China Sunergy Co., Ltd. (CSUN)

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China Sunergy Co., Ltd. (CSUN)

Q4 2013 Earnings Conference Call

April 04, 2014 08:00 AM ET


Elaine Li - Senior IR Manager

Stephen Cai - CEO

Yongfei Chen - CFO

Jianhua Zhao - CTO


James Medvedeff - Cowen & Company



Ladies and gentlemen, welcome to China Sunergy’s Fourth Quarter and Year 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 China Sunergy fourth quarter and full year 2013 earnings conference call. This is Elaine Li speaking, CSUN’s Senior Investor Relations Manager. We have posted a presentation on our website and during today’s discussion we will be closely following and referring to the presentation. With us today are China Sunergy’s CEO, Mr. Stephen Cai; CFO, Mr. Yongfei Chen; and CTO, Dr. Jianhua Zhao.

Today, before the market opened, the company issued a press release announcing our fourth quarter and full year 2013 financial results and our guidance for the first quarter and full year of 2014. This press release is also available on the Investor Section of our website at www.csun-solar.com.

To start, Stephen will present an overview of our fourth quarter results and a quick review of important developments at CSUN and the solar industry. Then, CFO, Mr. Chen will explain our financial results in more detail. Following that, CTO, Dr. Jianhua Zhao will provide a technology update, and then Stephen will close with guidance. Afterwards, they will all be available to take your questions.

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

Stephen Cai

Thank you all for joining today’s conference call. We are pleased that our shift to more OEM arrangements has benefited CSUN, driving better than expected total shipments. As you may recall from our discussion with you during the last earning calls, in light of China’s tightened credit environment has seriously limited our working capital, we productively decided to take on more OEM arrangements in order to sustain the production scale while employing our limited working capital to produce a higher margin cells and modules.

As summarized on slide four, in the fourth quarter, we shipped a total of 235.8 megawatts, beating the high end of our previous forecast of 168 megawatts. Embedded in the total shipments was 14 megawatts to OEM including 21 megawatts in module and 19 megawatts in cells.

Blended ASP for modules in the fourth quarter declined to $0.03 sequentially to $0.59 per watt, primarily due to the more sales to lower pricing regions, especially in China during the quarter. Even though the ASP declined our strong shipment volume more than made up for it as we more than doubled our total revenue from the previous quarter to $125.5 million.

We also expanded gross margin by 220 basis points from the previous quarter to 5.2% in the fourth quarter, aided by the higher gross profit, we were able to hold net loss for the quarter at $13.2 million, unchanged from the third quarter, despite high finance expense and the low ForEx gains in the fourth quarter.

In reviewing 2013, we are satisfied with our ability to nimbly adapt our strategy in keeping with the tough solar industry dynamics. Our operational flexibility and the scale combined with effective expense controls contributed to hand an overall improvement in efficiency. Our Turkey manufacturing plants favourably buffered us against the impact of anti dumping rules in the European market, and we achieved a rich geographical balance in our customer base.

At the same time, we continued to make progress in expanding our global sales network, increasing production efficiency and also for gaining ahead with the downstream projects. As such, despite the challenging macro-environment and the tough industry dynamics we believe China Sunergy is now more efficient and nimble than ever. Let’s together make a more detailed review of our progress in 2013.

First, please turn to slide 6 for updates on our initiatives to optimize the global supply chain. As you recall, we completed the construction of our Turkey manufacturing plants in the first quarter of 2013 with an initial capacity of 300 megawatt for module and 100 megawatt for cell. Subsequently, our top priority in Turkey was to ramp up production and the capacity utilization in order to enhance efficiency and profitability.

In the fourth quarter, our shipment from Turkey totalled 25 megawatts, up from 15 megawatts in the previous quarter. Thus far, modules made at our Turkey plant have been well accepted and are benefiting from the higher ASP in the region, the average gross margin for shipment from our Turkey plant reached 8% for fourth quarter of 2013, much higher than the average gross margin from our China plant. In addition, the Turkey plant also helped to broaden our financing channel at a cheaper cost.

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