Nov. 7, 2013 - China Sunergy today announced its financial results for the second quarter ended June 30, 2013.
Mr. Stephen Cai, CEO of China Sunergy, commented, "We are pleased with the solid second quarter financial results across all key financial metrics, including better-than-expected revenue and shipment volume, and significantly improved operating profitability. Leveraging on our Turkey manufacturing plant, we further expanded sales in Europe and emerging markets."
"At the same time, the solar market showed some near-term positive momentum, with a sequential improvement in ASP and spot prices for wafers and modules, and a surge in demand stimulated by a series of favorable government policies and plans around the world," Mr. Cai added.
Second Quarter 2013 Financial Highlights
- Total revenue was US$71.9 million, an increase of 16.5% from US$61.7 million in the first quarter of 2013.
- Shipments totaled 126.4MW, an increase of 23.3% (23.9MW) from 102.5MW in the first quarter of 2013. Module shipments including 25.7MW module processed under OEM arrangements were 125.1MW, or 99.0% of total shipments.
- Average selling price ("ASP") for the Company's solar modules was US$0.63 per watt, an increase of 6.8% from US$0.59 in the first quarter of 2013.
- Conversion costs for cells decreased 6.25% sequentially to US$0.15 per watt, from US$0.16 in the first quarter of 2013. Conversion cost for modules was US$0.20 per watt, unchanged from last quarter.
- Gross profit was US$6.7 million, and gross margin was 9.3%, compared with gross profit of US$0.3 million and gross margin of 0.4% in the first quarter of 2013.
- Net loss attributable to ordinary shareholders narrowed significantly to US$1.4 million, from US$22.9 million in the preceding quarter.
- Net loss attributable to ordinary shareholders per ADS improved to US$0.11, compared to net loss per ADS of US$1.71 in the first quarter of 2013.
- Operating cash inflow was US$6.3million, compared to net cash outflow of US$41.7 million in the first quarter of 2013.
- Cash, cash equivalents and restricted cash totaled US$219.8 million, as of June 30, 2013.
Second Quarter 2013 Financial Review
Total Revenue and Shipments
For the second quarter of 2013, total revenue was US$71.9 million, an increase of 16.5% from the first quarter of 2013, primarily driven by a combination of higher shipments and ASP.
Total shipments for the second quarter of 2013 were 126.4MW, an increase of 23.3% from the first quarter of 2013. Germany became the largest market for the Company, accounting for 29.1% of total revenue in the second quarter of 2013, while France, remaining solid for the Company, was the second largest market for the Company, contributing 28.4% of total revenue in the second quarter of 2013, followed by China and Japan, contributing 10.3% and 7.7% of total revenue, respectively.
Gross Profit and Gross Margin
Gross profit for the second quarter was US$6.7 million, and gross margin turned to 9.3%, compared to gross margin of 0.4% for the first quarter of 2013. Inventory provision was approximately US$12,000, compared to US$0.3 million in the prior quarter. The sequential increase in gross margin in the second quarter of 2013 was primarily attributable to the increased average selling price of solar modules, decreased inventory provision in this quarter, and the Company's continuous manufacturing cost reduction execution.
Module ASP for the second quarter was US$0.63 per watt, which increased by four cents or 6.8% compared with that of the last quarter. The higher ASP was primarily driven by an improvement in imbalance of supply and demand due to the anti-dumping legislation in the European Union, as well as increased shipments to high pricing regions, such as Australia and US.
Costs
Blended wafer costs in the second quarter of 2013 were US$0.23 per watt, which was one cent or 4.5% higher than those of the last quarter. Conversion costs of cells and modules manufactured in the second quarter of 2013 were US$0.15 and US$0.20 per watt, respectively.
Operating Expense, Operating Profit/Loss and Net Income/Loss
Operating expenses decreased to US$11.2 million in the second quarter of 2013, from US$15.2 million in the first quarter of 2013. The decrease in operating expenses was mainly attributable to a decrease of US$1.1 million in marketing expenses and a bad debt reversal of US$2.0 million attributable to collection efforts in the second quarter of 2013, compared to a bad debt provision of US$0.2 million in the first quarter of 2013.
Loss from operations decreased to US$4.6 million in the second quarter of 2013, compared to US$15.0 million in the first quarter of 2013.
Correspondingly, net loss attributable to ordinary shareholders was US$1.4 million and Non-GAAP net loss attributable to ordinary shareholders was US$3.4 million for the second quarter of 2013.
Amount due from Related Parties
Amount due from related parties totaled US$132.1 million as of June 30, 2013, an increase of US$42.5 million compared to US$89.6 million as of the end of first quarter. The increased balance was due primarily to short-term interest-free advances that the Company provided to one of the related companies, CEEG Nanjing Semi-Conductor Co. Ltd ("CEEG Semi-Conductor"). The short-term interest-free advances were provided to address liquidity pressure on CEEG Semi-Conductor and China Electric Equipment Group Co., Limited ("CEEG Group"), and in turn preserve China Sunergy's credit and liquidity, as CEEG Group guaranteed most of the Company's bank loans. As of October 30, 2013, CEEG Semi-Conductor had repaid all of the short-term interest-free non-trading advances.
Amount due to Related Parties
Amount due to related parties totaled US$25.8 million as of June 30, 2013, a decrease of US$48.2 million compared to US$74.0 million as of the end of first quarter.
Inventory
Inventories at the end of the second quarter of 2013 totaled US$46.5 million, a decrease of US$22.6 million from the prior quarter, driven by higher shipment and optimized production control. The Company strives to maintain an optimal inventory level and continues to diligently monitor and balance its inventories.
Cash and Cash Flow
As of June 30, 2013, the Company had cash and cash equivalents of US$60.1 million, and restricted cash of US$159.7 million. Operating cash inflow turned positive to US$6.3 million for the second quarter of 2013, compared with operating cash outflow of US$41.7 million in the first quarter of 2013, primarily driven by narrowed net loss, lower inventory, and higher account payables.
Additional Company Updates Subsequent to Second Quarter 2013
China Sunergy Further Expanded into Malaysia Market: the Company further expanded its market share in Malaysia market with shipment of 1MW QSAR solar modules for the first megawatt-level ground-mounted system of Pekat Solar Sdn Bhd ("Pekat "), a subsidiary company of Pekat Group of Companies. Pekat opted China Sunergy to be the exclusive partner for its first ground-mounted system as the Company's high-efficient and PID-free QSAR modules appropriately fit.
China Sunergy Commercialized New Super Black Mono Modules: the Company introduced a series of new highly efficient Super Black mono modules, following an initial custom order from Solar Marketing & Sales LLC for a 60KW rooftop project in Hawaii. The Super Black mono modules offer a pure black aesthetic covering the entire module body, including welding strips. This aesthetic advantage makes them well suited for high-end rooftop installations and other integrated constructions. The Super Black modules are certified for salt and ammonia resistance, while also offering up to 7200pa snow pressure and 2400pa wind pressure resistance. The Super Black mono modules were shipped in August 2013.
China Sunergy Wins 9.9MW Solar Module Contracts in Romania: the Company has signed two solar module supply contracts totaling 9.9MW with Bester Generacion ("Bester Generacion"), an engineering, procurement and construction company headquartered in Spain. The solar modules were supplied from the Company's Turkey plant to Romania in September 2013.
China Sunergy's High-Efficient Mono Cells Achieves Certified New Conversion Efficiency Record of 20.26%: the Company's new generation of high-efficient mono-crystalline solar cells have reached 20.26% conversion efficiency in the pilot research and development line, and have received certification recently from the Fraunhofer Institute for Solar Energy Systems ISE the largest solar energy research institute in Europe.
Business Outlook
Mr. Cai continued, "There were many positive takeaways for China Sunergy in the second quarter, in terms of our operations and the improving market environment. However, during the second quarter, Chinese banks significantly tightened credit facilities to solar companies, which caused us to face a constrained working capital and reduced our ability to procure adequate inventory for subsequent production. As such, we anticipate lower shipment volume and profitability for the third quarter of 2013, and correspondingly, we also anticipate lower total shipment for full year 2013."
For the third quarter of 2013, the Company estimates that total shipments will be approximately 110MW including approximately 20MW of solar module processed under OEM arrangement. Gross margin for the third quarter of 2013 is expected to be low single-digit, based on the average Euro-US dollar exchange rate in September 2013.
For the full year 2013, the Company revises its total shipment estimates to range between 440MW to 480MW, from the prior range of 500MW to 550MW.
This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.