Suntech Reports Fourth Quarter and Full Year 2008 Financial Results
Posted on 2009-02-18
SAN FRANCISCO and WUXI, China, Feb 18, 2009 /PRNewswire-Asia via COMTEX/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), the world's largest photovoltaic (PV) module manufacturer, today announced financial results for the fourth quarter and full year ended December 31, 2008. Fourth Quarter 2008 Financial Highlights(1) -- Total net revenues grew 4.2% year-over-year to $414.4 million. -- GAAP gross margin was 0.6% and non-GAAP(2) gross margin was 0.9%. Excluding the provision for inventory and purchase commitments, adjusted non-GAAP consolidated gross margin in the fourth quarter was 13.1%. -- GAAP net loss was $65.9 million, or negative $0.42 per diluted American Depository Share (ADS). On a non-GAAP basis, Suntech's net loss was $42.4 million, or negative $0.27 per diluted ADS. Each ADS represents one ordinary share. -- Net debt decreased by $273.7 million to $1,117.8 million as of December 31, 2008. Full Year 2008 Financial Highlights(1) -- Total net revenues grew 42.7% year-over-year to $1,923.5 million. -- Full year 2008 total shipments of solar products grew 36.0% year-over-year to 497.5 MW. -- GAAP gross margin was 17.8% and non-GAAP(2) gross margin was 18.2%. -- GAAP net income for the full year was $111.0 million or $0.66 per ADS. On a non-GAAP basis, Suntech's net income for the full year was $149.7 million or $0.89 per diluted ADS. -- Achieved 1GW solar cell and module production capacity."Customer recognition of Suntech's high performance and premium quality modules enabled us to deliver close to 500MW in the full year 2008 and extend our position as a world leader in solar," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "During 2008, we bolstered our on-the-ground customer service and support capability by opening branches in key markets and hiring experienced solar professionals, achieved 1GW production capacity, and demonstrated our strength in solar innovation with the successful commercialization of our Pluto technology.""We believe that we are now in a position to service all avenues of solar demand globally, including residential roof-top, commercial roof-top, ground mounted and utility scale. In particular, our continued investment in the U.S. should position us for strong growth in that key market and its burgeoning utility-scale segment via our systems integration unit, Suntech Energy Solutions, and our project development joint venture, Gemini Solar.""Despite the challenging market conditions, we are confident that we are well positioned to expand our market share in 2009. We believe that the project financing environment is improving and will continue to do so as the year progresses, leading to further growth of the solar industry. We are confident that Suntech's reputation as a global solar leader will benefit us as more and more customers realize the value in partnering with a company that offers stability, first class service, industry-leading scale, superior technology, quality and a broad product portfolio," added Dr. Shi. RECENT BUSINESS HIGHLIGHTS Silicon Procurement -- Suntech and MEMC Electronic Materials amended their 10-year silicon wafer supply agreement. As amended, the dollar value of silicon wafer purchases from MEMC remains unchanged, but a volume increase and a price reduction for 2009 have been effectuated. -- Suntech acquired a minority stake in Asia Silicon Co. Ltd, an independent polysilicon producer, for a total cash consideration of approximately $8.1 million. Suntech previously entered into an agreement to purchase up to $1.5 billion high purity polysilicon from Asia Silicon over a seven-year period. Polysilicon cost decreases to less than $40 per kilogram during the term of the agreement. Notable PV Projects -- Suntech was chosen to design and construct a BIPV system totaling 3MW on the China and Theme Pavilions at the World Expo Shanghai 2010. The project will be the largest BIPV installation in China. -- Suntech supplied 5MW of Suntech solar panels for the largest solar plant in the Middle East, a 10MW solar electricity system to power Masdar City, the world's first carbon neutral city being built in Abu Dhabi, United Arab Emirates. The solar system is being built and designed by leading Abu Dhabi based solar power system integrator, Enviromena Power Systems. Product Offering Expansion -- Suntech entered into an exclusive agreement giving Suntech rights related to the worldwide manufacturing, distribution and marketing of Applied Solar's building integrated solar roof tile product, SolarBlend(TM), and roof membrane product, SolarEze(TM). The agreements combine Suntech's industry-leading products with Applied Solar's innovative BIPV applications to provide a more comprehensive set of product offerings to the residential and commercial market. U.S. Dealer Network -- Suntech continued expanding its dealer network of residential rooftop installers and integrators in the U.S. Currently, Suntech's network includes over 100 dealers, up from 30 at the end of the third quarter of 2008. Technology -- Suntech has a fully operational 34MW Pluto PV cell line and is in the process of adding another 68MW of Pluto capacity. Suntech expects to receive industry certification for Pluto PV modules in the second quarter of 2009 and targets shipments of more than 50MW of Pluto modules in 2009. -- The Pluto high efficiency technology consistently achieves conversion efficiencies of close to 17% on multi-crystalline PV cells and close to 19% on mono-crystalline PV cells. Suntech anticipates that the higher conversion efficiencies will improve power output by up to 12% above conventional screen-printed PV cells, enable improved space utilization and reduce installation and other balance of system costs. Convertible Senior Note Repurchase -- Through December 31, 2008, Suntech repurchased $93.8 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2012 for cash consideration of $61.0 million. As a result, Suntech realized a net gain of approximately $31.1 million. Capital and Credit Facilities -- Suntech had approximately $2.4 billion of approved credit lines to be used for fixed asset purchase, working capital or trade financing as of December 31, 2008. Of these credit facilities approximately $1.2 billion had been drawn down as of December 31, 2008. Suntech expects that its capital will be sufficient to cover its capital expenditures in 2009 while maintaining adequate working capital to support its operations. Fourth Quarter 2008 Results Net Non-GAAP Non-GAAP Revenues Gross Profit Gross Margin (in $ % of Net (in $ millions) Revenues millions) (%) Standard PV Modules $382.6 92.3 % $11.4 3.0 % Others $31.8 7.7 % ($7.8) (24.0%) Total Net Revenues $414.4 100 % $3.6 0.9 % Provision for inventory and purchase commitment $50.7 12.2 % Adjusted Non-GAAP Gross Profit $54.3 13.1 %Total net revenues for the fourth quarter of 2008 were $414.4 million, a decrease of 30.3% from $594.4 million in the third quarter of 2008. The sequential decrease in revenues was primarily due to a decrease in shipments and the average selling price of PV products.Non-GAAP gross profit for the fourth quarter of 2008 was $3.6 million, compared to $129.7 million for the third quarter of 2008.Fourth quarter of 2008 non-GAAP consolidated gross margin was 0.9%, compared to 21.8% in the third quarter of 2008. Gross margin decreased from the third quarter of 2008 primarily due to a sequential decrease in the average selling price of PV products and a provision for inventory and purchase commitments of $50.7 million in total, reflecting the rapid decrease in the silicon and module prices in the fourth quarter. The provision for inventory and purchase commitments had a 12.2% negative impact on margins. Excluding the provision for inventory and purchase commitments, adjusted non- GAAP consolidated gross margin in the fourth quarter was 13.1%, and adjusted non-GAAP net income margin was 2.0%.Non-GAAP operating expenses in the fourth quarter of 2008 totaled $41.9 million or 10.1% of total net revenues, compared to $37.1 million or 6.2% of total net revenues in the third quarter of 2008. The increase was primarily due to an increase in provisions for doubtful debts and additional compensation expenses attributable to employees at Suntech Energy Solutions, which was acquired during the fourth quarter.Non-GAAP loss from operations for the fourth quarter of 2008 was $38.2 million, compared to income from operations of $92.6 million in the third quarter of the 2008. Non-GAAP operating margin was negative 9.2% in the fourth quarter of 2008, compared to positive 15.6% in the third quarter of 2008.Net interest expense was $8.0 million in the fourth quarter of 2008 compared to net interest expense of $7.9 million in the third quarter of 2008.In January 2009, Suntech adopted Financial Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash Upon Conversion ("FSP APB 14-1"). The Company is currently assessing the impact of adopting FSP APB 14-1, which the Company believes will be material to its results of operations. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer's nonconvertible debt borrowing rate.Foreign currency exchange loss was $3.2 million in the fourth quarter of 2008, compared to a loss of $16.6 million in the third quarter of 2008. The decrease was primarily due to a revaluation gain from the depreciation of net liabilities denominated in CNY in the fourth quarter of 2008. The exchange gain was largely offset by the revaluation loss resulting from the significant depreciation of net assets denominated in EUR.Net other expenses increased to $19.7 million in the fourth quarter of 2008 from $3.2 million in the third quarter of 2008. The increase in net other expenses was primarily due to an investment impairment of $48.8 million for Suntech's investments in Hoku and Nitol, which was partially offset by a net gain of $31.1 million from the repurchase of the Convertible Senior Notes at a discount.Non-GAAP net loss for the fourth quarter of 2008 was $42.4 million, or negative $0.27 per diluted ADS, compared to non-GAAP net income of $60.3 million, or $0.35 per diluted ADS in the third quarter of 2008.On a GAAP basis, for the fourth quarter of 2008 gross profit was $2.3 million. Consolidated gross margin was 0.6% for the fourth quarter of 2008.On a GAAP basis, operating expenses for the fourth quarter of 2008 were $46.2 million or 11.1% of total net revenues. Loss from operations was $43.8 million for the fourth quarter of 2008. Net loss for the fourth quarter of 2008 was $65.9 million, or negative $0.42 per diluted ADS.In the fourth quarter of 2008, capital expenditures, which were primarily related to expanding production capacity and constructing Suntech's production facilities, totaled $109.1 million. Depreciation and amortization expenses totaled $11.6 million.Cash and cash equivalents increased to $507.8 million as of December 31, 2008 from $394.6 million as of September 20, 2008. The increase was mainly due to the accelerated collection of VAT recoverable and the liquidation of short- term investments. The increase was partially offset by the cash payments for the repurchase of the Convertible Senior Notes and repayment of bank borrowings. As a result of the foregoing, the net debt balance decreased from $1,391.5 million as of September 30, 2008 to $1,117.8 million as of December 31, 2008.Restricted cash was $70.7 million as of December 31, 2008.Inventory totaled $231.9 million as of December 31, 2008 compared to $247.9 million as of September 30, 2008. The decrease was primarily caused by the inventory provision.Value-added tax recoverable totaled $75.7 million as of December 31, 2008, compared to $201.8 million as of September 30, 2008. The decrease was mainly due to the accelerated collection of some value-added tax recoverable in the fourth quarter of 2008. Full Year 2008 Results Net Non-GAAP Non-GAAP Revenues Gross Profit Gross Margin (in $ % of Net (in $ millions) Revenues millions) (%) Standard $1,785.8 92.8 % $343.8 19.3 % PV Modules Others $137.7 7.2 % $5.7 4.1 % Total Net $1,923.5 100 % $349.5 18.2 % RevenuesTotal net revenues for the full year 2008 were $1,923.5 million, representing a 42.7% increase from 2007.On a non-GAAP basis, the full year 2008 gross profit was $349.5 million, an increase of 22.7% year-over-year. 2008 consolidated gross margin was 18.2% compared to 21.1% in 2007. Income from operations was $205.7 million compared to $215.1 million in 2007. Net income was $149.7 million or $0.89 per diluted ADS, compared to non-GAAP net income of $201.0 million or $1.19 per diluted ADS in the full year 2007.On a GAAP basis, for the full year 2008 gross profit was $342.9 million, an increase of 25.1% year-over-year. 2008 gross margin was 17.8% compared to 20.3% in 2007. Income from operations was $182.5 million, a decrease of 0.8% year-over-year. Net income was $111.0 million, a decrease of 35.2% year-over- year, or $0.66 per diluted ADS, compared to net income of $171.3 million or $1.02 per diluted ADS in the full year 2007.In the full year 2008, capital expenditures, which were primarily related to expanding production capacity and constructing Suntech's production facilities, totaled $347.9 million. Depreciation and amortization expenses totaled $39.3 million.Business OutlookBased on current operating conditions, Suntech expects revenues for the first quarter of 2009 to be in the range of $340 million to $380 million, assuming an exchange rate of $1.28 U.S. dollars to the Euro in the first quarter 2009. GAAP consolidated gross margin in the first quarter of 2009 is expected to be in the range of 12% to 15%.Suntech expects full-year 2009 shipments of more than 800MW. Suntech intends to hold PV cell production capacity at 1GW in 2009 until credit market visibility improves. Suntech expects capital expenditures of approximately $100 million in 2009. The majority of 2009 capital expenditures will be utilized to retrofit existing production capacity to the high efficiency Pluto technology and the completion of the thin film facility.Fourth Quarter and Full Year 2008 Conference Call InformationSuntech management will host a conference call today, Wednesday, February 18, 2009 at 8:00 a.m. Eastern Time (which corresponds to 9:00 p.m. Beijing/Hong Kong time and 1:00 p.m. Greenwich Mean Time on February 18, 2009) to discuss the Company's results.To access the conference call, please dial +1-617-786-2963 (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 March 4, 2009 by dialing +1-617-801-6888 (passcode: 58672451).