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China Sunergy Co., Ltd. (CSUN)

Q4 2009 Earnings Call

March 11, 2010 8:00 am ET


Peter Schmidt – IR, Financial Dynamics

Siegfried Yi Chou Hsu – CFO

Alex Ghian [ph] – Senior Manager of Strategic Planning Department

Zeny Xu [ph] – Director of Accounting and Corporate Finance


Paul Clegg – Jefferies

Lu Yeung – Bank of America

Rob Stone – Cowen & Company

Amy Young – Macquarie



Good day, ladies and gentlemen, and welcome to the fourth quarter 2009 China Sunergy earnings conference call. My name is Anita and I will be your operator for today. At this time, all participants are in listen-only mode. We will have a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. At this time, I would now like to turn the call over to Mr. Peter Schmidt of Financial Dynamics. Please proceed, sir.

Peter Schmidt

Thank you, and welcome to the call today. Before we continue, please note that the discussion today will include forward-looking statements made under the Safe Harbor Provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the reviews expressed 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. With that, I'd like to turn the call over to the CFO of China Sunergy, Siegfried, please go ahead.

Siegfried Yi Chou Hsu

Thank you, Peter, and welcome everyone to our fourth quarter and full year 2009 conference call. Unfortunately, our CEO, Mr. Allen Wang, is unable to join us today. But joining me on the call is our CTO, Dr. Zhao; Zeny Xu [ph], our Director of Accounting and Corporate Finance; Marcus Chen [ph], the Senior Manager of Investor Relationship Department; and, Alex Ghian [ph], the Senior Manager of Strategic Planning Department.

I will start by reviewing our results before turning it over to Alex who will run through our financials. Owing [ph] that, I'd like to discuss some of the strategic initiatives that China Sunergy will be pursuing in the coming year. We entered 2009 in the midst of uncertain economic environment, which was directly impacting the solar sector and our company's performance.

Although we were unable to fully overcome the difficult first half of the year resulting in weaker revenues and bottom line full year results, the dedicated focus on cost control, technological innovation, and sales efforts, we began to demonstrate steady improvement towards the end of the year. We reached the high end of our shipment guidance by shipping 74.3 megawatts and 194 megawatts of solar products in the fourth quarter and full year, respectively, making – marking an increase of 427% from the troubled quarter a year ago, and 36.6% rise from this quarter.

Despite (inaudible) shipment of jackets, China Sunergy's gross margins were lower than expectations. Although the 10.7% gross margin for the fourth quarter will show an improvement from the 10.2% last quarter, we were unable to achieve the expected (inaudible) gross margin for the quarter. This was largely a function of decreasing pricing as well as product mix and the continual need for improved production efficiency.

Additionally, despite reporting an annual and quarterly gross profit along with a significant bad debt provision, these declines contributed to China Sunergy's reported loss for the fourth quarter and full year. Although we are not satisfied with these bottom line results, we do want to point out that if we look at the results of our ongoing operations with other various one-time items, we would have, in fact, be profitable for the fourth quarter. In short, if they (inaudible) of ongoing operations, our profit will – and we will continue to refine this in the coming quarters while looking to reduce costs and return China Sunergy to profitability.

We realized to achieve this, China Sunergy must improve across a variety of items, and we are enhancing our production and management execution. We are also exploring several strategic options, including potential downstream capabilities to ensure we deliver the best possible products through our diverse client base while building shareholder value.

To fully realize the benefits of this flexible development strategy, China Sunergy has started to implement critical adjustments within our manufacturing. First, we have engaged experts from the semiconductor sector to further optimize our production systems while streamlining operations. This will provide China Sunergy with better throughput rate and year rate performance. Secondly, we have initiated product design and profits improvements. When combined with the review of – on our wafer raw materials purchase policy, we expect this will give China Sunergy a lower cost structure by the second half of 2010. Finally, we are starting to experience the benefits of high utilization rates and economies of scale, which are making China Sunergy's manufacturing costs per watt within high efficiencies from large panel products more competitive compared to our peers. These are all (inaudible) moments, which are currently in place and will contribute to our improved performance and results in 2010.

Before I go into further details regarding additional strategies, I'd like to turn the call over to Alex for a brief review of our financial results.

Alex Ghian

Thank you, Siegfried, and hello, everyone. I'm going to briefly discuss our fourth quarter and full year 2009 results, which are denominated in US dollars and have been prepared under US debt.

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