Suntech Power Holdings maintained robust growth in the second quarter after revenues rose by 94.8 percent year on year from $321 million to $625.1 million.
The Chinese solar giant achieved 1.4 gigawatts of photovoltaic cell and module production capacity in the quarter – a milestone that contributed to the company’s revenue growth, as well as to an increase in photovoltaic deliveries.
Total photovoltaic shipments swelled by 11.9 percent sequentially and 181.7 percent year on year.
However, Suntech’s quarterly consolidated gross profit margin dropped sequentially from 19.5 percent to 18.2 percent, bringing in a gross profit of $113.9 in contrast with $114.5 million in the previous quarter. This decline was due to cheaper average sales prices caused by the euro’s depreciation against the dollar.
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The company aims to keep at least 70 percent hedging coverage of euro exposure in the next quarters to reduce its vulnerability to the fluctuations of the euro-dollar exchange rate.
These hedging activities also contributed to a significant increase in Suntech’s net income, which rose from last quarter’s $2.8 million to $24.1 million.
Operating expenses soared from $51 million to $132.9 million due to the noncash impairment of thin-film equipment worth $54.6 million after Suntech halted trial production of thin-film modules.
“Despite successful sales expansion and strong execution during the second quarter, our financial results bear the significant impact of our Shanghai facility restructuring and Shunda Holdings investment impairments,” noted Zhengrong Shi, chairman and chief executive of Suntech.
The company is restructuring its Shanghai facility to focus on the manufacture of crystalline silicon cells. Suntech also reported a $25 million special prepayment provision to account for credit risks related to silicon wafers shipment from Shunda Holdings Company, which is currently reorganizing due to debt obligations.
Suntech (NYSE:
STP
) expects growth in solar demand to continue in the next quarters. To answer the anticipated rise in demand, the company aims to expand its 1.4 GW production capacity to 1.8 GW by the end of 2010.
The expansion will allow Suntech to increase its annual shipment target to 1.5 GW from 1.3 GW to support its growing global customer portfolio. The expansion will require capital expenditure of about $300 million, which the company will fund through cash on hand, operating cash flow and existing credit lines.
