According to the company, the wafer manufacturing capacity is being spun off from a subsidiary of Glory Silicon Technology Investments (Hong Kong) Limited, in which Suntech holds an equity investment.
Under the acquisition, Suntech will acquire the remaining 70 percent shares of the capacity, for a total cash consideration of approximately $127 million. This, it says is the total consideration after an offset of approximately $80 million of liabilities owed to it.
It added that it will take operational control in the fourth quarter of this year. The new business is expected to be immediately accretive to earnings, said Suntech.
Suntech chairman and CEO Dr. Zhengrong Shi stated: "The acquisition of wafer manufacturing capacity is the next step of our vertical integration, which will enable Suntech to balance dual goals of large scale and low cost. The proximity of the manufacturing facility, operating experience of the management team and ample capacity make this an ideal acquisition for Suntech.
"Over the next 12 months, we intend to expand internal wafer capacity to 25 percent to 50 percent of our total cell and module capacity. This should enable us to significantly reduce wafer cost, and improve profitability," Dr. Shi continued. "Going forward, we also plan to leverage Suntech's global R&D resources to drive innovation and efficiency improvements in ingot and wafer manufacturing processes."
Third quarter financial performance
In other news, the company has released its third quarter financial results. By all accounts, positive progress was reported.
For example, the company stated that total PV shipments increased 25.3 percent sequentially and 107.1 percent year-over-year.
Total net revenues reached $743.7 million, which is an increase of 19.0 percent from $625.1 million in the second quarter, and an increase of 57.2 percent from $473.1 million in the third quarter of 2009.
Consolidated gross profit, on the other hand, was $122.0 million and gross margin was 16.4 percent, compared to consolidated gross profit of $113.9 million and gross margin of 18.2 percent in the second quarter of the year. The sequential decline in gross margin, says Suntech, was primarily due to a small decrease of average selling price, and a marginal increase in the cost of silicon wafers used in production.
Furthermore, operating expenses significantly decreased to $59.5 million, compared to $132.9 million in the second quarter. This was attributed to expenses incurred in the second quarter, which include a non-cash impairment of thin film equipment. Income from operations was $62.6 million for the third quarter compared to a loss from operations of $19.1 million in the second quarter.
Looking ahead to the rest of the year, Suntech said that it expects at least a 10 percent sequential growth in shipments. It also aims to ship more than 1.5 gigawatts (GW) of solar products in the fourth quarter of the year, which represents year-over-year growth of at least 113 percent.
Moreover, full year 2010 capital expenditures are expected to be approximately $350 million. Suntech targets to achieve 1.8 GW of installed cell and module production capacity by the end of 2010.
"The third quarter was a highly productive period for Suntech," continued Shi. "Shipments and revenues each hit new quarterly records and we reached production capacity of 1.6 GW. We are on track to achieve our goal of 1.8 GW cell and module capacity by the end of this year."
"In the third quarter, we continued to diversify our sales globally and participated in high profile solar projects across Europe, the Americas, and Asia Pacific. In Europe, we supplied a five MW project in Thiva, which is one of the largest grid connected solar projects in Greece. In Asia Pacific, we were selected for phase two of a 44m MW project in Thailand. And we recently opened our module manufacturing facility in Goodyear, Arizona, which will help us to service the accelerating demand in the Americas. Indicative of our rapid market penetration, we sold more product in the Americas in the third quarter of 2010 than we did in the full year 2009.
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