Suntech’s Q1 results highlight declining ASP slightly offset by falling silicon prices. Good repurchase of debt. I hope to get back to these notes soon to add some much needed comments. Included are links to the Q1 Filing, Conference call and prospectus for the 20 million ADRs. Suntech currently has $255.8 million principal amount of 2012 convertible notes outstanding. They repurchased debt in Q1 at 78 cents on the dollar, and it appears they plan on doing the same with the money raised. I think that is an excellent return on investment by the company. When I look at a balance sheet I reduce the assets and keep the liabilities at 100%, this move by Suntech shows how they are prepared to opportunistically invert that. Well maybe invert is getting carried about, but hopefully you get the idea.

First Quarter 2009 Highlights

• Total net revenues were $315.7 million in the first quarter of 2009
• Gross margin improved to 17.8% for the first quarter of 2009, compared with 0.6% for the fourth quarter of 2008.
• Operating expenses were reduced by 24% to $35.1 million in the first quarter of 2009 from $46.2 million in the fourth quarter of 2008.
• Net income attributable to holders of ordinary shares was $1.8 million or $0.01 per diluted American Depository Share (ADS). Each ADS represents one ordinary share.
• Suntech submitted 179MW of rooftop solar project applications for China’s national rooftop solar subsidy.
• 100MW of Pluto production capacity commissioned with expected conversion efficiencies of approximately 19% on mono-crystalline PV cells and 17% on multi-crystalline PV cells.
• Suntech maintained PV cell production capacity of 1GW at the end of the first quarter of 2009.

“Considering the impact of seasonality, global economic headwinds, a contraction in PV project financing and falling sales prices, which greatly affected companies throughout the solar industry, we are pleased to have achieved revenues only 24% below the fourth quarter of 2008. This indicates the flexibility of Suntech’s business model and customer preference for Suntech products,” said Dr. Zhengrong Shi, Suntech’s Chairman and CEO.  [Compare to other solar companies: ]

Dr. Shi added, “Europe continued to be the greatest source of solar demand in the first quarter. Going forward we expect further market diversification due to recently introduced stimulus initiatives in high potential markets. China’s recently announced national solar subsidy; Japan’s reintroduction of solar subsidies in 2009; and state incentive programs and the federal stimulus package in the U.S. should provide a strong foundation for mid-term growth. 

“ The Global Solar Fund has invested in companies that currently have 240MW of projects fully permitted and is targeting to finalize permits for at least another 360MW by the end of 2009. In addition, Gemini Solar is pursuing a pipeline of approximately 1.1GW of projects in the U.S. that we have either bid on, or are preparing bids for, and which are scheduled to be developed over the next 3 or 4 years.”

RECENT BUSINESS HIGHLIGHTS

Project Development Initiatives

•		Suntech made significant progress with its strategic project development initiatives. Suntech’s equity method investment, the Global Solar Fund (GSF), a European based investment fund, which qualifies for investment company fair value accounting under AICPA investment company guide, was created to make investments in private companies that own or develop projects in the solar energy sector. GSF has invested in companies that currently have 240MW of projects fully permitted and is targeting to finalize permits for another 360MW by the end of 2009.
•		Gemini Solar, a Suntech joint venture with Renewable Ventures, a Fotowatio company, is pursuing a pipeline of approximately 1.1GW of projects in the U.S. that we have either bid on, or are preparing bids for, and which are scheduled to be developed over the next 3 or 4 years.

China Market

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Suntech recently submitted 179MW of rooftop solar project applications for China’s national rooftop solar subsidy.

 

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Suntech announced the ground breaking of a 1.5MW rooftop solar project in HuaiAn City, Jiangsu Province, China. This is expected to be the first one megawatt plus rooftop solar system in Jiangsu Province. Suntech is currently implementing a 3MW project for the Shanghai World Expo.

Global Market Penetration

•		Suntech has shipped a total of more than 1.2GW of solar products since inception of the Company.
•		Suntech intends to double its sales and marketing team in Europe over the next three to six months to enhance localized service and support for existing and prospective customers. Europe continues to drive global solar demand accounting for over 80% of Suntech revenues in the first quarter of 2009.
•		Suntech entered into an agreement with House Care Co. Ltd. under which House Care will be an authorized distributor of Suntech in Japan and distribute 30MW of Suntech solar products in 2009. Suntech targets over 40MW of sales into Japan in 2009.

U.S. Market

•		Gemini Solar was awarded a contract by Austin Energy, the municipal electric utility in Austin, Texas, to build a 30MW PV power plant in 2010.
•		Suntech continued to expand its national dealer network in the U.S to expand market share in the residential and small commercial rooftop segment. Currently, Suntech’s network includes over 200 dealers, up from 40 at the end of 2008.
•		Suntech recently announced plans to establish a manufacturing base in the U.S. as part of its strategy to create a long-term presence within the U.S.

Technology

•		The Fraunhofer Institute recently tested a mono-crystalline Pluto PV cell with a conversion efficiency of 18.8% and a multi-crystalline Pluto PV cell with a conversion efficiency of 17.2%. Both were produced using standard grade silicon solar wafers on Suntech’s commercial scale production line.
•		Suntech is collaborating with the Swinburne University of Technology in Australia to develop nanoplasmonic solar cells that are twice as efficient and run at half the cost of those currently available.

Convertible Senior Note Repurchase

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Through March 31, 2009, Suntech repurchased an aggregate of $244.2 million principal amount of its 0.25% Convertible Senior Notes due 2012 for a total consideration of $190.9 million. Suntech currently has $255.8 million principal amount of 2012 convertible notes outstanding.

First Quarter 2009 Results

• Total net revenues for the first quarter of 2009 were $315.7 million, a decrease of 23.8% from $414.4 million in the fourth quarter of 2008. The sequential decrease in revenues was primarily due to a decrease in the average selling price of PV products and a decline of shipments.
• For the first quarter of 2009 gross profit was $56.3 million and gross margin was 17.8% compared to gross profit of $2.3 million and gross margin of 0.6% in the fourth quarter of 2008. The increase in gross profit was primarily due to a decrease in silicon wafer cost, non-silicon wafer production costs, and a reduction in inventory provision.
• Operating expenses for the first quarter of 2009 were $35.1 million compared to $46.2 million in the fourth quarter of 2008. The decrease in operating expenses was primarily due to improved cost controls, enhanced operating efficiency and a reversal of provision for doubtful debts.
• Net interest expense was $21.6 million in the first quarter of 2009 compared to net interest expense of $21.1 million in the fourth quarter of 2008. Addition of non-cash interest expense resulted from the adoption of FASB Staff Position No APB14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB14-1”), and amounted to $11.7 million and $13.1 million in the first quarter of 2009 and the fourth quarter of 2008, respectively.
• Net other income was $12.6 million in the first quarter of 2009, compared with $52.0 million of net other expense in the fourth quarter of 2008. The net other income in the first quarter of 2009 was mainly due to $9.3 million in gains from the convertible senior notes repurchase and $3.2 million in gains from mark-to-market valuation of foreign exchange forward contracts. The net other expense during the fourth quarter of 2008 was primarily due to investment impairments in Suntech’s upstream investments.
• Net income attributable to holders of ordinary shares for the first quarter of 2009 was $1.8 million, or $0.01 per diluted ADS compared to a net loss of $109.1 million, or negative $0.70 per diluted ADS, in the fourth quarter of 2008.
• In the first quarter of 2009, the major non-cash related expenses were share-based compensation charges of $4.0 million; additional $11.7 million of non-cash interest expenses related to the adoption of FSP APB 14-1; and depreciation and amortization expenses of $15.3 million.
• In the first quarter of 2009, capital expenditures, which were primarily for the construction of our thin film production facilities in Shanghai, and to retrofit our existing production capacity to enable production of PV modules based on our high efficiency Pluto technology, totaled $60.9 million.
• Cash and cash equivalents decreased to $406.0 million as of March 31, 2009 from $507.8 million as of December 31, 2008. The decrease was primarily due to repurchases of Suntech’s 0.25% Convertible Senior Notes due 2012.
• Restricted cash increased to $179.1 million as of March 31, 2009 from $70.7 million as of December 31, 2008. The increase was mainly due to the pledges of cash in order to obtain bank notes facilities and loan borrowings.
• Account receivable due from investee companies of GSF was $104.9 million as of March 31, 2009, compared with nil as of December 31, 2008.

Business Outlook

Suntech expects moderate revenue growth in the second quarter of 2009. Suntech expects full-year 2009 shipments to be in the range of 600MW to 700MW reflecting a constrained project financing environment and the resultant limited demand visibility. Suntech intends to hold PV cell production capacity at 1GW in 2009 until demand visibility improves. Suntech expects capital expenditures of approximately $100 million in 2009.

via 6-K.

20,000,000 American Depositary Shares

Suntech Q1 2009 Conference Call

• Although our top line was weaker than expected, we are extremely pleased with our progress on improving our cost structure, which enabled us to outperform our gross margin targets by almost 300 basis points.
• Germany and Italy were our strongest sales regions, representing around 75% of our sales for the first quarter. The next largest markets were the U.S. and Japan, which represented approximately 5% of sales each
• China recently announced its first national solar subsidy to encourage the installation of building integrated and building attached solar systems of 50-kilowatts and larger.
• The second major market is Japan, where the reintroduction of solar subsidies has stimulated demand, particularly from residential rooftop projects.
• the U.S. has the potential to be the largest solar market in the world within the next two to three years,
• We are executing well on our cost roadmap to achieve $1 per watt at the module level that we target to achieve in the next two to three years.

Via  Q1 2009 Conference Call

Related posts:

1. Suntech Reports Preliminary Q4 and 2008 Financial Results
2. Akamai Reports First Quarter 2009 Financial Results, Announces Share Repurchase
3. Suntech Achieves 1GW and 1MW
4. Suntech Q3 Update and Thoughts
5. Suntech Smashes Estimates and Ramps Production
6. Shorting Suntech