Suntech Power Holdings Company Ltd posted first quarter 2012 adjusted loss of 74 cents per American Depository Share (EPADS), far wider than the Zacks Consensus Estimate of a loss of 48 cents. The results were a stark contrast to the year-ago adjusted earnings of 17 cents per share.
Suntech registered total net revenues of $409.5 million, a decrease of 34.9% from $629.0 million in the fourth quarter of 2011 and a decrease of 53.3% from $877.0 million in the first quarter of 2011. The sequential decrease of revenues was due to a decline in shipments and a decline in the average selling price of photovoltaic (PV) products. Revenues in the reported quarter also came below the Zacks Consensus Estimate of $436 million.
Cost of revenues was $407.1 million in the first quarter of 2012, compared with $566.7 million in the fourth quarter of 2011 and $694.3 million in the first quarter of 2011.
In the reported quarter, Suntech’s gross profit was $2.4 million and gross margin was 0.6% versus $62.3 million and 9.9%, respectively, in the fourth quarter of 2011; and $182.7 million and 20.8% in the first quarter of 2011. The sequential decline in gross margin was further impacted by sales price declining faster than the cost of production.
Overall, the company recorded a net loss of $133.0 million for the first quarter of 2012, compared with a net loss of $148.8 million for the fourth quarter of 2011 and net income of $31.9 million for the first quarter of 2011.
Cash and restricted cash totaled $663.8 million as of March 31, 2012, compared with $709.0 million as of December 31, 2011. Inventory was $508.4 million as of March 31, 2012, compared with $516.5 million as of December 31, 2011. Due to lower shipment volume in the first quarter of 2012, inventory turnover days increased to 112 days from 82 days in the fourth quarter of 2011. Net debt increased from $1,582.4 million as of December 31, 2011 to $1,599.8 million as of March 31, 2012. In the first quarter of 2012, cash used in operations was $12.5 million, compared to cash provided by operations of $253.3 million in the fourth quarter of 2011, and cash used in operations of $134.7 million in the first quarter of 2011.
Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (PV) cells and modules.
In the second quarter of 2012, Suntech expects PV shipments to increase by more than 20% from the first quarter of 2012. Gross margin in the second quarter of 2012 is expected to be in the range of 3% to 6%. For the fiscal year ending December 31, 2012, Suntech reaffirmed the guidance for shipments to be in the range of 2.1GW to 2.5GW.
Suntech expects to maintain cell and module production capacity at 2.4GW and wafer capacity at 1.6GW in 2012. Full year 2012 capital expenditures are expected to be in the range of $120 million to $150 million.
Suntech Power is one of the largest producers of PV solar modules under its proprietary Pluto technology with a geographically diversified customer base. Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies. However, the positives are overshadowed by fears of tepid module demand in Europe, rising competition, the volatile Euro and the financial stability of its customers.
In the near term, the Zacks #3 Ranked (Hold) Suntech Power will move in tandem with the market. This is in line with its peers Ascent Solar Technologies, Inc. (ASTI - Snapshot Report) and Canadian Solar Inc. (CSIQ - Analyst Report). In the longer run, our ‘Neutral’ recommendation on the stock indicates that it would perform in sync with the broader market.