CSUN

China Sunergy Co., Ltd. (CSUN)

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China Sunergy Co., Ltd. (CSUN)

Q4 2011 Earnings Conference Call

March 16, 2012 8:00 AM EST

Executives

Elaine Li – Senior IR Manager

Stephen Zhifang Cai – CEO

Yongfei Chen – CFO

Analysts

Rob Stone – Cowen & Company

Min Xu – Jefferies

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the China Sunergy Fourth Quarter 2011 Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, 16th of March 2012.

I will now like to have the conference over to your first speaker for today, Ms. Elaine Li. Ma’am, please go ahead.

Elaine Li

Thank you, operator, and welcome to China Sunergy’s Fourth Quarter and Full Year 2011 Earnings Conference Call. This is Elaine speaking, China Sunergy’s Senior Investor Relations Manager. With us today are China Sunergy’s CEO, Mr. Stephen Cai; and CFO, Mr. Yongfei Chen.

Today, before the market opened, the company issued a press release announcing our fourth quarter financial results and our guidance update for the first quarter and the full year 2012. The press release is also available on our Investors section of the China Sunergy website at www.chinasunergy.com. In addition, we have posted a presentation for this call on our website.

Today, we’ll be closely following and referring to that presentation in our prepared remarks. Stephen will first present an overview of our first quarter and full year results and discuss our 2012 strategy, and then our CFO, Mr. Chen will explain our financial results in more detail. Afterwards, they will be available to take questions.

Before I turn the call over to Stephen, may I remind our listeners that management’s prepared remarks include forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

And as such, our results may be materially different from the views expressed here today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. China Sunergy does not undertake any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference is being recorded.

Now, I’d like to turn the call over to our CEO, Stephen. Hi, Stephen.

Stephen Zhifang Cai

Thank you all for joining. I like to pass an apology from our CTO Dr. Zhao who is travelling on business and therefore not joining today’s call. I would also like to mention that Bob Rice who joined the last quarter’s earnings call had left China Sunergy due to personal reasons.

First of all, I would like to offer my brief comments on the industry at large. As we are all aware, 2011 was an incredibly tough year for the PV industry. Market demand was soft while oversupply was a huge problem and the pricing levels fell dramatically. In the first half of this year, the uncertainty over fill-in tariff in Italy and the subsidy cuts in many key markets, led us to an inventory pile up on the one side, and a faster drop in ASPs on the other. Many players have a high level of the high cost inventory which dented margins.

In the second half, there was an increase in market demand, but this was volatile and it became clear that manufacturers have to reduce costs to survive. Meanwhile, the day’s situation in Europe made it a lot harder for end users to obtain project financing. Today, the oversupply situation is improving, as weaker players have ceased to operate in China and the West. The strongest Chinese manufacturers are leading the world in high-tech, cost-effective solar panel manufacturing.

As per our result, solar is moving closer to the grid parity, and a solar energy is becoming more economically viable for end-users, however, demand is still soft, because the sector continues to rely on subsidies, and a larger market in the world today, Germany, is about to be cutting subsidies dramatically.

Other markets, like China, India and the U.S., will pick up the slack, but this will take some time. We can foresee that China could overtake Germany as the world’s largest solar market in the near future, which is of course, very positive for Chinese suppliers who can hold on through the transition period.

I would now like to comment on our fourth quarter and full-year results. Please refer to slide four. In the last three quarters, I told you we will work hard to make more accurate guidance for projections, and I’m pleased to announce today that our largest – our latest guidance for both the fourth quarter and the full year was in-line with our performance. Our shipments in the fourth quarter were 116.8 megawatts, exceeding our guidance slightly.

Gross margin, forecast to be at breakeven levels, exceeded our expectation by 20 basis points and due to the strong sales in Q4. For the full year our total shipments of 420.3 megawatts also slightly exceeded the guidance. Demand was a bit stronger than I hoped and then we made good progress in clearing inventory levels. The bad news is that we suffered and that will also $49.6 million in first quarter and then 94.3 million for the year.

However, the quarterly and annual of non-cap net loss was 35.8 million and then 79.5 million, respectively. But our operational efficiency is clearly improving. Our cash position remains strong and that we are focused on technology improvement. We have much to be optimistic about long term.

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