SunTech, World's Biggest PV Firm: Healthy Revenue, Difficult Margins in Q2

SunTech, World’s Biggest PV Firm: Healthy Revenue, Difficult Margins in Q2

“Entering challenging times as an industry.” ASPs will continue to fall in the next quarter while shipments will rise.

Eric Wesoff August 22, 2011

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

Suntech is the world's largest manufacturer of solar panels. The firm announced its financial results for its second fiscal quarter this morning.

Suntech met its shipment guidance and is on track to meet its full year guidance of 2.2 gigawatts. Total net revenues were $830.7 million in the second quarter of 2011 -- a sequential decrease of 5.3 percent from last quarter, and an increase of 32.9 percent on the quarter year-over-year. Revenue guidance for full year 2011 was dialed down $100 million to $3.2 billion to $3.4 billion.

However, gross margins were 4.1 percent in the second quarter of 2011. And the firm's ASP declined 7 percent quarter-to-quarter and Suntech expects mid- to high-teen price declines in Q3.

This will only put further pressure on already slim margins.

For many solar firms (SunPower, First Solar, Trina Solar, JA Solar, etc.) and their investors, the second quarter and first half of 2011 could not have ended soon enough. The common refrain was that high inventories, plus a lack of transparency in German and Italian policy impacted share price, ASPs, profit, and revenue. An additional theme was that North American utility deployments and small-scale systems in Europe were going to be the star of the second half of 2011 and the savior of the industry this year.

Suntech sees some upside in China, expecting China to becoming a multi-gigawatt market in 2012 and beyond due to a small feed-in tariff. The firm expects China's PV installations to double in 2012. Suntech sees North America accounting for 15 percent of its sales in 2011.

Suntech, like most every other public solar firm, has seen its stock price and market capitalization get battered over the last month.

Despite revenue expectations of $3.2 billion to $3.4 billion, the company has a market capitalization of $918 million.

Suntech expects PV shipments in Q3 to increase by over 15 percent compared with the second quarter of 2011. Suntech looks for gross margins to be in the range of 11 percent to 13 percent in the third quarter of 2011.

For full year 2011, Suntech expects to ship at least 2.2 gigawatts and generate revenues of $3.2 billion to $3.4 billion.

Suntech reached 2.4 gigawatts of PV cell and module capacity. Pluto, the firm's higher-performance product, remains a relatively small piece of the shipment pie.

Charts from Google Finance