2012 has been a tumultuous year to date for the worlds largest crystalline silicon photovoltaic module manufacturer. In addition to investigating the possibility that it backed 560 million worth of fraudulent bonds, news of which has seen market value plummet by 40%, Suntechs financials have continued to be negatively affected by the current solar market conditions.
While it expected to see a Q2 2012 gross margin of between 3 and 6%, preliminary figures show that it fell significantly from 0.6% in Q1, to around negative 10%. "Gross margin was impacted by a non-cash inventory provision of $76 million. The impact of the non-cash inventory provision on gross margin was 16%," said Suntech in a statement released.
Meanwhile, up from $121.6 million in Q1 2012, preliminary Q2 operating expenses hit $133 million. The results were said to have been affected by a $56 million non-cash provision related to a prepayment for a long-term supply contract. Suntech says it is disputing this.
On a more positive note, Q2 2012 revenues were around $471 million, up from the $409.5 million reaped in Q1. Photovoltaic module sales were said to account for approximately 93% of this figure, while sales from photovoltaic systems, cells, silicon wafers and production equipment comprised the remaining 7%. Demand from Europe, China, Japan and Australia is said to have driven the increase.
Despite this, Suntech has lowered its FY shipment guidance from of 2.1 to 2.5 GW, to between 1.8 and 2 GW. It further expects to see a Q3 2012 gross margin in the low single digits range. Commenting, new CEO, David King said, "In the second half of this year, we will continue to drive down cost, negotiate better terms with our suppliers, and stringently manage working capital. We will also manage the balance between price and volume in order to improve margins. For that reason, we have decided to reduce our annual shipment target to the range of 1.8GW to 2.0GW."
Regarding the publication of its actual Q2 results, Suntech said it is "not in a position to provide additional financial data", due to its current assessment of the "potential impact of the GSF investigation and its dispute with a supplier on its consolidated financial statements."
Referring to the news that criminal charges have been filed in Italy against the 80% Suntech-owned Global Solar Fund, S.C.A., Sicar (GSF), claiming it "illegally" built solar farms in the country, communications manager Europe, Björn Emde told pv magazine, "Many solar plants owned by other developers and in the same region of Italy were developed using a similar permit process. We have been advised by GSF management that the permit procedures were in compliance with all the relevant laws and regulations at the time of development. GSF management intends to contest the charges vigorously and expects to achieve a positive outcome."
He continued, "GSF management has recently informed Suntech that additional solar plants owned by GSF subsidiaries with a total installed capacity of approximately 17MWp are being investigated, but continue to operate and produce electricity. Suntech is continuing to work with the court-appointed manager and GSF management to further review all of the PV plants in their portfolio and to confirm that they are operating in line with our initial expectations."
In todays statement, King added, "We are continuing to pursue a number of options to refinance our 2013 convertible notes and intend to address this issue in the near future. In addition, we are making good progress with our due diligence of GSF assets and we will provide an update when we have new developments."