CSUN

China Sunergy Co., Ltd. (CSUN)

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China Sunergy Co., Ltd. (CSUN)

F1Q13 Earnings Call

July 1, 2013 8:00 AM ET

Executives

Elaine Li – Senior Investor Relations Manager

Stephen Zhifang Cai – Chief Executive Officer

Yongfei Chen – Chief Financial Officer

Dr. Jianhua Zhao – Chief Technical Officer

Analysts

James Medvedeff – Cowen & Company

Paul Strigler – Esplanade Capital

Presentation

Operator

Ladies and gentlemen, welcome to China Sunergy's first quarter 2013 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Ms. Elaine Li, Senior Investor Relations Manager, you may begin your conference.

Elaine Li

Thank you operator and welcome to CSUN’s first quarter 2013 earnings conference call. This is Elaine Li speaking CSUN’s Senior Investor Relations Manager. We have posted a presentation for this call on our website and during today’s discussion; we’ll be closely following and referring to.

With us today are CSUN’s CEO, Mr. Stephen Cai, CFO, Mr. Yongfei Chen, and CTO, Dr. Jianhua Zhao. Today before the market opened, the company issued the press release announcing our first quarter 2013 financial results and our guidance for the second quarter and full year 2013. This press release is also available on the Investors Section of our website at www.csun-solar.com.

To start, Stephen will present an overview of our first quarter results and a quick review of important developments in the solar industry during the quarter. Then, CFO, Mr. Chen will explain our financial results in more details. Following that, CTO, Dr. Jianhua Zhao will provide a technology update and then Stephen will close with guidance for second quarter and full year 2013. Afterwards, we will all be available to take your questions.

Before I turn the call over to Stephen, may I remind our listeners that management’s prepared 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 CEO, Mr. Stephen Cai. Stephen?

Stephen Zhifang Cai

Thank you, Elaine. Thank you all for joining today’s conference call. We are pleased that despite the industry’s persistent oversupply and anticipated ASP downward trend, CSUN was able to grow revenue and has returned to the positive gross margin in this quarter.

We believe this demonstrated our relative success in stating and executing our operational strategy, diversifying geographically and optimizing global supply chains.

As summarized on slide four, in the first quarter, we grew revenue by 13% from the pre quarter to $62 million, but we shipped a total of 102.5 megawatts, which was 31% more than fourth quarter.

Our ASP for the first quarter decreased to $0.59 a watt, which was nearly 8% lower than previous quarter. More importantly, we were able to quickly improve gross margin and returned to a positive 0.4% compared with negative gross margin of 3.7% in the pre quarter.

As previously discussed, we always want to further penetrate the emerging market in order to diversify customer base and mitigating the competition risk. And I think we did a good job with that this quarter.

As you can see this on slide five, though Europe continue to lead in terms of demand, Asia have quickly gained initial revenue contribution with a strong demand coming from India, Japan and China. The emerging markets in Asia contributed the higher revenue growth in our total mix with India, Japan and China contributing 15%, 13% and 9% of total revenue respectively.

In the quarter, Europe with an overall revenue contribution of the 60% remained a largest destination for our products. Within Europe, we have also improved revenue mix with revenues contributions from France, Germany and Italy up 26%, 17% and 6% respectively.

We believe the overall demand in Europe was negatively impacted by that investigation of EU AD and our CVD [Antidumping and countervailing duties] during the quarter. Notably, total installations in Germany decreased more than 50% year-over-year, followed by Italy, Belgium and some of the other major EU solar markets.

One bright spot in Europe was France, which became our largest revenue contributor during the quarter driven by French government doubling of the 2013 solar installation target from 500 megawatt to 1 giga, as well as a much more simplified tender process.

We expect the challenging situation in Europe to persist, however, we are pleased [to Greenfield] [ph] our Turkey plant which we will be talking about later. We will continue to execute on our strategy of the diversifying geographic mix, especially in making the inroad into the emerging markets.

We view Japan, China, Turkey and the Indian as important markets for CSUN in the second half of 2013.

Next, please turn to slide six for a quick update on our progress in downstream projects. As of 10 megawatt project in UK, one has been connected and will start generating revenue in the third quarter, while other is in the application process to qualify for FIT.

In addition, our commercial roof top project totaling 22 megawatt from China’s Golden Sun project will be completed at the end of the August. Last week, we just received approval from China National Development and Reform Commission known as the NDRC for the construction of the 40 megawatt solar project in Hami City, Xinjiang, which will deploy our high efficient poly modules.

Read the rest of this transcript for free on seekingalpha.com