Europe-Focused China Sunergy Posts Another Loss

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The Chinese solar cell and module manufacturer China Sunergy Co Ltd (NASDAQ:CSUN) has released its fourth-quarter results in which the company recorded its seventh consecutive loss amid European woes, one of its biggest markets. The business is now looking toward China and Japan for its revival.

In the final quarter of 2012, China Sunergy’s revenues dropped to $54.4M, a loss of 8.56% from $59.5M in the previous quarter, and  50.92% from $110.8M in the same quarter in 2011. Total shipments during the quarter stood at 78.4MW, of which 77.4MW were module shipments, which is significantly lower than its guidance of 90MW to 100MW. The three biggest markets for the business were all based in Europe from where Chinese companies are facing a potential threat of tariffs. Almost 29% of the total revenues came from Germany, 12.3% from Italy and 11.2% from France. Together, the three represent more than half of the total revenues.

Although the cost of goods sold decreased by 4.53% sequentially and by 49% year-over-year, while conversion costs for cells and modules improved to $0.15 per watt (down 11.8% sequentially) and $0.20 per watt (down 13% sequentially), these improvements could not offset the greater decline of revenues and as a result, the business swung to a gross loss of $2.03M from gross profits of $392,000 and $239,000 in Q3-2012 and Q4-2011, respectively. The gross loss also came from the continuous decline of average selling prices (ASP), which stood at $0.64 per watt, down 9.9% from the previous quarter. The current losses also include a bad debt provision of $26.2M, which was $12.3M in the previous quarter and $9.4M in Q4-2011. Besides this, China Sunergy also incurred tax expenses of $24.4M in Q4-2012, as opposed to tax benefits of $2.0M and $5.3M in Q3-2012 and Q4-2011, respectively. All of this translated into a net loss of $70.52M, rising from a loss $23.2M in the previous quarter and a loss of $49.6M in Q4-2011.

In the current quarter, the business has signed an agreement with the Malaysia-based Pekat Solar Sdn Bhd, thus paving way for the entry of China Sunergy into one of the biggest markets of Asia Pacific. China Sunergy made total shipments of 343kW to the country in February.

In Q1-2013, China Sunergy is expecting to touch shipments of 100MW to 110MW while gross margins are expected to remain stable from Q4-2012 levels. However, the industry outlook isn’t very bright. Mr. Stephen Cai, CEO of China Sunergy, said in the press release, “In early 2013, we saw the overall global market began to rationalize in terms of supply and demand as well as pricing. Also, we witnessed that selective markets such as China and Japan are improving, and as such we will continue to target opportunities in these growing markets while diligently managing our cash position. However, the oversupply in the global solar market will likely persist through the year."