China Sunergy 6-K 2012
China Sunergy Announces Fourth Quarter and Full Year 2011 Financial Results
Quarterly and Annual Shipments Exceed Guidance
NANJING, China, March 16, 2012 - China Sunergy Co., Ltd. (NASDAQ: CSUN) (“China Sunergy” or “the Company”), a specialized solar cell and module manufacturer, today announced its financial results for the fourth quarter and full year ended December 31, 2011. The quarterly results reflected a combination of industry-wide factors such as a peak in European installation activity, and company-specific factors including continued declines in average selling price (“ASP”) and goodwill write-downs.
Fourth Quarter 2011 Financial Highlights
Full Year Financial Highlights
Operational, Technological and Business Highlights in Fourth Quarter
Mr. Stephen Cai, CEO of China Sunergy, commented: “China Sunergy’s fourth quarter results were in line with our expectations. Despite the difficult and volatile market conditions, we were able to achieve our quarterly and full year shipments by diversifying our sales into several emerging markets such as China, Australia and the U.K.. ASPs continued falling in the fourth quarter of 2011, and we expect this trend to continue in the first half of 2012. In 2012, we will solidify our position in the market by stringently controlling costs, improving product quality and efficiency, and satisfying customer needs. We believe we will maintain our position in Europe and expand our market share in high potential markets including India, China and Australia.”
Fourth Quarter & Full Year 2011 Financial Review
Total Revenue and Shipments
For the fourth quarter of 2011, revenue was US$110.8 million, a decrease of 24.0% over the third quarter of 2011. Revenue in 2011 was US$566.3 million, an increase of 9.5% over the previous year. The quarterly decrease in revenue was driven mainly by falling ASPs. During the fourth quarter of 2011, sales from modules amounted to US$109.3 million and accounted for 98.7% of total revenue.
Shipments for the fourth quarter were 116.8MW, including 116.4MW of solar modules. Total shipments in 2011 were 420.3MW (411.5MW of which were solar module shipments), which was 20.8% higher than the previous year and exceeded the Company’s most recent guidance.
Gross Profit / Loss and Gross Margin
Gross profit for the fourth quarter was US$0.2 million. Gross margin was 0.2% for the fourth quarter of 2011, which was in line with the breakeven level that the Company previously estimated. For the full year of 2011, the gross profit was US$1.8 million with a gross margin of 0.3%.
Module ASP during the fourth quarter was US$0.94 per watt, declining from US$1.26 per watt in the third quarter of 2011. The module ASP in 2011 was US$1.36 per watt. This continued decline was mainly due to the imbalance of supply-demand throughout the value chain and clearing of high cost inventories in Europe.
In the fourth quarter of 2011, blended wafer costs were US$0.38 per watt, representing a sequential decrease of 29.6% over the third quarter of 2011. The prices of polysilicon and wafers are expected to continue to decline in 2012. Conversion costs of cells and modules manufactured in the fourth quarter of 2011 were US$0.23 and US$0.27 per watt respectively.
Operating Expense, Operating Profit/Loss and Net Income/Loss
SG&A expenses in the fourth quarter of 2011 were US$36.9 million, compared to US$16.2 million in the third quarter of 2011 and US$7.8 million in the fourth quarter of 2010. The increase was primarily due to a US$14.8 million impairment for goodwill associated with our acquisition of SST and NRE in November 2010, and also to US$9.3 million of bad debt provision accrued as a result of providing extended credit terms to, and accruing specific provisions for, certain customers.
GAAP operating expenses were US$39.1 million for the fourth quarter of 2011. Adjusted non-GAAP operating expenses were US$24.3 million for the fourth quarter of 2011, a 35.8% increase over the level of US$17.9 million in the third quarter of 2011. GAAP operating expenses were US$81.9 million for 2011. Adjusted non-GAAP operating expenses were US$67.0 million for 2011, an 154.6% increase from US$26.3 million in 2010. The full year increase was due to the expansion of operations, and primarily attributable to the module manufacturers the Company acquired in November 2010.
Losses from operations were US$38.9 million for the fourth quarter of 2011 and US$80.0 million for 2011. Our net loss was US$49.6 million for the fourth quarter of 2011 and US$94.3 million for 2011. Adjusted non-GAAP net loss was US$34.8 million for the fourth quarter of 2011 and US$79.5 million for 2011.
Inventories at the end of the fourth quarter of 2011 reached US$44.0 million. Inventory levels for the fourth quarter of 2011 decreased 48.2% over the third quarter of 2011, and for the full year 2011 decreased 39.2% over 2010. The company intends to keep inventory levels as low as possible through 2012 by planning production strictly according to orders received and by streamlining production capacity.
Cash and Cash Flow
As of December 31, 2011, the Company had cash and cash equivalents of US$209.5 million. Net operating cash inflow was US$27.9 million for the fourth quarter. For the full year of 2011, the operating cash outflow was US$119.6 million, largely due to the net loss of US$94.3 million and an increase of US$98.1 million in accounts receivable as a result of providing extended credit terms to certain European customers.
Capital expenditures were US$22.9 million for the fourth quarter of 2011 and US$53.3 million for 2011, primarily for the purchase of equipment associated with the expansion of the Company’s cell and module lines and its investment in a new R&D center.
Additional Company Updates Subsequent to Q4 2011
First Quarter and Full Year 2012 Guidance
The Company believes that weak market demand and industry oversupply will continue to adversely affect its business in at least the first half of 2012, and the challenging conditions in the global solar market are expected to continue in 2012.
The Company estimates, to the best of its knowledge at this time, that first quarter shipments will be in the range of 70MW to 80MW. The Company expects gross margin to be around 1% and forecasts a net loss in the first quarter. For the full year 2012, the Company estimates its total shipments to be approximately 500MW to 550MW.
China Sunergy’s management will host an earnings conference call on Friday, March 16, 2012 at 8:00 a.m. Eastern Time (Friday, March 16, 2012 at 8:00 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss financial highlights of the fourth quarter and full year 2011 and answer questions.
To access the conference call, please dial:
Please ask to be connected to Q4 2011 China Sunergy Co., Ltd. Earnings Conference Call and provide the following passcode: 57128743.
China Sunergy will also broadcast a live audio webcast of the conference call. The broadcast will be available for 7 days by visiting the “Investor Relations” section of the company’s web site at http://www.chinasunergy.com
Following the earnings conference call, an archive of the call will be available by dialing:
The passcode for replay participants is: 57128743. The telephone replay also will be archived on the “Investor Relations” section of the company’s website for seven days following the earnings announcement.
About China Sunergy Co., Ltd.
China Sunergy Co., Ltd. is a specialized manufacturer of solar cell and module products in China. China Sunergy manufactures solar cells from silicon wafers, which utilize crystalline silicon solar cell technology to convert sunlight directly into electricity through a process known as the photovoltaic effect, and assembles solar cells into solar modules. China Sunergy sells these solar products to Chinese and overseas module manufacturers, system integrators, and solar power systems for use in various markets. For more information, please visit our website at http://www.chinasunergy.com.
Use of Non-GAAP Financial Measures
To supplement China Sunergy's consolidated financial results presented in accordance with GAAP, China Sunergy uses the following measures defined as non-GAAP financial measures by the SEC: net income (loss) excluding goodwill impairment, margin excluding goodwill impairment, basic and diluted net income (loss) per ADS excluding goodwill impairment and operating expenses excluding goodwill impairment. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures" set forth at the end of this release. China Sunergy believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s performance and when planning and forecasting future periods. The Company expects to provide net income (loss) on a non-GAAP basis using a consistent method on a quarterly basis going forward. A limitation of using non-GAAP net income (loss) excluding goodwill impairment, non-GAAP margin excluding goodwill impairment, basic and diluted net income (loss) per ADS excluding goodwill impairment and operating expenses excluding goodwill impairment is that these non-GAAP measures exclude goodwill impairment that have been and will continue to be for the foreseeable future a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amount(s) excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures.
Investor and Media Contacts:
China Sunergy Co., Ltd.
Phone: + 86 25 5276 6696
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts in this announcement are forward-looking statements. These forward-looking statements are based on current expectations, assumptions, estimates and projections about the Company and the industry, and involve known and unknown risks and uncertainties, including but not limited to, the Company’s ability to raise additional capital to finance the Company’s activities; the effectiveness, profitability, and the marketability of its products; litigations and other legal proceedings, including the ultimate outcomes of SolarMax legal proceedings and any decisions by the ITC and DOC on the petitions filed; the economic slowdown in China and elsewhere and its impact on the Company's operations; demand for and selling prices of the Company’s products, the future trading of the common stock of the Company; the ability of the Company to operate as a public Company; the period of time for which its current liquidity will enable the Company to fund its operations; the Company’s ability to protect its proprietary information; general economic and business conditions; the volatility of the Company’s operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; future shortage or availability of the supply of raw materials; impact on cost-competitiveness as a result of entering into long-term arrangements with raw material suppliers and other risks detailed in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
The following financial information is extracted from the Company’s condensed consolidated financial statements for the respective periods.
China Sunergy Co., Ltd.
Unaudited Condensed Consolidated Income Statement Information
(In US$ ’000, except share and per share data)
China Sunergy Co., Ltd
Unaudited Condensed Consolidated Balance Sheet Information
(In US$ ’000, except share and per share data)
Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures
(In US$ ’000)