CSUN

China Sunergy Co., Ltd. (CSUN)

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China Sunergy Co., Ltd. (CSUN)

Q1 2009 Earnings Call

May 27, 2009 8:00 am ET

Executives

Allen Wang - Chief Executive Officer

Shiliang Guo - Acting Chief Financial Officer

Dr. Zhao - Chief Technology Officer

Peter Schmidt - Financial Dynamics

Analysts

Rob Stone - Cowen & Co.

Paul Clegg - Jefferies

Lu Yeung - Bank of America/Merrill Lynch

Sanjay Shrestha - Lazard Capital Markets

Jake Greenblatt - Barclays Capital

Arch Pei - JL McGregor

Presentation

Operator

Good day ladies and gentlemen and welcome to the first quarter 2009 China Sunergy Company Limited earnings conference call. My name is Chanelle and I will be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to your host for today’s call Mr. Peter Schmidt from FD. Please proceed.

Peter Schmidt

Thank you and welcome to the first quarter 2009 conference call. Joining us today are China Sunergy’s CEO, Dr. Allen Wang; Acting CFO, Mr. Shiliang Guo; and CTO, Dr. Zhao.

Before we continue, I’d like to remind you that this announcement and presentation contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts in this are forward-looking statements.

These forward-looking statements are based on current expectations, assumptions, estimates and projections, about the company and the industry and involve known and unknown risks and uncertainties, including but not limited to the company’s ability to raise additional capital, the effectiveness, profitability, and marketability of its products, the economic slowdown in China and elsewhere and its impact on the company’s operations, demand for and selling prices of the company’s products, the future trading of the common stock of the company, the ability of the company to operate as a public company, the period of time for which its current liquidity will enable the company to fund its operations, impact of cost-competitiveness as a result of entering into long term arrangements with raw material suppliers and other risks detailed in the company’s filings with the Securities and Exchange Commission.

The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as maybe required by law. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

With that, I’d like to introduce Al Wang, the CEO of China Sunergy. Allen?

Allen Wang

Thank you Peter and I welcome everyone to our 2009 first quarter conference call. Our anticipation for the first quarter was that several of the negative factors we experienced in the first quarter will continue to impact our performance as we enter into 2009. As expected, our performance was hurt by the difficult sales environment that we find ourselves operating in.

Overall declining ASPs, combined with our existing high cost inventory negatively pressure our gross margins, leading to a reported loss for the quarter. However, I also believe that towards the end of the quarter, we will begin to see some of these factors being alleviate and that China Sunergy will report better operational and financial results during the first quarter than the fourth quarter of 2008. Although our quarter was not a strong one, we did achieve some improvements and expect this trend to continue into the next quarter and throughout the year.

During the first quarter we shipped 23.9 megawatt of solar cell products to a diverse set of customers, a 70% increase from the previous quarter. Of that, we shipped 8.9 megawatts of high efficiency cell, an increase from 6.5 megawatt last quarter. Although high efficiency cell sales declined as a percentage of the overall sales; this was largely due to the increase in shipment of our multicrystalline cells.

Among monocrystalline customers, the shipment of high efficiency cells increased slightly from 55.6% to 58.2% and we expect this trend to continue. Our shipments experienced a recover during the first quarter, and our results continue to be flat by our high cost inventory levels, especially early in the quarter. This inventory was purchased during 2008 and they are prior to the rapid decline in wafer costs.

As referenced, our parameter wafer cost during the first quarter was $2.74 per watt and the first quarter blended ASP at $2.97; this was a manageable though non-ideal cost base. However, we saw blended ASP fall to $1.64 per watt during the quarter, meaning the cost of this existing inventory led to severe gross margin pressure and the resulting bottom line loss. We were enabled to significantly realize the advantage of the reduced upstream cost opportunity, given our existing inventory levels at the beginning of the quarter.

Despite this inventory constraint, we do see our gross margins and our bottom line performance recover compared to the fourth quarter. I do have to acknowledge that this was in comparison to a weak fourth quarter. So far we still did not perform at their sustainable level. During the first quarter, we did make small, but important improvements.

We have been undertaking strong efforts to improve our results towards the end of the quarter and in the past months. We’re seeing several positive indications that we believe were results of continued improvement going forward, primarily involving our inventory levels and the resulting costs. While I will go into detail regarding these items with you shortly, before that I would like to review some of our operational items for the first quarter.

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