Suntech Power Holdings Company Ltd. (STP) announced preliminary financial results for the third quarter ended September 30, 2012.
In the reported quarter, Suntech's shipments of photovoltaic (:PV) products declined by approximately 10% from the second quarter of 2012. Revenues in the third quarter of 2012 were approximately $387 million, a sequential decline of 18%. This was also way below the Zacks Consensus Estimate of $470 million for the quarter.
In the reported quarter, approximately 88% of revenues were generated from the sale of PV modules, and 12% of revenues were generated from the sale of PV systems, cells, silicon wafers and production equipment.
Gross margin in the third quarter of 2012 was approximately 5%. Gross margin benefited from the reversal of a prior provision for anti-dumping tariffs and countervailing duties in the United States of $18 million. This was partially offset by a $13 million provision for purchase commitments related to long-term supply agreements.
In the third quarter of 2012, Suntech's operating expenses were approximately $98 million. Operating expenses were impacted by $6 million of legal fees; $8 million in restructuring fees associated with the reduction of PV cell production capacity and headcount; and a $6 million impairment of intangible assets.
Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (:PV) cells and modules.
Suntech expects shipments of PV products in the fourth quarter of 2012 to decline in a low single-digit percentage rate compared to the third quarter of 2012. The gross margin in the fourth quarter of 2012 is expected to be slightly negative. Suntech now expects 2012 annual PV shipments to be in the range of 1.7GW to 1.8GW, compared to the previous guidance of 1.8GW to 2.0GW.
Suntech Power is one of the largest producers of PV solar modules under its proprietary Pluto technology with a geographically diversified customer base. Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies. However, the positives are overshadowed by fears of tepid module demand in Europe, rising competition, the volatile Euro and the financial stability of its customers.
In the near term, the Zacks #3 Ranked (Hold) Suntech Power will perform in line with the market. Over the longer run, our ‘Neutral’ recommendation on the stock indicates that it would perform in sync with the broader market. This is in line with its peers JA Solar Holdings Co. Ltd. (JASO) and Canadian Solar Inc. (CSIQ).
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