China Sunergy Co., Ltd. , a specialized solar cell and module manufacturer, today announced its financial results for the first quarter ended March 31, 2014.
Mr. Stephen Cai, CEO of China Sunergy, commented, “I’m pleased that in the first quarter we executed on our key initiatives for 2014 and laid a foundation for future development. We expanded our market presence in Japan, generated net profits at our Turkey plant, and sustained operating scale with OEM arrangements, which together combined to help us expand gross margin by more than 300 basis points year-over-year.”
First Quarter 2014 Financial Highlights
- Total revenue was US$62.7 million, an increase of 1.6% from US$61.7 million in the first quarter of 2013, and a decrease of 50.0% from US$125.5 million in the fourth quarter of 2013.
- Shipments totaled 140.2MW, an increase of 36.8% (37.7MW) from 102.5MW in the first quarter of 2013, and a decrease of 40.5% (95.6MW) from 235.8MW in the fourth quarter of 2013. Module shipments, including module processed under OEM arrangements of 16.5MW, were 100.5MW. Cell shipments, including cell processed under OEM arrangements of 33.3MW, were 39.7MW.
- Average selling price (“ASP”) for the Company’s solar modules, excluding those processed under OEM arrangements, was US$0.66 per watt, an increase of 11.9% from US$0.59 in the fourth quarter of 2013.
- Conversion cost for cells was US$0.14 per watt, a decrease of one cent from US$0.15 per watt in the fourth quarter of 2013. Conversion cost for modules was US$0.20 per watt, an increase of one cent from US$0.19 in the fourth quarter of 2013.
- Gross profit was US$2.3 million on gross margin of 3.7%, compared with US$0.3 million on gross margin of 0.4% for the first quarter of 2013, and US$6.6 million on gross margin of 5.2% in the fourth quarter of 2013.
- Net loss attributable to ordinary shareholders was US$14.7 million, compared with US$22.9 million in the first quarter of 2013, and US$13.2 million in the fourth quarter of 2013.
- Net loss attributable to ordinary shareholders per ADS was US$0.99, compared with US$1.71 in the first quarter of 2013, and US$0.89 in the fourth quarter of 2013.
- Cash, cash equivalents and restricted cash totaled US$230.4 million, as of March 31, 2014.
First Quarter 2014 Financial Review
Total Revenue and Shipments
For the first quarter of 2014, total revenue was US$62.7 million, an increase of 1.6% from US$61.7 million in the first quarter of 2013, and a decrease of 50.0% from US$125.5 million in the fourth quarter of 2013. Revenue from the Company’s self-brand modules and cells business, accounting for 91.7% of the total revenue, was US$57.5 million, and, revenue from the modules and cells processed under OEM arrangements, accounting for 8.3%, was US$5.2million.
Total shipments for the first quarter of 2014 were 140.2MW, an increase of 36.8% from 102.5MW in the same period of last year, and a decrease of 40.5% from 235.8MW in the prior quarter. The decrease quarter over quarter was primarily due to the weaker demand from China solar market during the first quarter of 2014. Total module shipments, including module processed under OEM arrangements of 16.5MW, were 100.5MW for the first quarter of 2014. Total cell shipments, including cell processed under OEM arrangements of 33.3MW, were 39.7MW for the first quarter of 2014.
Asia continued to be the largest market for the Company, accounting for 63.5% of total revenue in the first quarter of 2014, with Japan and China accounting for 33.4% and 21.5%, respectively. Total shipment to Japan more than doubled to 31.2MW during the quarter, and Japan, for the first time, becomes the largest revenue contributor by country. Sales to European markets represented 35.7% of total revenue in the first quarter of 2014, mainly contributed by France and Germany.
ASP
Module ASP for the first quarter of 2014 was US$0.66 per watt, increased by seven cents or 11.9% compared with that of the previous quarter. The higher module ASP was primarily due to the increased shipments to higher-priced markets, such as Japan and France.
Wafer and Conversion Costs
Blended wafer costs in the first quarter of 2014 were US$0.23 per watt, which was one cent or 4.5% higher than those of last quarter. Conversion costs of cells and modules manufactured in the first quarter of 2014 were US$0.14 and US$0.20 per watt, respectively, compared with US$0.15 and US$0.19 per watt, respectively, in the previous quarter. The increase of one cent in conversion cost of modules was mainly due to a higher production mix from the Company’s Turkey plant, where manufacturing cost is comparatively higher than that of its mainland factories.
Gross Profit and Gross Margin
Gross profit for the first quarter was US$2.3 million on gross margin of 3.7%, this compared to gross profit of US$0.3 million on gross margin of 0.4% for the first quarter of 2013, and gross profit of US$6.6 million on gross margin of 5.2% for the fourth quarter of 2013. The sequential decrease in gross profit compared to the fourth quarter of 2013 was mainly attributable to the combined impacts of comparatively lower shipment and increased manufacturing cost in the quarter ended March 31, 2014. Excluding inventory provision of US$0.5 million, non-GAAP[1] gross profit was US$2.9 million and non-GAAP gross margin was 4.6% in the first quarter of 2014.
Operating Expenses, Operating Loss and Net Loss
Operating expenses significantly decreased to US$10.1 million in the first quarter of 2014, from US$15.2 million in the first quarter of 2013, and US$13.9 million in the fourth quarter of 2013. The decrease in operating expenses was primarily attributable to the Company’s effective control over its general and administration expenses. Operating expenses included reversal of bad debt provision of US$0.4 million in the first quarter, compared to bad debt provision of US$0.2 million in the same period of last year, and US$1.1 million in the prior quarter.
Loss from operations was US$7.8 million in the first quarter of 2014, compared with US$15.0 million in the first quarter of 2013, and US$7.3 million in the fourth quarter of 2013.
Correspondingly, net loss attributable to ordinary shareholders was US$14.7 million in the first quarter of 2014. Non-GAAP net loss attributable to ordinary shareholders was US$14.6million for the first quarter of 2014.
Amount Due from/to Related Parties
Amount due from related parties totaled US$67.5 million as of March31, 2014, a decrease of US$16.5 million compared to US$84.0 million as of December 31, 2013. Amount due to related parties totaled US$33.0 million as of March 31, 2014, an increase of US$21.2 million compared to US$11.8 million as of December 31, 2013.
Inventory
Inventories at the end of the first quarter of 2014 totaled US$64.1 million, an increase of US$19.4 million from the prior quarter, which is mainly due to lower shipment in the quarter and increased purchase of raw materials in anticipation of increasing demand of the second quarter of 2014.
Cash Position
As of March31, 2014, the Company had cash and cash equivalents of US$30.1 million, and restricted cash of US$200.3 million.
Additional Company Updates Subsequent to First Quarter 2014
- China Sunergy Signed Licensing Agreement with Zep Solar: the Company signed a licensing agreement with Zep Solar, Inc., a US-based manufacturer of a comprehensive platform for module-integrated installation hardware. The agreement covers all of the Company’s three production sites in Nanjing, Shanghai and Istanbul, allowing for maximum flexibility in terms of delivery of Zep Compatible PV modules to the USA. The Company will incorporate the patented “Zep Groove” into the frame design of its mono- and poly-crystalline modules.
- 540KW Solar Park with CSUN Modules Installed in Croatia: the Company’s partner, Fibernet Solar, completed construction of a 540 KW solar park in Croatia with CSUN’s “Made in Turkey” PV modules. The system was deployed with CSUN 250-60P modules near the Croatian town of Buje, close to the Slovenian port of Koper.
- China Sunergy Signed Framework Contract with Turkish EPC: the Company signed a 15MW framework agreement with Turkish EPC PV-Systems at the Solarex exhibition in Istanbul. The framework agreement covers CSUN 250-60P modules produced at the Company’s Turkey plant, as well as, those from China. The modules will be used in ground-mounted projects across Turkey.
- 240KW System with CSUN Modules Completed in Turkey: the Company’s long-time partner, Asunim Solar Lda, completed a 240KW project in eastern Turkey installed with CSUN modules.
- CSUN Ranks 8th for the full year 2013 in the German PV Market: China Sunergy was ranked 8th-largest supplier based on shipments to the German market by IHS Technology for the full year 2013.
Business Outlook
Mr. Cai continued, “We remain committed in executing our key initiatives for 2014 and further lowering our cost structure. We are seeing solid progress in our efforts to upgrade our OEM customer base, integrate our supply chains, enhance our manufacturing processes, and obtain additional overseas financing. We anticipate these efforts will significantly lower costs and drive meaningful improvements to profitability in the second half of 2014.”
The Company estimates that the total shipment for the second quarter of 2014 will range from 150MW to 160MW, including 40MW to 50MW of cell and module shipments under OEM arrangements. Gross margin for the second quarter of 2014 is expected to remain stable from that of the first quarter of 2014.
This guidance is based on the current market conditions and reflects the Company’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.
About China Sunergy Co., Ltd.
China Sunergy Co., Ltd. (NASDAQ: CSUN) designs, manufactures and delivers high efficiency solar cells and modules to the world from its production centers based in China and Turkey. China Sunergy also invests in high potential solar projects. Founded in 2004, China Sunergy is well known for its advanced solar cell technology, reliable product quality, and excellent customer service.
SOURCE China Sunergy Co., Ltd.
