Suntech Power Holdings Company Ltd.
) announced preliminary financial results for the second quarter
ended June 30, 2012.
In the reported quarter, greater demand from European markets,
China, Japan and Australia drove sequential shipment growth. As a
result, Suntech's shipments of photovoltaic (PV) products for the
quarter increased by approximately 33% from the first quarter of
2012, higher than the previous guidance of a 20% increase in PV
shipments. Revenues in the second quarter of 2012 were
approximately $471 million, a sequential increase of 15%. However,
this was below the Zacks Consensus Estimate of $505 million for the
In the reported quarter, approximately 93% of revenues were
generated from the sale of PV modules, and 7% of revenues were
generated from the sale of PV systems, cells, silicon wafers and
Gross margin in the second quarter of 2012 was approximately
negative 10%. Gross margin was impacted by a non-cash inventory
provision of $76 million. The impact of the non-cash inventory
provision on gross margin was 16%.
In the second quarter of 2012, Suntech's operating expenses were
approximately $133 million. Operating expenses were impacted by a
$56 million non-cash provision related to a prepayment for a
long-term supply contract, which Suntech is currently disputing.
Suntech generated positive operating cash flow of approximately $5
million during the quarter.
Wuxi, China-based Suntech is a leading solar energy company. The
company designs, develops, manufactures and markets photovoltaic
(PV) cells and modules.
In the third quarter of 2012, Suntech expects PV shipments 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 PV shipments to be in the
range of 1.8GW to 2.0GW, compared to the previous guidance of 2.1GW
Suntech Power is one of the largest producers of PV solar modules
under its proprietary Pluto technology with a geographically
diversified customer base. Other positive factors for Suntech
include ongoing expansion programs, higher conversion efficiency
through its Pluto technology-enabled modules, subsidy program in
China, and improving operating efficiencies. However, the positives
are overshadowed by fears of tepid module demand in Europe, rising
competition, the volatile Euro and the financial stability of its
In the longer run, our 'Neutral' recommendation on the stock
indicates that it would perform in sync with the broader market. In
the near term, however, the Zacks #4 Ranked (Sell) Suntech Power
will perform lower versus the market. This is in line with its
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