The Chinese photovoltaics module manufacturer exceeded both its revenue and shipment targets in 2010, leading it to predict that it would ship at least 2.2 gigawatts (GW) of solar products this year, in addition to generating revenues of between $3.4 billion and $3.6 billion.
However, as with many of the module producers, the first quarter of this year has been disappointing. IMS Research announced earlier this month that quarter one photovoltaic module shipments and prices have decreased by almost 10 percent from the fourth quarter of last year.
As such, Suntech says that it expects to reap revenues of between $3.3 billion and $3.5 billion for the full year, as opposed to its previous guidance of $3.4 billion to $3.6 billion. In a statement, it explains: "Due to pricing pressure, Suntech has revised its full year revenue guidance ( )." Consequently, consolidated gross margin for the full year 2011 is now expected to be in the high teens, as opposed to its previous guidance of around 20 to 22 percent.
Meanwhile, it says that in the second quarter of the year, it expects low single digit growth of photovoltaic shipments and "relatively flat" gross margin compared with the first quarter. Howver, it stands by its previous shipping guidance of 2.2 GW.
Even so, first quarter photovoltaic shipments decreased by 3.1 percent from the fourth quarter of 2010, but increased by a significant 62.9 percent year-on-year. 2010 saw a total of 1,572 megawatts (MW) of products shipped.
As Suntech said at the end of last year, in terms of installed cell and module production capacity, 2.4 GW is expected to be achieved by the end of the second quarter, of which 600 MW of photovoltaic cell capacity, says the company, will be owned and operated by a joint venture. Installed wafer capacity for the full year, on the other hand, is expected to reach 1.2 GW.
Financial breakdown
In terms of its first quarter financial performance, Suntech achieved net revenues $877 million. While this has decreased from $945.1 million in the fourth quarter of 2010, it represents an increase of 49.1 percent year-on-year. The company attributed the sequential decline to Italys regulatory uncertainty and the bad weather experienced in Germany last winter.
Gross profit, on the other hand performed well both in comparison to the first and fourth quarters of 2010. It reached $166.9 million in the first quarter of this year, in comparison to $114.5 million and $153.4 million in the first and fourth quarters of 2010 respectively.
Gross margin also experienced positive sequential growth, having grown from 16.2 percent in the fourth quarter of 2010 to 19 percent in the first quarter of 2011. However, in comparison to the first quarter of 2010, it saw a decline of 0.5 percent
Suntechs operating expenses increased in the first quarter of the year, "primarily due to $6.5 million of non-cash, amortization expenses related to the recent wafer acquisition and integration of the operating team at the wafer subsidiary", from $51 million and $63.2 million in the first and fourth quarters of 2010 respectively to $72.4 million.
Despite the declines experienced, the company remains positve. Commenting, Zhengrong Shi, chairman and CEO said: "The first quarter of 2011 was a solid quarter that demonstrated the resilience of Suntech's business model under challenging market conditions.
"Despite a slight sequential decline in our shipments related to policy uncertainty in Italy, a long winter in Germany and first quarter seasonality, we improved our gross margin from the fourth quarter and continued to diversify our sales across global markets. These outcomes reflect our ongoing efforts to enhance our competitiveness, mitigate policy risk, and position Suntech to increase our share in high-growth emerging markets. In particular, we were pleased to see greater demand in the Chinese solar market."
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