China Sunergy Lowers Costs, Guides Q2 Higher

China Sunergy Co. (NYSE:CSUN) sold 22% of its shipments to Italy, with European countries dominating the customer list; however, shipments to Australia were at 18%, and on the list of destinations Bulgaria was at 14%, beating Germany

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China Sunergy’s (CSUN) quarterly revenue was only at $68.5M, a sequential decrease of 38% from Q4, 2011, and a 59% decrease from Q1, 2011. Total shipments for the period were 79.9MW, of which 75.5MW were modules, an ASP average of $0.86 per watt. Sunergy sold its modules two cents higher than Renesola (SOL) and around three cents lower than Canadian Solar (CSIQ). Shipments were lower sequentially by 31% and 19% lower in comparison to Q1, 2011.

The company managed to improve its processing costs by a total of $0.06 per watt, down to $0.19 for cell processing, a $0.04 reduction, and to $0.25 per module, a $0.02 reduction.  This is a 12% overall drop in costs over Q4. Sunergy is a wafer purchaser and the company realized blended wafer costs at $0.31 per watt, an 18% reduction from Q4, 2011, for total all-in-costs of $0.75 per watt. Expectations for wafer pricing due to overcapacity are to be lower moving into Q2.

Financially, Sunergy is exiting the period with $233M in cash and cash equivalents, with similar borrowings levels to those of Q4, but increased accounts payables and amounts owned to third parties. The company also reduced the accounts receivables by around $27M. The company described positive net operating cash flow of $85M, three times the figure of results in Q4-2011, thanks to tighter management of finances, which included changes in turnover days for payables.

The company sold 22% of its shipments to Italy, with European countries dominating the customer list; however, shipments to Australia were at 18%, and on the list of destinations Bulgaria was at 14%, beating Germany.   Sunergy’s shipments to Bulgaria constitute 30% of that market, and that is a nearly 100% increase for Sunergy from 2011. The company expects its business to expand in Central and Western Europe.  Sunergy made a number of deals in Germany and France, including outsourcing arrangements.  In Asia, Sunergy participated in and sponsored the India Solar Summit, where CEO Stephen Cai was one of the speakers.  

Most interesting was the guidance for Q2 with expectations to essentially double the shipments to 145-155MW and see gross margins increase to 5%. Sunergy upheld its full-year guidance for module shipments in area of 500 to 550MW.  The ASP for Q2 is expected at $0.76 per watt with costs per watt reduced further to $0.16 for cell and $0.23 for module processing.