CSUN

China Sunergy Co., Ltd. (CSUN)

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China Sunergy Co., Ltd. (CSUN)

Q4 2010 Earnings Conference Call

March 24, 2011, 8:00 am ET

Executives

Tom Evrard – IR, Financial Dynamics

Stephen Cai – CEO

John Wong [ph] – Finance Controller

Analysts

Anthony Kit – Barclays Capital

Rob Stone – Cowen & Company

Kelly Dougherty – Macquarie

Christine Hersey – Wedbush

Vishal Shah – Barclays Capital

Sri Nadesan – Lazard Asset Management

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2010 China Sunergy Company Limited earnings conference call. My name is Michael, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I will now turn the presentation over to your host for today’s conference, Mr. Tom Evrard. You may proceed.

Tom Evrard

Thank you, operator. And everyone, welcome on behalf of China Sunergy. Our fourth quarter and full year 2010 earnings results were released earlier today and are available on the company’s website as well as on those newswire services. On the call from China Sunergy are Mr. Stephen Cai, CEO; Dr. Jianhua Zhao, CTO; Mr. Yongfei Chen, Finance Controller; and John Wong [ph], also Finance Controller.

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 risk and uncertainties. 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. And as a reminder again, this conference is being recorded.

With that, I’ll turn it over to our CEO, Mr. Stephen Cai. Stephen?

Stephen Cai

Thank you, Tom. And let me welcome everyone to our fourth quarter and full year 2010 conference call. Before I begin by discussing our quarterly and full year results and the overall comparative strategies, I would like to introduce John Wong, who will provide us a more in-depth look at our financials. John recently joined as the core Financial Controller alongside Yongfei Chen. He brings with him 24 years of international financial experience, including the global manufacturing companies, PricewaterhouseCoopers and Ernst & Young. Following the financial highlights and overview by John, I will discuss our outlook for the first quarter and our vision for 2011.

I’m pleased to report that the demand for our products remains strong and our fully integrated strategy is working. Our results reflect the dramatic improvement from what we saw at the end of 2009. It is important to note that it is the first time we are reporting results, which reflect a shift in our business model. The cell and the modules businesses were combined beginning November 1st. For the quarter, we remained at full capacity utilization, reporting record shipments, revenue, gross profit, and net income. They reflect our ongoing improvement.

Our shift to in-house module manufacturing following the acquisitions of the CEEG Solar Science and Technology Company in Shanghai and the CEEG New Energy Company in Nanjing has already had a positive impact as demonstrated by continued momentum that we saw through this fourth quarter, helping us end the year with solid results.

Shipment for the fourth quarter was 97.9 megawatts. This is including the 60.6 megawatts of the solar modules, 33.9 megawatt of the solar cells and a small volume of the OEMs. Full year shipment was 347.8 megawatt, of which 277.2 megawatts were solar cells and 67.2 megawatts were solar modules.

Q4 revenue was $169.6 million, representing cell sales of $51.1 million and module sales of $116.8 million, an increase of 34.8% sequentially and 73.8% year-on-year. Full year net revenue was $517.2 million, 81.5% increase from 2009. Gross profit for the quarter was $27.1 million, which led to a splendid gross margin of 16% and increased the margin of the 18.7%. Gross profit for the year was $92.3 million, with gross margin of 17.8%.

Net income in the fourth quarter was $15.4 million compared to the net loss of $3.6 million and net income of $15.4 million in the fourth quarter of 2009 and the third quarter of 2010 respectively. Blended cell ASP during the fourth quarter was $1.51 per watt. Blended module ASP during the fourth quarter was $1.93 per watt, representing a premier over the industrial level.

Our objective of becoming vertically integrated has already started paying off. This is giving lot of opportunities as strategic formations last quarter, which we will continue to execute. They include increasingly the sales and marketing approach. The company has to yet make up expansion plans and our strong results and development capability. More specifically, the two module manufacturers we acquired have marked a critical strategic state to move downstream while advancing our commitment to becoming a vertically integrated manufacturer.

Most of the solar cells produced are now consumed internally through our module business. Not only have we applied module capacity of 480 megawatts, but also a strong diversified sales network within Italy, Eastern Europe, Germany, United States, and Asia Pacific. Our sales and marketing efforts are focused on both end user and the distributors, as we see market potential in both growths. In the fourth quarter, our sales from the end user accounted for about 70% of the total sales. And we have established brand equity in certain markets.

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