China Sunergy Announces Financial Results for the Fourth Quarter and Full Year 2008
Posted on: Thursday, 19 March 2009, 06:15 CDT
* Please refer to "Reconciliation Tables of GAAP to adjusted Non-GAAP Figures" at the end of this press release.
Commenting on the results, Dr.
"China Sunergy has faced the same unprecedented and volatile environment as many of our peers across the solar sector, as a result of the ongoing global financial crisis. The severe pressure we initially experienced in September have persisted, as reflected by our lower than anticipated financial results including our negative gross margin and a higher than expected net loss. In the past months, we have experienced cancellation or postponement of orders, even as we reduced the selling price of our products significantly in response to market conditions. Although our recent financial results have been drastically impacted, we shipped 45 percent more solar cells in 2008 than in 2007 and remained cash flow positive at an operational level. We expect conditions to remain difficult in the coming quarter, however we retain our belief and confidence that our advanced solar cell offerings, coupled with our R&D, engineering and manufacturing capabilities will ensure the Company fulfills its long-term potential."
Operational Highlights -- Full year production of 111.0 MW of solar cells represented a 38.2% increase compared to 80.3 MW in 2007. Fourth quarter production of 20.1 MW of solar cells represented a 9.9% decrease on a year-over-year basis and a 43.7% decrease sequentially, as the Company proactively reduced production given the demand environment. -- Shipments of solar power products amounted to approximately 107.2 MW in 2008, representing a 44.9% increase from 74.0MW in 2007. Shipments in the fourth quarter amounted to approximately 14.1 MW, representing a 39.2% decrease on a year-over-year basis and a 58.7% decrease sequentially, as shipments were impacted by reduced downstream demand given the rapid decline in the availability of solar project financing. -- Shipments of high efficiency cells (defined as any cells with a conversion efficiency rate of over 17%) during the fourth quarter of 2008 amounted to 6.5MW, or 46.1% of total solar cell shipments, comparing with 11.1 MW, or 34.0% of total solar cell shipments, during the third quarter of 2008. The Company will continue to focus on its high efficiency products to benefit from their increased margins and customer preference. -- The Company has recently entered into several important sales and framework agreements with a diverse client base. - A supply of between 10MW and 30MW of solar cells in 2009 to asola Advanced and Automotive Solar System GmbH ("asola"), a German solar module manufacturing company. China Sunergy also entered into a 10-year framework agreement with asola the potential delivery of up to 480MW of solar cells from 2009 to 2018. - The supply of 22MW of solar cells in 2009 to Solarwatt AG, a leading manufacturer of solar modules in Germany. - A supply agreement for 12MW of multi-crystalline solar cells in 2009 to Ajit Solar Pvt Ltd ("Ajit Solar"), a privately-owned module manufacturer based in Jaipur, India. - The supply of between 20MW to 25MW of solar cells in 2009 to a U.S. based manufacturer of photovoltaic products, utilizing wafers procured from that manufacturer. -- China Sunergy established its European headquarters in Munich, Germany in June 2008, and has recently increased its European sales force, enhancing its sales and marketing capabilities throughout Europe. "The solar sector will continue to be impacted by the broader, macro
economic climate leading to reduced ASP and market demand," continued Dr. Wang.
"To mitigate these challenges, which we believe are likely to remain in the
near future, the Company has been actively negotiating for lower raw material
costs and continuing to focus on developing advanced, high efficiency cells
while realizing our sales strategy of actively targeting more diverse solar
markets within
Recent Technological Developments
China Sunergy continued to make important progress with the production and development of its high efficiency cells.
-- Average selective emitter ("SE") mono-crystalline cell conversion efficiency was 17.3% in the fourth quarter of 2008. Mono-crystalline cells produced on the HP lines achieved an average conversion efficiency rate of approximately 16.8%. -- The installation of four new selective emitter cell production lines was completed at the end of November, bringing the total number of SE lines to five as of the end of 2008. Given any specific quality of wafer, SE cells can not only generally achieve higher conversion efficiencies than P and HP-type cells, but also display greater wafer quality tolerance. -- China Sunergy has successfully tested multi-crystalline wafers on one SE production line, resulting in selective emitter multi-crystalline ("SEM") cells. These new cells have a 16.5% average conversion efficiency, with some test lots reaching 17%, compared to the normal 15.7% for P-Type multi-crystalline cells. Given the popularity of high efficiency multi-crystalline cells and that the conversion of SE lines to multi-crystalline capability requires minimal time and capital expenditure, the Company aims to start commercial production in the second quarter of 2009. -- Three of the four HP cell lines were refurnished, enabling multi- crystalline wafers to be used in these lines. This allows the Company more flexibility in both the procurement of raw materials and the product offering. -- At the end of 2008, the Company had five SE cell lines, four HP lines, three capable of using multi-crystalline and mono-crystalline wafers, and one normal P-type line for multi-crystalline cells for a total name-plate capacity of 320MW. -- China Sunergy's N-type cell consistently achieved an average efficiency of over 19% at the laboratory level during the quarter. However, due to the capital requirements of an N-type production line and a new priority regarding the SEM opportunity, the Company now anticipates production beginning in the first half of 2010. Fourth Quarter & Full Year 2008 Financial ReviewRevenues, Shipment and Production
Revenues in 2008 grew 49.4% to
Sales from solar cells, modules, cells processed under OEM arrangements, and other sales during the year accounted for 95.0%, 3.1%, 0.8%, and 1.1% of total revenue respectively. Shipments for the year, including 2.6MW for module sales, amounted to approximately 107.2 MW, compared to 74.0MW during 2007. For the fourth quarter, sales from solar cells, modules, cells processed under OEM arrangements and other sales accounted for 93.8%, 0%, 0.7% and 5.5% of total revenues, respectively. Shipments, including 0.5 MW of solar cells processed under OEM arrangements, amounted to approximately 14.1 MW, compared to 23.2 MW during the fourth quarter of 2007 and 34.1 MW during the third quarter of 2008.
During 2008 the Company increased its sales of core cell products by 63.2%
to
The percentage of solar cell sales in overseas markets of total solar cell sales increased to 42.9% in 2008 from 38.3% in 2007. These sales were 56.4% in the fourth quarter of 2008 compared to 40.6% and 45.1% in the fourth quarter of 2007 and the third quarter of 2008, respectively.
Gross Profit/Loss, Gross Margins and Average Selling Price ("ASP")
Gross profit for the year was
Blended ASP was
Wafer Costs
Wafer costs continued to account for a large portion of overall
manufacturing costs. In 2008, wafer costs rose to
In the fourth quarter of 2008, blended wafer costs as reported declined to
SG&A, Operating Profit/Loss and Net Income/Loss
Our SG&A expenses were
The Company incurred an operating loss of
Interest expense for the fourth quarter 2008 was
Full year net loss was
In the fourth quarter, the Company reported a net loss of
Non-GAAP net loss, which excludes share-based compensation and change in
fair value of foreign currency derivative loss, was
The non-GAAP measures are described and reconciled to the corresponding GAAP measures in the section below titled "Use of Non-GAAP Financial Measures."
Balance Sheet and Cash Flow
As of
Commenting on the financial results,
"China Sunergy achieved lower than expected financial results in the
fourth quarter due to the ongoing global financial crisis. We recorded a gross
margin of negative 33.1% mainly attributable to inventory write down, and a
net loss of
"The first quarter has not been encouraging for a rapid near-term recovery, as we have seen weak performance primarily due to continued poor demand and decline in ASP. However, we do anticipate our first quarter demonstrating both operational and financial improvement over the fourth quarter of 2008. China Sunergy will take all precautionary and necessary steps to successfully navigate through these uncertain times as we look to continue signing new sales agreements, expand into new markets and carefully monitor and reduce our supply costs as we monetize our impressive R&D capabilities."
Outlook & Selected Company Objectives
Entering 2009, China Sunergy will focus on the following key business strategies during the year:
-- Extend industry leadership in high efficiency cells. The Company aims to achieve increased efficiency throughout the year, with average SEM cell efficiency of 16.8% and increasing improvement in existing selective emitter and HP cells. The Company will also work to ensure production level N-type efficiency will remain above 19% when introduced in 2010. China Sunergy has already seen conversion efficiency of its products increased by 0.2% overall in the first two months of 2009, compared with the 2008 average. -- Improve internal operational efficiencies to reduce conversion costs to US$0.22 per watt, while enhancing yield by 5% to the mid-90% level. -- Take advantage of current wafer price environment and exact greater control over incoming wafer quality while establishing stable and long-term relationships with high quality suppliers. -- Diversify customer coverage, through the greater saturation of existing markets and the penetration of new geographies. -- Offer differentiated products and services through advanced design, research and manufacturing capabilities.As the Company pursues these strategies, the economic environment will impact China Sunergy more than originally anticipated in the near term, especially in the first quarter of 2009. A slowdown of orders as a result of the weak credit environment and an ongoing decline in ASP have affected the Company's gross margin and will continue in the first quarter of 2009.
Taking into account the above strategies, blended with declining ASP, requests for re-pricing, a decrease in demand volume and a destocking of relatively expensive, previously purchased wafers, the Company believes the gross margin for the first quarter will remain negative, but overall financial and operational results should be better than the fourth quarter of 2008.
For the full year of 2009, the Company believes that demand exists although is limited by the current economic situation. China Sunergy will focus on maintaining the recent momentum seen by the Company with regards to signing agreements while proceeding cautiously on supply procurement and capital expenditure. Given current trends, the Company believes that it will achieve gross margins of 15% to 20% for the second half of 2009. For the full year, China Sunergy expects shipments of 150MW to 200MW.
Additional Company Updates
China Sunergy recently announced the resignation of CFO
Quarterly Earnings Conference Call Details
China Sunergy will host an earnings conference call at
For those who cannot access the live broadcast, a replay will be available
online and from two hours after the end of the call until
A webcast of the call and replay with be available online at http://www.chinasunergy.com .
About China Sunergy Co., Ltd.:
China Sunergy Co., Ltd. (NASDAQ: CSUN) ("China Sunergy") is a specialized
manufacturer of solar cell products in
Use of Non-GAAP Financial Measures
To supplement China Sunergy's consolidated financial results presented in accordance with GAAP, China Sunergy uses the following measures defined as non-GAAP financial measures by the SEC: net income excluding share-based compensation and change in fair value of foreign currency derivative loss, and basic and diluted net income per ADS excluding share-based compensation and change in fair value of foreign currency derivative loss. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures" set forth at the end of this release. China Sunergy believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. The Company expects to provide net income on a non-GAAP basis using a consistent method on a quarterly basis going forward. A limitation of using non-GAAP net income excluding share-based compensation and change in fair value of foreign currency derivative loss, and basic and diluted net income per ADS excluding share-based compensation and change in fair value of foreign currency derivative loss is that these non-GAAP measures exclude the share-based compensation and change in fair value of foreign currency derivative loss that have been and will continue to be for the foreseeable future a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical fact in this
announcement are forward-looking statements. These forward-looking statements
and are based on current expectations, assumptions, estimates and projections
about the company and the industry, and involve known and unknown risks and
uncertainties, including but not limited to, the company's ability to raise
additional capital to finance the company's activities; the effectiveness,
profitability, and the marketability of its products; the economic slowdown in
The following financial information is extracted from the Company's condensed consolidated financial statements for the respective periods.
China Sunergy Co., Ltd. Unaudited Condensed Consolidated Income Statement Information (In US$ '000, except share and per share data) For the 3 months ended Dec 31, Sep 30, Dec 31, 2008 2008 2007 Sales to third parties 27,916 102,006 66,256 Sales to related parties 15,289 17,031 5,241 Total sales 43,205 119,037 71,497 Cost of goods sold (57,513) (107,987) (66,888) Gross profit (loss) (14,308) 11,050 4,609 Operating expenses: Selling expenses (1,290) (582) (571) General and administrative expenses (4,439) (4,319) (4,771) Research and development expenses (386) (431) (449) Total operating expenses (6,115) (5,332) (5,791) Income/(Loss) from operations (20,423) 5,718 (1,182) Interest expense (2,428) (2,081) (2,027) Interest income 497 408 456 Other income/(expenses), net 2,463 (3,728) 32 Changes in fair value of derivatives (9,016) (848) -- Income/(Loss) before income tax (28,907) (531) (2,721) Income tax (expense) benefit 2,634 742 467 Net income/(loss) (26,273) 211 (2,254) Net income/(loss) attributable to ordinary shareholders (26,273) 211 (2,254) Net income/(loss) per ADS Basic ($0.66) $0.01 ($0.06) Diluted ($0.66) $0.01 ($0.06) Weighted average ADS outstanding Basic 39,759,696 39,737,547 39,555,463 Diluted 39,759,696 40,392,139 39,555,463 China Sunergy Co., Ltd. Unaudited Condensed Consolidated Income Statement Information (In US$ '000, except share and per share data) For the Year Ended December 31 2008 2007 Sales to third parties 297,299 224,316 Sales to related parties 53,621 10,592 Total sales 350,920 234,908 Cost of goods sold (335,454) (216,881) Gross profit 15,466 18,027 Operating expenses: Selling expenses (3,324) (1,644) General and administrative expenses (16,779) (13,664) Research and development expenses (1,871) (2,555) Total operating expenses (21,974) (17,863) Income/(Loss) from operations (6,508) 164 Interest expense (8,069) (7,394) Interest income 1,665 1,577 Other income/(expenses), net (2,268) 93 Changes in fair value of derivatives (9,864) -- Income/(Loss) before income tax (25,044) (5,560) Income tax (expense) benefit 2,583 705 Net income/(loss) (22,461) (4,855) Dividend on Series A redeemable convertible preferred shares -- (155) Dividend on Series B redeemable convertible preferred shares -- (330) Dividend on Series C redeemable convertible preferred shares -- (233) Net income/(loss) attributable to ordinary shareholders (22,461) (5,573) Net income/(loss) per ADS Basic ($0.57) ($0.21) Diluted ($0.57) ($0.21) Weighted average ADS outstanding Basic 39,679,982 30,860,960 Diluted 39,679,982 30,860,960 China Sunergy Co., Ltd Unaudited Condensed Consolidated Balance Sheet Information (In US$ '000, except share and per share data) Dec 31, Sep 30, Dec 31, 2008 2008 2007 Assets Current Assets Cash and cash equivalents 94,800 122,099 60,458 Restricted cash 62,400 56,690 23,473 Accounts Receivable (net) 9,448 16,156 26,817 Other receivable (net) 11,531 11,330 16,316 Inventories 59,125 41,046 56,092 Advance to suppliers 7,320 34,178 79,912 Amount due from related companies 18,583 17,788 2,112 Current deferred tax assets 1,927 430 527 Total current assets 265,134 299,717 265,707 Prepayments for equipment 173 5,498 7,535 Property, plant and equipment, net 102,609 87,658 45,394 Long-term deferred assets 1,379 1,418 -- Land use rights 6,441 2,144 2,179 Deferred tax assets 1,512 262 329 Restricted cash- Collateral account 17,502 31,416 -- Convertible bond issuance cost 3,451 3,757 -- Total assets 398,201 431,870 321,144 Liabilities and shareholders' equity Current liabilities Short-term bank borrowings 97,299 103,398 121,841 Accounts payable 29,099 15,333 7,157 Notes payable 14,631 14,666 -- Accrued expenses and other current liabilities 4,640 4,975 2,344 Advance from customers 706 1,789 4,893 Amount due to related companies 247 1,176 8 Income tax payable -- 292 -- Total current liabilities 146,622 141,629 136,243 Collateral account payable 17,502 31,416 -- Derivative liability 9,058 851 -- Other liabilities 1,187 999 1,053 Convertible bond payable 48,099 55,147 -- Total liabilities 222,468 230,042 137,296 Minority Interest 299 299 -- Shareholders' equity Ordinary shares: US$0.0001 par value; 267,766,443 and 237,332,777 shares issued outstanding as of December 31, 2008 and December 31, 2007, respectively 27 27 24 Additional paid-in capital 182,070 181,438 178,361 Subscription receivable (405) (405) -- Retained deficit (27,315) (1,042) (4,855) Accumulated other comprehensive income 21,057 21,511 10,318 Total shareholders' equity 175,434 201,529 183,848 Total liabilities and shareholders' equity 398,201 431,870 321,144 * Note 1 Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures (In US$ '000) For the 3 months ended Dec 31, Sep 30, Dec 31, 2008 2008 2007 GAAP Net income/(loss) (26,273) 211 (2,254) Stock based compensation 633 925 144 Changes in fair value of derivatives- REC contract 6,763 848 -- Changes in fair value of derivatives- Euro hedging 2,253 -- -- Non-GAAP Net income/(loss) (16,624) 1,984 (2,110) Non-GAAP Net income/(loss) per ADS Basic ($0.42) $0.05 ($0.05) Diluted ($0.42) $0.05 ($0.05) Weighted average ADS outstanding Basic 39,759,696 39,737,547 39,555,463 Diluted 39,759,696 40,392,139 39,555,463 Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures (In US$ '000) For the Year Ended December 31 2008 2007 GAAP Net income/(loss) (22,461) (5,573) Stock based compensation 3,232 536 Changes in fair value of derivatives- REC contract 7,611 -- Changes in fair value of derivatives- Euro hedging 2,253 -- Non-GAAP Net income/(loss) (9,365) (5,037) Non-GAAP Net income/(loss) per ADS Basic ($0.24) ($0.16) Diluted ($0.24) ($0.16) Weighted average ADS outstanding Basic 39,679,982 30,860,960 Diluted 39,679,982 30,860,960SOURCE China Sunergy Co., Ltd.
Source: PR Newswire
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