WUXI, China, March 14 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world’s leading manufacturers of photovoltaic (PV) cells and modules, today announced fourth quarter and full year 2006 financial results.
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Fourth Quarter and Full Year 2006 Highlights
-- Fourth quarter 2006 total net revenues went up 144.8%
year-over-year to $217.9 million. Non-GAAP Suntech
Group net income attributable to holders of ordinary
shares grew 101.4% year-over-year to $35.5 million,
or $0.23 per non-GAAP(*) diluted American Depository
Share (ADS). Each ADS represents one ordinary share.
-- Fourth quarter 2006 production output was 55.3MW; full
year 2006 production output was 160.1MW, representing
136.5% year-over-year growth.
-- Full year 2006 total net revenues went up 165.0%
year-over-year to $598.9 million. Suntech Group net
income attributable to holders of ordinary shares
grew 275.6% year-over-year to $106.0 million, or
$0.68 per diluted ADS.
-- Annual capacity grew from 150MW at the end of 2005 to
270MW at the end of 2006, representing an increase of
80%.
* All non-GAAP measures exclude share-based compensation expenses and the amortization expenses incurred from purchase price allocation related to the acquisition of MSK Corporation as of August 11, 2006. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of management’s use of non-GAAP information below.
“We exceeded our initial fourth quarter output and revenue guidance for our core business as we increased our sales of PV modules, achieved sequential average selling price increases throughout 2006 and ramped up recently installed production lines ahead of schedule,” said Dr. Zhengrong Shi, Suntech’s Chairman and CEO. “Our operations are the healthiest they have been since our IPO as our low cost per watt strategy combined with our strong technology capabilities, expanding sales network and successful silicon procurement keep us on track to achieve industry leading growth.”
“During the quarter, we cemented our silicon supply for 2007 and beyond by signing additional long term, fixed price silicon supply agreements. In fact, we have secured more silicon than we require to meet our upwardly revised projected 2007 PV cell and module output target,” said Dr. Shi. “This ability to secure silicon, despite the global shortage, is one of the key reasons we have been able to increase our 2007 production output target from 250 megawatts to 280 megawatts and our year-end capacity target from 390 megawatts to 420 megawatts.”
Commenting on Suntech’s international sales development, Dr. Shi said, “In the fourth quarter, we continued to diversify our sales geographically and extended the reach of our global network. In addition to partnering with SunEdison, we continued to build momentum in the U.S. market and our current pipeline indicates that we will be able to more than triple our sales to this region in 2007. With the integration of MSK’s sales network and the establishment of Suntech Europe, we have set the foundation to further expand our selling channels in key European markets such as Spain.”
Recent Business Highlights
-- In February 2007, Suntech closed an offering of $500
million convertible senior notes, more than 60% above
the original offering size. Suntech plans to use the
net proceeds to expand production capacity, procure
raw materials, repay a bridge loan related to the MSK
acquisition and for other corporate purposes.
-- Multi-year silicon supply agreements were entered into
with REC, Comtec and Sunlight Group in the fourth
quarter of 2006. Combined with existing agreements with
MEMC and several leading China-based silicon suppliers,
Suntech expects over two-thirds of silicon supply in 2007
needed for its projected output will come from long-term
silicon supply agreements, which will ramp up over the
year and have average wafer costs measurably below 2006
wafer purchase prices.
-- After winning the contract to supply over 23MW of solar
modules to the world’s largest solar farm in Spain,
Suntech continued to achieve steady sales wins in Spain.
In the fourth quarter of 2006, Suntech sales to Spain
increased four-fold above the nearly 10% of total revenues
in the first nine months of 2006 and it is currently
expected that it will grow to be approximately 20% of
total revenues in 2007.
-- In February 2007, Suntech made the strategic decision to
halt MSK’s module production activities in Japan and
initiated immediate actions to focus MSK on its three
strategic goals. MSK will concentrate efforts on BIPV
product development and expanding BIPV sales into key
geographies beyond Japan, growing Japan-based sales and
utilizing MSK’s sales organization to expand Suntech’s
customer base.
-- Suntech recently entered into multiple sales agreements
with Conergy AG, a leading global solar system integrator,
to supply PV modules with a value of approximately $270
million in 2007.
-- Suntech established Suntech Europe in January as part of
a natural evolution to expand its customer base as well
as to deepen the service and support offered to its
customers in Europe, the Middle East and Africa (EMEA).
The headquarters for Suntech Europe will be in London with
sales offices expected to be opened in key cities in the
region commencing in 2007.
-- Suntech recently joined the Global Roundtable on Climate
Change (GROCC) to raise the profile of solar energy and
encourage governments worldwide to develop effective
policies on climate change.
Suntech Group Consolidated Results for the Full Year 2006 Including MSK
Suntech Group’s net revenues for the full year 2006 were $598.9 million, an increase of 165.0% year-over-year. For the full year 2006, Suntech Group derived approximately 20.8 % of total net revenues from sales of PV cells and 78.8% from PV modules.
Gross profit for the full year 2006 was $148.9 million, an increase of 117.2% over the full year 2005. Gross margin decreased to 24.9% in 2006 from 30.3% in 2005. Suntech Group’s income from operations for the full year 2006 was $103.2 million, an increase of 142.0% year-over-year. Operating margin was 17.2% in 2006, down from 18.9% in 2005. Net income attributable to holders of ordinary shares for the full year 2006 was $106.0 million, an increase of 275.6% from 2005. Diluted income per ADS was $0.68 in 2006, compared to $0.26 in 2005.
Capital expenditures were $52.3 million in the full year 2006. Depreciation and amortization expenses in the full year 2006 were $11.9 million.
As of December 31, 2006, Suntech had cash and cash equivalents of $225.5 million compared with $314.2 million at the end of the third quarter of 2006. Short term debt rose to $288.2 million at the end of the fourth quarter of 2006 from $221.7 million at the end of the third quarter of 2006, primarily as a result of continuous leverage of banking facility to support expanding production scale and capital expenditures and cash flow management needs related to PRC foreign currency controls.
Outlook for First Quarter and Full Year 2007
Based on current operating and other conditions, Suntech expects its first quarter 2007 total production output, including contribution from MSK, to be in the estimated range of 60MW to 62MW and its total net revenues to be in the estimated range of $220 million to $228 million.
As the Company will have carryover spot market priced silicon supply from 2006 and as its silicon supply from its long term supply contracts will not become a majority of its silicon supply until the second quarter of 2007, the Company will likely have a slight decline in the gross margin in its core business in the first quarter of 2007 with stabilization and improvement expected in the gross margin of its core business thereafter.
Such guidance takes into account the assumption that Suntech’s total PV cell production capacity will remain constant at 270MW until the second quarter of 2007 when additional capacity is expected to become operational. In addition, the first quarter 2007 guidance also takes into account the shorter month of February and the Chinese New Year holiday.
Suntech has increased its total PV cell production output target for 2007 from 250MW to 280MW. This target takes into account third party PV cell purchases originally contracted by MSK. Suntech has also raised its expected 2007 year end PV cell production capacity target from 390MW to 420MW.
Suntech expects capital expenditures for the full year 2007 to be in the estimated range of $80 to $100 million.
Given the accelerated integration between Suntech and MSK’s business operations, Suntech will not continue to report separate results or give separate guidance for MSK in the future.
About Suntech
Suntech Power Holdings Co., Ltd. is a leading solar energy company in the world as measured by both production output and capacity of solar cells and modules. Suntech provides solar solutions for a green future. Suntech designs, develops, manufactures, and markets a variety of high quality, cost effective and environmentally friendly PV cells and modules for electric power applications in the residential, commercial, industrial, and public utility sectors. Suntech’s majority-owned subsidiary, MSK Corporation is a pioneer within the higher value-added building-integrated photovoltaics (BIPV) space. Suntech’s customers are located in various markets worldwide, including key markets throughout Europe, Japan, China and the United States. For more information, please visit http://www.suntech-power.com .
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology suchas "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar statements. In particular, the projected first quarter and fiscal year 2007 data, regarding production output, total net revenues and consolidated net income, core business gross margin, the business outlook and quotations from management in this announcement, statements regarding Suntech’s beliefs and expectations about integrating the business and operations of MSK Corporation and the resulting synergies and benefits, as well as Suntech’s strategic and operational plans, are forward-looking statements. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Suntech’s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F. Suntech does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement its consolidated financial results presented in accordance with GAAP, Suntech uses the following non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to share-based compensation and the purchase price allocation effect related to the MSK Corporation acquisition. Management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Suntech’s core business across different reporting periods on a consistent basis, independently of stock-based compensation expenses and the purchase price allocation effect related to the MSK acquisition. Thus, the non-GAAP financial measures provide investors with another method for assessing Suntech’s operating results in a manner that is focused on the performance of its ongoing operations. Management also uses these non-GAAP measures internally to make an apples-to-apples comparison of the business and financial performances of current and historical results, for strategic decision making, forecasting future results and evaluating the Company’s current performance. Many analysts covering Suntech use the non-GAAP measures as well. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release and which shall be read together with the preceding financial statements prepared under GAAP.
