Suntech Power Holdings Company Ltd (STP) posted fourth quarter 2011 adjusted loss of 76 cents per American Depository Share (EPADS), far wider than the Zacks Consensus Estimate of a loss of 32 cents. The results were a stark contrast to the year-ago adjusted earnings of 32 cents.
Fiscal 2011 adjusted loss came in at $1.33 per share, narrower than the Zacks Consensus Estimate of a loss of $2.19 per share. However, fiscal 2011 adjusted earnings per share came below fiscal 2010 adjusted earnings of 64 cents per share.
Operational Results
Suntech registered total net revenues of $629.0 million, a decrease of 33.0% from $945.1 million in the fourth quarter of 2010 and a decrease of 22% from $809.8 million in the third quarter of 2010. 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, however, comfortably beat the Zacks Consensus Estimate of $603 million.
In the reported quarter, Suntech’s gross profit was $62.3 million and gross margin was 9.9% versus $107.8 million and 13.3%, respectively, in the third quarter 2011; and $164.4 million and 17.4% in the fourth quarter 2010. Overall, the company recorded a net loss of $136.9 million versus a net income of $358.0 million in the year-ago period.
Fiscal 2011 revenue amounted to $3,146.6 million surpassing the Zacks Consensus Estimate of $3,121.0 million and fiscal 2010 revenue of $2,901.9 million. The year-over-year increase was primarily attributable to a 33.3% increase in shipments of PV products, which was offset by a decline in the average selling price of PV products.
For the full year 2011, gross profit was $386.6 million and gross margin was 12.3% compared with a gross profit of $543.1 million and a gross margin of 18.7% for fiscal 2010. The decrease in gross margin was primarily the result of a reduction in the average selling price of PV products. Also, gross profit in 2011 was impacted by a $91.9 million write-off of the unamortized cost of warrants previously issued to MEMC Electronic Materials Inc. (WFR) in conjunction with a supply agreement, which was terminated in the second quarter 2011. Overall, the company recorded a net loss of $1,006.7 million versus net income of $236.9 million in the year-ago period.
Financial Condition
At fiscal 2011 end, Suntech reported cash and cash equivalents of $492.4 million, compared with $872.5 million at fiscal 2010 end. During fiscal 2011, cash provided by operations was $80.1 million, compared to cash used in operations of $30.0 million in the full year 2010. In the full year 2011, capital expenditure primarily related to the construction of manufacturing facilities, totaled $366.8 million versus $276.0 million for the full year 2010. Depreciation and amortization expenses totaled $141.6 million in 2011, compared with $84.9 million in 2010.
Outlook
Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (PV) cells and modules. In the reported quarter, shipments and revenues were a record.
In the first quarter of 2012, Suntech expects PV shipments to decline by approximately 30% from the fourth quarter of 2011owing to lower-than-expected inventory levels and a seasonal weakness in demand. Overall, for the fiscal year ending December 31, 2012, Suntech expects shipments to be in the range of 2.1GW – 2.5GW.
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, we believe its Zacks #2 Rank (Buy) peer SunPower Corporation (SPWR) is more promising compared to the Zacks #3 Rank (Hold) Suntech Power. In the longer run, our ‘Neutral’ recommendation on the stock indicates that it would perform in-sync with the broader market.
SUNPOWER CORP-A (SPWR): Free Stock Analysis Report
SUNTECH PWR HLD (STP): Free Stock Analysis Report
MEMC ELEC MATRL (WFR): Free Stock Analysis Report
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