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Suntech Power Holdings Co., Ltd. (STP)

Q2 2011 Earnings Call

August 22, 2011 8:00 AM ET


Rory MacPherson – Director, IR

Zhengrong Shi – Chairman and CEO

Andrew Beebe – Chief Commercial Officer

David King – CFO


Min Xu – Jefferies

Brandon Heiken – Credit Suisse

Sanjay Shrestha – Lazard

Robert Stone – Cowen and Company.

Vishal Shah – Deutsche Bank

Daniel Ries – Collins Stewart

Edwin Mok – Needham and Company

Kelly Dougherty – Macquarie

Lu Yeung – UBS

Paul Clegg – Mizuho

Colin Rusch – ThinkEquity LLC

Pranab Sarmah

Sam Dubinsky – Wells Fargo

Brian Gamble – Simmons & Company

Mark Bachman – Avian Securities

Pavel Molchanov – Raymond James

Mehdi Hosseini – SIG



Good day ladies and gentlemen and welcome to the Second Quarter 2011 Suntech Power Earnings Conference Call. My name is Stephanie and I will be your conference moderator for today. At this time all participants are in listen-only mode. Later we will conduct a question and answer session towards the end of today’s call. (Operator Instructions)

I will now like to turn the conference over to your host for today Mr. Rory MacPherson, Director of Investor Relations. Please proceed.

Rory MacPherson

Thank you. Hello everyone and welcome to Suntech’s second quarter 2011 earnings conference call. My name is Rory MacPherson, Suntech’s Director of Investor Relations. On the call today Dr. Zhengrong Shi, Suntech’s Chairman and CEO will give an overview of our performance and operational initiatives. Andrew Beebe, our Chief Commercial Officer will discuss sales and markets and David King, our Chief Financial Officer will discuss our financial performance.

During this conference call, we will make certain forward-looking statements in an effort to assist you in understanding the company and its results. The forward-looking statements will be made under the Safe Harbor provisions of the U.S. Private Securities Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, Suntech’s future results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our earnings release issued today and our SEC filings. Suntech does not undertake any obligation to update any forward-looking statements except as required under applicable law.

To enhance our presentation of information and data during this conference call we have provided a set of top link flag field reference. This presentation is posted on the main page of the Investor Relations section of our website after this call. We have allocated one hour for the conference call and we’ll endeavor the field there is any questions as possible within that timeframe. Please limit questions to one question and one follow-up.

As a reminder, this conference call is being recorded and a webcast replay will also be available on the Investor Relations section of Suntech’s website after this call. Please note that all figures mentioned during this conference call are in U.S. dollars unless otherwise specified.

I will now turn the call over to Suntech’s Chairman and CEO, Dr. Zhengrong Shi.

Zhengrong Shi

Thank you, Rory. Hello and thank you for joining us. Please turn to page four. Despite a competitive market and ongoing macro challenges in Europe and in the U.S. Our corporation performed well during the second quarter. Due to our field diversification and a solid demand for cost effective and a bankable solar products.

We met our shipments guidance and hit our ASP target. Additionally, we are well positioned to gain market share in the second half of the year. The highlights of the second quarter was – first to the revenue increased 33% year-over-year to $831 million and the second our total PV shipments increased 2% sequentially and 48% year-over-year.

This quarter one time charges related to the termination of a long-term supply agreement with MEMC and a discontinued operations of CSG Solar impacted below the line results. And we’ve recorded a net loss of $260 million in the second quarter, and the non-GAAP loss of $34 million or $0.19 per diluted ADS.

Turning to operational initiatives, please turn to page five. During the quarter, we took two steps to enhance the flexibility of our supply chain. First, we continued to build our internal wafer capacity and ended the quarter with 1.2 gigawatt, which can supply 50% of our wafer needs. The experienced management team of our wafer operation has executed extremely well in expanding of this facility from 370 megawatt in the fourth quarter of 2010 and have met great progress in both costs reductions and a new technology development.

We believe that fairly integration of wafer capacity will ultimately enable us to lower our cost structure and have decided to expand wafer capacity to 1.6 gigawatt by the end of this year. Second, we just continued our long-term supply agreement with MEMC and it was not suited to the finance processing amendments and the market conditions that we see today.

As a result some that is no longer required to purchase approximately 4.6 gigawatt of wafer between 2011 and 2016. These initiatives will allow us to optimize our assortment strategy and it lead to estimated cost savings of over $400 million in the next five years. We still maintain a strong relationship with MEMC and we’re continuing to work with them by silicon wafers and the supply modules to their project development division.

Early initiatives will enable Suntech to benefit from the decline in silicon prices that we have in over the past few months and allow to adjust our supply chain to reflect market conditions. We expect that the price of silicon will continue to decline in 2012 through our semi-integrated strategy very critical to maintaining our competitive cost structure.

At the cell and module level, we added 200 megawatt of capacity taking us to 2.4 gigawatt at the end of the second quarter. This includes 600 megawatts of cell capacity that is operated by Suntech joint venture and are co-located at our main Wuxi campus. In addition to improvement in our cost structure, we continue to be at the forefront of solar innovation.

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