Suntech predicts intense competition in 2012, following losses of $1 billion in 2011

"Looking into 2012, we expect excess capacity and further policy adjustments in Europe and the U.S. will result in a sustained period of intense competition in the solar industry," stated Suntech’s Zhengrong Shi. "In this context, our top priorities are to continue to drive down our production cost, invest in channel development and bring to market the most competitive product offerings."

In light of the continuing uncertain solar market conditions, the company says it expects Q1 2012 photovoltaic shipments to decline by 30 percent, compared to Q4 2011. While it failed to provide any concrete shipment figures for each of the four quarters, for the FY, shipments reached 2.09 gigawatts (GW), representing 33.3 percent annual growth. For FY 2012, it expects shipments to be in the range of 2.1 GW to 2.5 GW. Overall, the company wants to maintain 2012 photovoltaic cell and module production capacity at 2.4 GW, and wafer capacity at 1.6 GW.

Q1 2012 gross margin, meanwhile, is expected to be in the range of three and six percent. In terms of 2011, Q4 gross margin was 9.9 percent, compared to 13.3 percent in Q3 2011, and 17.4 percent in Q4 2010, while FY gross margin was 12.3 percent, compared to a gross margin of 18.7 percent in 2010. "The decrease in gross margin was primarily a result of the reduction in the average selling price of PV products exceeding the reduction in cost of goods sold," explained Suntech in a statement released.

Considerable losses

At over US$1 billion ($1,006.2 million), Suntech’s FY 2011 net loss was considerable, particularly when held against 2010, which achieved a profit of $237.9 million. Q4 2011 recorded a loss of $-136.9 million, compared to an income of $358.6 million in Q4 2010. A significant operating loss was additionally recorded: in Q4 2011, a loss of $-52.3 million, compared to an income of $90.1 million in Q4 2010.

Likewise, the company’s Q4 gross profit took a big hit, having fallen from $164.4 million in Q4 2010, and $107.8 million in Q3 2011, to just $62.3 million. For the FY 2011, it reaped just $386.6 million, compared to gross profit of $543.1 million in 2010. "The gross profit in 2011 was impacted by a $91.9 million write-off of the unamortized cost of warrants previously issued to MEMC in conjunction with a supply agreement, which was terminated in the second quarter of 2011," continued the company.

Q4 2011 net revenues were also negatively affected, having fallen 22 percent from $809.8 million in Q3 2011, and 33 percent from $945.1 million in Q4 2010, to $629 million. However, for the FY, the situation was slightly better, with $3,146.6 million being recorded in 2011, compared to $2,901.9 million in 2010. On another positive note, cost of revenues decreased from $702 million in Q3 2011 and $780.7 million in Q4 2010, to just $566.7 million in Q4 2011.

Meanwhile, for FY 2011, loss from operations was $633.3 million and operating margin was negative 20.1 percent, compared to operating income of $197.2 million and operating margin of 6.8 percent for FY 2010.

Q4 2011 earnings before tax from continuing operations didn’t fare much better, having recorded $-97.8 million, compared to $63.4 million in Q4 2010. For FY 2011, $-940.5 million was seen, compared to $10.9 million in 2010. Furthermore, loss from continuing operations was $992.1 in 2011, compared to an income of $237.9 million in 2010.

Operating expenses for Q4 2011 were $114.6 million, which represented 18.2 percent of revenues, compared to $613.1 million, or 75.7 percent of revenues, in Q3 2011, and $74.3 million, or 7.9 percent of revenues, in Q4 2010. "Operating expenses in Q4 2011 included $19 million of expenses due to planned lower utilization of production facilities," said Suntech.

For the FY, operating expenses soared to $1,019.9 million, compared to $345.9 million for FY 2010. "Operating expenses in 2011 included $120 million of expenses related to the termination of a supply contract with MEMC; a $17.5 million provision for litigation; a $407.2 million impairment of goodwill and intangible assets; a $54.6 million impairment of fixed assets; and a $21.1 million non-cash provision for prepayments to affiliated companies, Nitol Solar and Shunda. Excluding these impairments and provisions, non-GAAP operating expenses for 2011 were $399.5 million. Non-GAAP operating expenses for 2010 were $283.3 million," continued the company.

Finally, inventory was $516.5 million as of December 31, 2011, compared with $696.3 million as of September 30, 2011.