-- Third quarter total net revenue was up 27.2 % sequentially and 187.8%
year-over-year to $163.0 million. Non-GAAP(1) Suntech Group net income
grew 11.7% sequentially and 164.5% year-over-year to $32.8 million, or
$0.21 per non-GAAP diluted American Depository Share (ADS).
-- Excluding newly acquired MSK, Suntech's third quarter total net revenue
was up 15.9% sequentially and 162.2% year-over-year to $148.5 million.
Non-GAAP net income excluding MSK grew 13.5% sequentially and 168.8%
year-over-year to $33.3 million, or $0.22 per non-GAAP diluted ADS.
-- Suntech excluding MSK increased annualized PV cell production capacity
from 210MW to 270MW.
-- Construction commenced at the Company's Phase II facility in Wuxi which
is expected to accommodate up to 1,000MW future production capacity.
-- Building upon its 180 micron thick wafer production capabilities,
Suntech made advances in production technology capable of utilizing 150
micron thick wafers.
-- Suntech and the University of New South Wales signed a new $1.2 million
collaborative research agreement through 2007 with a $3 million
extension through 2010.
Note 1: 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.
WUXI, China, Nov. 20 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co.,
Ltd. (NYSE: STP), one of the world’s leading manufacturers of photovoltaic
(PV) cells and modules, today announced total net revenue for the third
quarter 2006 of $163.0 million and net income for the same quarter of $28.7
million, or $0.19 per diluted American Depository Share (ADS). Non-GAAP Group
net income for the third quarter 2006 was $32.8 million, or $0.21 per non-
GAAP diluted ADS.
“Suntech experienced another quarter of strong growth in our core
business within a silicon constrained environment. We continued to outpace
our production capacity expectations through increased silicon purchases in
the spot market and we achieved broad sales wins and expanded market share in
our increasingly diverse PV markets,” said Dr. Zhengrong Shi, Suntech’s
Chairman and CEO.
Dr. Shi added, “The long-term silicon wafer supply agreements we
recently entered into are favourably priced relative to spot market prices.
In fact, in 2007 a majority of our silicon supply is expected to come from
our multiple long-term silicon supply agreements. This will help ensure that
Suntech achieves its growth objectives and will enhance Suntech’s
competitiveness and profit leadership as PV module prices are reduced in the
future.”
Commenting on MSK Corporation’s results, Dr. Shi said, “MSK’s results
were lower than our expectations as they experienced an unexpected shortfall
in PV cell supplies during the quarter and moved to GAAP standard accounting
methods. Looking forward, increased integration of Suntech’s operations into
MSK’s production is expected to facilitate significant increases in MSK’s
profitability as we expand sales of high margin BIPV products in MSK’s key
geographies, particularly Japan and Europe.”
Dr. Shi noted that the Company anticipates achieving key milestones of
its 180-day MSK integration plan earlier than scheduled. Synergies are
expected to be realized from alignment of sales and marketing initiatives,
sales channels and customer bases, as well as cost reduction from
consolidation of back-office functions and sharing of best practices in
production and R&D. Areas of early progress include refining marketing
strategies, joint sales channel initiatives, implementing the Sarbanes-Oxley
audit project and the installation of Suntech’s ERP system at MSK.
Additional Business Highlights
-- The majority of Suntech’s silicon supply in 2007 is expected to come
from multiple long-term silicon supply agreements with an average wafer
cost measurably below 2006 current spot market prices. Suntech has
secured multi-year silicon wafer supply agreements set to begin in 2007
with MEMC, REC and several leading China-based silicon suppliers.
-- Suntech continued to execute upon its long term strategy of
diversifying sales among various geographical regions and distributors.
During the third quarter of 2006, sales to Spain grew to 11.6% of total
sales for the quarter, compared with 9.6% in the second quarter of
2006. In addition, Suntech continued to build relationships with key
distributors in the United States and recently secured a multi-year
contract to supply PV modules with an aggregate output of up to 25.5MW.
-- Suntech is on track to begin construction in early 2007 on
manufacturing and R&D facilities in Shanghai to produce new thin film
solar technologies and value-added PV solutions. These facilities are
expected to begin ramping up production in 2008 with a capacity of 20MW
to 40MW.
-- In October 2006, Suntech continued to expand its system integration
presence in China with the establishment of Shenzhen Suntech, which has
already secured initial commitments for several solar power grid
integration projects.
-- Suntech’s CEO Dr. Shi established the China Solar Photovoltaic Suntech
Prize, an annual award to honor engineers, scientists, entrepreneurs
and government officials who have made substantial contributions to the
development of China’s PV industry.
-- Suntech’s CTO Dr. Stuart Wenham received the 2006 World Technology
Award in recognition of innovation for Suntech’s special semiconductor
finger technology that Dr. Wenham architected. This follows the award
granted by the 15th International PV Science and Engineering Conference
to Dr. Shi in 2005 for outstanding promotion of international science
and engineering.
Third Quarter 2006 Group Results
Income Statement Summary (In $ millions, except for per ADS data)
Suntech Suntech Suntech Non-
Group Group Non- GAAP
GAAP GAAP Excluding
MSK
Net revenues 163.0 163.0 148.5
Gross profit 37.2 38.0 38.6
Income from
operations 25.3 29.8 31.6
Net income 28.7 32.8 33.3
Net income per
diluted ADS $0.19 $0.21 $0.22
Suntech Group Results for the Third Quarter of 2006 Excluding MSK
Suntech Group’s net revenues excluding MSK for the third quarter of 2006
were $148.5 million, an increase of 15.9% sequentially and 162.2% year-over-
year. Excluding MSK, Suntech recorded a non-GAAP gross profit of $38.6
million, representing an increase of 5.4% over the second quarter of 2006 and
122.9% over the third quarter of 2005. Non-GAAP gross margin excluding MSK,
for the third quarter of 2006 was 26.0%, compared with 28.6% in the second
quarter of 2006 and 30.6% in the third quarter of 2005. Gross margins
excluding MSK in the third quarter 2006 decreased primarily due to the
increase in the cost of silicon as Suntech purchased additional silicon from
the spot market in order to accelerate production and expand its market
share. Excluding MSK, Suntech’s non-GAAP income from operations for the
third quarter of 2006 was $31.6 million and the operating margin for the
quarter was 21.3%, compared with 24.2% in the second quarter of 2006 and
24.8% in the third quarter of 2005. Additional operating expenses were
incurred during the quarter to broaden the geographical sales regions and
further the MSK integration. Excluding MSK, non-GAAP net income
attributable to holders of ordinary shares for the third quarter of 2006 was
$33.3 million, or $0.22 per non-GAAP diluted ADS.
Breakdown of Third Quarter 2006 Net Revenues (Excluding MSK) (In $
millions)
Q3 2006 % of Q3 Growth Growth
US$ 2006 Net vs. Q3 vs. Q2
(in millions) Revenues 2005 2006
PV Cells 39.9 26.8 185.4 14.7
Standard PV
Modules 107.9 72.7 156.0 16.9
PV System
Integration,
BIPV and Others 0.7 0.5 43 -35.0
Total $148.5 100.0 % +162.2 % +15.9 %
Suntech excluding MSK shipped 40.0MW of PV cells and modules during the
quarter; average sales prices for PV cells and PV modules were $3.34 and
$3.86 per watt, respectively, compared with $3.22 and $3.78 per watt,
respectively, in the second quarter of 2006 and $3.10 and $3.34,
respectively, in the third quarter of 2005.
Suntech Group Consolidated Results for the Third Quarter of 2006
Including MSK
Suntech Group’s non-GAAP gross profit for the third quarter of 2006 was
$38.0 million and the non-GAAP gross margin was 23.3%. Non-GAAP income from
operations for the third quarter of 2006 was $29.8 million and the non-GAAP
operating margin was 18.3%.
As of September 30, 2006, Suntech had cash and cash equivalents of $314.2
million compared with $312.8 million at the end of the second quarter of
2006. Short-term debt rose to $212.7 million at the end of the third quarter
of 2006 from $82.8 million at the end of the second quarter of 2006 primarily
as a result of the $100 million bridge loan obtained in connection with the
MSK acquisition. The ongoing short-term debt is related to transactions made
by the Company to address issues relating to foreign currency controls of the
PRC Renminbi. Capital expenditures were $15.7 million in the third quarter
of 2006 which were primarily related to production capacity expansion.
New Senior Hires
-- Mr. Steven Chan joined Suntech in September 2006 as its Vice President
of Business Development. Mr. Chan’s responsibilities include heading
the investor relations function as well as focusing on key corporate
initiatives such as strategic partnerships, investments and mergers and
acquisitions. Prior to joining Suntech, Mr. Chan worked at CDC Corp.,
most recently serving as its Acting CEO and General Counsel. Prior to
that, Mr. Chan was a New York-qualified corporate attorney with
Morrison & Foerster LLP and Milbank, Tweed, Hadley & McCloy LLP. Mr.
Chan graduated from the University of California at Berkeley and also
received a JD law degree from the Boston College Law School.
-- Ms. Vivian Chan joined Suntech in November 2006 as Financial Controller
of MSK. Before joining MSK, Ms. Chan was Financial Controller at Dell
Japan. Ms. Chan has more than 15 years experience in areas including
Sarbanes Oxley compliance, GAAP, corporate governance, internal audit,
business planning and financial reporting. Ms. Chan was also an auditor
with Deloitte. Ms. Chan graduated from the Chinese University of Hong
Kong and is a fellow member of the ACCA.
-- Mr. YK Chang joined Suntech in September 2006 as Director of
Operations/Production. Mr. Chang’s responsibility is to focus on
ensuring that the production teams meet Suntech’s capacity growth
objectives. He brings with him rich experience in industrial
production management including plant layout, production control
planning, productivity monitoring, and quality control measures. Prior
to joining Suntech, Mr. Chang acted as Operations Director for Pentex-
Schweizer Circuits for over 16 years. Mr. Chang received certificates
and diplomas in Mechatronics, Industrial Management and Mechanical
Engineering.
-- Mr. Zhi Hao joined Suntech as Investment Controller in September 2006.
Mr. Hao was previously a Senior Manager with PricewaterhouseCoopers
Corporate Finance in Singapore, specializing in financial advisory on
cross-border M&A and capital market transactions. From 2003 to 2005,Mr.
Hao was a Manager with Daiwa Securities SMBC Singapore, and from 2002
to 2003, he served as an Investment Analyst with Kim Eng Securities in
Singapore. Mr. Hao received an MBA degree from the National University
of Singapore.
Annual General Meeting
Suntech will convene its annual general meeting of shareholders on
December 22, 2006. Ordinary shareholders of record as of November 10, 2006
will be entitled to attend the meeting.
Outlook for Fourth Quarter 2006
Based on current operating and other conditions, Suntech expects its
total net revenue, excluding MSK, in the fourth quarter 2006 to be in the
estimated range of $166 million to $170 million, representing year-over-year
growth of 87% to 91%.
Suntech expects its total production output, excluding MSK, to be in the
estimated range of 45MW to 46MW in the fourth quarter of 2006 and 250MW for
the full year 2007.
In the fourth quarter 2006, MSK is expected to contribute $60 to $64
million, or approximately 27% to Suntech’s total net revenue, and production
output to be in the estimated range of 14MW to 15MW. In 2007, the Company
expects the volume of PV modules shipped by MSK to be flat to down as it
focuses on growing the sales of MSK’s higher value-added BIPV products.
Conference Call Information
Suntech’s earnings announcement conference call will take place on
November 20, 2006 at 8:00 a.m., Eastern Time, which corresponds to November
20, 2006 at 9:00 p.m., Beijing/Hong Kong time. To access the conference call,
please dial +1 617 213 8845 (for U.S. callers) or +852 3002 1672 (for
international callers) and ask to be connected to the Suntech earnings
conference call.
A live webcast of the conference call will be available on the investor
relations section of Suntech Power’s website at http://www.suntech-
power.com .
A replay of the conference call will be available on the investor
relations section of Suntech Power’s website or by dialing +1 617 801 6888
(passcode: 10412557).
About Suntech
Suntech Power Holdings Co., Ltd. is a leading global solar energy company
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 one
of Japan’s largest PV manufacturers and one of the top-ranked companies in
the 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 announcement contains forward-looking statements. These statements
are made under the “safe harbor” provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified by terminology such as “will,” “expects,” “anticipates,”
“future,” “intends,” “plans,” “believes,” “estimates” and similar
statements. Among other things, the business outlook and quotations from
management in this announcement, as well as Suntech’s strategic and
operational plans, contain forward-looking statements. Such statements
involve inherent 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 annual
report on Form 20-F filed with the U.S. Securities and Exchange Commission
which can be found on Suntech’s website at http://www.suntech-power.com .
Suntech does not undertake any obligation to update any forward-looking
statement, 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.
Note: The quarterly consolidated income statements are unaudited. The
summary consolidated balance sheet as of September 30, 2006 is derived from
Suntech’s unaudited consolidated financial statements. The summary
consolidated balance sheet data as of December 31, 2005 is derived from
Suntech’s audited consolidated financial statements. The condensed income
statements of reportable segments is also unaudited.
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(In $’000)
Suntech Group Suntech Group
Consolidated Consolidated
December 31, September 30
2005 2006
Unaudited
ASSETS
Current assets:
Cash and cash equivalents 359,324 314,178
Restricted cash 7,997 21,489
Inventories 40,428 134,171
Accounts receivable 1,660 44,781
Other receivables 2,408 3,641
Value-added tax recoverable 339 12,365
Advances to suppliers 24,001 87,471
Deferred tax assets 322 350
Short-term investment -- 2,937
Total current assets 436,479 621,383
Property, plant and equipment, net 39,718 103,312
Intangible assets, net 2,923 80,865
Goodwill 135 22,654
Investments in affiliates 1,059 2,704
Non-current advances to suppliers
and other assets -- 16,084
Non-current receivables -- 21,875
Deferred compensation charges
to suppliers -- 117,828
Deferred tax assets 1,350 2,668
TOTAL ASSETS 481,664 989,373
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including
current portion of long-term bank
borrowings 52,193 215,223
Accounts payable 3,522 17,857
Other payables 4,770 14,962
Payables in respect of purchase of
property, plant and equipment 550 4,153
Advances from customers 3,059 4,943
Accrued payroll and welfare 1,408 2,672
Government grants 4,107 4,528
Amounts due to related parties 468 191
Income tax payable 1,899 2,667
Deferred taxes liability -- 70
Total current liabilities 71,976 267,266
Long-term bank borrowings 3,717 38,505
Accrued warranty costs 2,619 6,954
Other liabilities -- 12,472
Deferred tax liability -- 30,948
Total liabilities 78,312 356,145
Minority interest 1,429 22,439
Shareholders’ equity:
Ordinary share of par value $0.01:
authorized 465,332,948 shares;
147,487,707 and 149,529,163 shares
issued and outstanding as of
December 31, 2005 and as of
September 30, 2006, respectively 1,475 1,495
Additional paid-in capital 364,043 483,815
Deferred compensation (12,716) --
Retained earnings 47,603 122,187
Accumulated other comprehensive
income 1,518 3,292
Total shareholders’ equity 401,923 610,789
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY 481,664 989,373
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED INCOME STATEMENT (*)
(In $’000, except share, per share, and per ADS data)
Suntech Group Suntech Group Suntech Group
Consolidated Consolidated Consolidated
2005 2006 2006
Q3 Q2 Q3
Unaudited Unaudited Unaudited
Net revenues 56,624 128,154 162,969
Total cost of revenues 39,728 92,034 125,742
Gross profit 16,896 36,120 37,227
Operating expenses
Selling expenses 1,017 1,547 2,889
General and administrative expenses 4,720 4,751 7,050
Research and development expenses 826 1,632 2,038
Income from operations 10,333 28,190 25,250
Interest expenses (570) (1,177) (1,869)
Interest income 25 3,030 4,119
Other income (expense) (161) (1,387) 1,707
Income before income taxes 9,627 28,656 29,207
Tax provision (859) (2,153) (1,617)
Net income after taxes before minority
interest and equity in earnings of
affiliates 8,768 26,503 27,590
Minority interest (5) (30) 301
Equity in (loss) earnings of
affiliates (103) 63 838
Net income 8,660 26,536 28,729
Deemed dividend on Series A
Redeemable convertible preferred
shares (972) -- --
Net income attributable to holders
Of ordinary shares 7,688 26,536 28,729
Net income per share and per ADS:
- Basic 0.09 0.18 0.19
- Diluted 0.07 0.17 0.19
Shares used in computation:
- Basic 90,000,000 148,240,382 148,324,230
- Diluted 128,342,026 156,012,742 154,930,224
(*) Purchase price allocation is preliminary and will be finalised by the
end of this year.
SUNTECH POWER HOLDINGS CO., LTD.
CONSDENSED INCOME STATEMENT OF REPORTABLE SEGMENTS
(In $’000)
MSK
Corporation
Suntech Excluding Effect
Group Effect of of Purchase
Excluding Purchase Price Suntech
MSK Price Allocation Group
Corporation Allocation Consolidated
2006 2006 2006 2006
Q3 Q3 Q3 Q3
Unaudited Unaudited Unaudited Unaudited
Net revenues 148,482 14,488 -- 162,970
Total cost of revenues 110,194 15,091 458 125,743
Gross profit 38,288 (603) (458) 37,227
Operating expenses
Selling expenses 2,509 380 -- 2,889
General and administrative
expenses 5,689 807 554 7,050
Research and development
expenses 2,004 34 -- 2,038
Income from operations 28,086 (1,824) (1,012) 25,250
Interest expenses (1,330) (508) (31) (1,869)
Interest income 4,055 64 -- 4,119
Other income 140 1,494 73 1,707
Income before income taxes 30,951 (774) (970) 29,207
Tax provision (2,029) (13) 425 (1,617)
Net income after taxes before
minority interest and equity
in earnings of affiliates 28,922 (787) (545) 27,590
Minority interest 40 261 -- 301
Equity in earnings
Of affiliates 838 -- -- 838
Net income 29,800 (526) (545) 28,729
Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures (*)
(in $ millions, except margin data, per share and per ADS data, unaudited)
Three months ended September 30, 2005
Suntech
Suntech Share- Effect of Group
Group based Purchase Non-
GAAP Compen Price GAAP
Results sation Allocation Results
Gross profit 16.9 0.4 -- 17.3
Gross margin 29.8% 30.6%
Income from operations 10.4 3.7 -- 14.1
Income from operations margin 18.2% 24.8%
Net income attributable to holders of
ordinary shares 8.7 3.7 -- 12.4
Net income margin 15.3% 21.9%
Net income per share and per ADS
-Basic 0.09 0.13
-Diluted 0.07 0.10
Three months ended June 30, 2006
Suntech
Suntech Share- Effect of Group
Group based Purchase Non-
GAAP Compen Price GAAP
Results sation Allocation Results
Gross profit 36.1 0.5 -- 36.6
Gross margin 28.2% 28.6%
Income from operations 28.2 2.8 -- 31.0
Income from operations margin 22.0% 24.2%
Net income attributable to holders of
ordinary shares 26.5 2.8 -- 29.3
Net income margin 20.4% 22.9%
Net income per share and per ADS
-Basic 0.18 0.20
-Diluted 0.17 0.19
Three months ended September 30, 2006
Suntech
Effect Group
Of Suntech Excluding
Suntech Share- Purchase Group
Group based Price Non- Non-
GAAP Compen Alloc GAAP MSK GAAP
Results sation ation Results Results Results
Gross profit 37.2 0.3 0.5 38.0 0.6 38.6
Gross margin 22.8% 23.3% 26.0%
Income from operations 25.3 3.5 1.0 29.8 1.8 31.6
Income from operations
margin 15.5% 18.3% 21.3%
Net income attributable to
Holders of ordinary shares 28.7 3.5 0.6 32.8 0.5 33.3
Net income margin 17.6% 20.1% 22.4%
Net income per share and
per ADS
-Basic 0.19 0.22 0.22
-Diluted 0.19 0.21 0.22
(*) The adjustment is for share-based compensation and amortization
expenses incurred from purchase price allocation related to the
acquisition of MSK Corporation.