Suntech Power Holdings Co. Ltd.
) has closed a portion of its solar cell production capacity in
Wuxi, China for the time being. The move comes after the company
plans to reduce production cost and operating expenses.
As a result of the initiative, the company's operational solar cell
capacity will be temporarily reduced to 1.8GW. However, module
capacity and wafer capacity will remain at 2.4GW and 1.6GW,
respectively. This consolidation process will affect approximately
1,500 employees in China. However, the company is planning to offer
positions to majority of the employees at other production
Excluding non-recurring items, the company intends to reduce its
operating expenses by 20% year over year. Also, the company targets
to create a sustainable business model as well as return to
positive operating cash flow in 2013 with the help of these
attempts. The company is currently assessing the impairment charges
related to the closure of facilities, severance payments and other
related expenses. It plans to disclose those expenses with the
third quarter of 2012 earnings results.
The need to take up such program comes in light of the
preliminary U.S. anti-dumping tariff, the European anti-dumping
investigation, and oversupply of solar modules. The company aims at
right-sizing its production capacity and continues to make best use
of the resources of the organization. The company aims to make its
manufacturing base small in order to lower the production cost,
increase utilization rates and improve product performance.
Moreover, it expects panel cost to improve as the production will
be concentrated at the company's highest efficiency and lowest cost
Suntech Power Holdings is one of the largest producers of
crystalline solar cells and modules, serving
geographically-diversified customers. The company is prudently
expanding its revenue base to divergent markets around the globe,
while increasing megawatts shipped. Positive factors include
ongoing expansion programs, higher conversion efficiency through
its Pluto technology-enabled modules, China's subsidy program and
improving operating efficiencies.
These positives are overshadowed by fears of tepid module demand in
Europe, rising competition, the volatile euro and the financial
stability of its customers. However, we believe that the
restructuring initiatives taken up by the company will help it in
reducing their expenses, resulting in improvement of profits.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
Wuxi, China, based Suntech Power Holdings Company is a solar energy
company that designs, develops, manufactures and markets a variety
of photovoltaic (PV) products, including a broad range of
value-added building-integrated photovoltaics, or BIPV, products.
The company manufactures silicon wafers and ingots used in
manufacturing its PV cells and modules.
Some of its main competitors are
First Solar, Inc.
FIRST SOLAR INC (FSLR): Free Stock Analysis
SUNPOWER CORP-A (SPWR): Free Stock Analysis
SUNTECH PWR HLD (STP): Free Stock Analysis
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