Despite losses, Suntech increases Q2 shipments

The sequential decline in the average selling price of photovoltaic products was attributed to Suntech’s second quarter (Q2) 2011 total net revenue, which came in at $830.7 million, compared to the $877 million generated in Q1 2011, and $625.1 million in Q2 2010.
The company’s gross profit was also hit, having fallen from a respectable $182.7 million in Q1 2011 and $123.3 million in Q2 2010 to just $33.7 million in Q2 2011. Gross margin for the quarter, meanwhile, was 4.1 percent, down from 20.8 percent and 19.7 percent in Q1 2011 and Q2 2010 respectively.
The sequential decrease was said to have been caused by Suntech’s terminated supply agreement with MEMC.
With expenses of $120 million, the terminated supply agreement was also said to have hit the company’s Q2 operating expenses, which rose from $85.8 million in Q1 2011 and $142.3 million in Q2 2010 to reach $204 million.
The Chinese module manufacturer additionally recorded an operating loss in Q2 of $170.3 million and a negative operating margin of 20.5 percent. This is in comparison to a successful Q1 2011, which reaped an operating income of $96.9 million and an operating margin of 11.1 percent, and Q2 2010, which recorded a loss of $19 million and an operating margin of minus three percent.
On a positive note, Suntech stated that its total photovoltaic shipments increased by two percent sequentially, and 48 percent year-on-year. The actual figures were, however, not provided. The company added that it achieved 2.4 gigawatts (GW) of cell and module capacity, and 1.2 GW of silicon ingot and wafer capacity by the end of Q2.
Expanded capacity
Looking ahead, Suntech is confident that the year will end on a positive note. In terms of Q3 2011, the company believes shipments will sequentially increase by 15 percent. It also expects its gross margin to be in the range of 11 to 13 percent.
Q3 losses related to hedging and foreign exchange of around $30 million are additionally expected.
For the full year, Suntech says it will ship a minimum of 2.2 GW of photovoltaic products and generate revenues of between $3.2 billion to $3.4 billion.
Furthermore, it says it will expand its wafer capacity to 1.6 GW by the end of the year. Meanwhile, cell and module production capacity will be maintained at 2.4 GW.
Chairman and CEO, Zhengrong Shi commented: "Operationally, we implemented a number of initiatives to improve our supply flexibility and lower our cost structure. Specifically, we discontinued a long term agreement with MEMC and expanded internal wafer capacity to 1.2 GW. We also continued to drive solar innovation with the launch of two new high performance product lines that we are shipping in large-scale today."
He added: "Looking forward, we anticipate the highly competitive market environment to continue for the next few quarters."