103.2 million, an increase of 142.0% year-over-year. Operating margin was 17.2% in 2006, down from 18.9% in 2005. Net income attributable to holders of ordinary shares for the full year 2006 was $106.0 million, an increase of 275.6% from 2005. Diluted income per ADS was $0.68 in 2006, compared to $0.30 in 2005.Capital expenditures were $52.3 million in the full year 2006. Depreciation and amortization expenses in the full year 2006 were $11.9 million.As of December 31, 2006, Suntech had cash and cash equivalents of $225.5 million compared with $314.2 million at the end of the third quarter of 2006. Short term debt rose to $288.2 million at the end of the fourth quarter of 2006 from $221.7 million at the end of the third quarter of 2006, primarily as a result of continuous leverage of banking facility to support expanding production scale and capital expenditures and cash flow management needs related to PRC foreign currency controls.March Analyst DaySuntech will host an Analyst and Investor Day in Hong Kong on Monday, March 26, 2007. The event will address all key aspects of Suntech's operations and vision to become the globally leading pure-play producer of solar energy products. For more information, please contact The Piacente Group at +1 212-481-2050 or via email at email@example.com.Outlook for First Quarter and Full Year 2007Based on current operating and other conditions, Suntech expects its first quarter 2007 total production output, including contribution from MSK, to be in the estimated range of 60MW to 62MW and its total net revenues to be in the estimated range of $220 million to $228 million.As the Company will have carryover spot market priced silicon supply from 2006 and as its silicon supply from its long term supply contracts will not become a majority of its silicon supply until the second quarter of 2007, the Company will likely have a slight decline in the gross margin in its core business in the first quarter of 2007 with stabilization and improvement expected in the gross margin of its core business thereafter.Such guidance takes into account the assumption that Suntech's total PV cell production capacity will remain constant at 270MW until the second quarter of 2007 when additional capacity is expected to become operational. In addition, the first quarter 2007 guidance also takes into account the shorter month of February and the Chinese New Year holiday.Suntech has increased its total PV cell production output target for 2007 from 250MW to 280MW. This target takes into account third party PV cell purchases originally contracted by MSK. Suntech has also raised its expected 2007 year end PV cell production capacity target from 390MW to 420MW.Suntech expects capital expenditures for the full year 2007 to be in the estimated range of $80 to $100 million.Given the accelerated integration between Suntech and MSK's business operations, Suntech will not continue to report separate results or give separate guidance for MSK in the future.Conference Call InformationSuntech's earnings announcement conference call will take place on March 12, 2007 at 8:00a.m., Eastern Time, which corresponds to March 12, 2007 at 8:00p.m., Beijing/Hong Kong time. To access the conference call, please dial +1-617-614-3523 (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 the Investors section of Suntech's website at http://www.suntech-power.com .A replay of the conference call will be available until March 26, 2007 by dialing +1-617-801-6888 (passcode: 99523904).