June 3, 2010

Wuxi, China: Suntech Reports First Quarter 2010 Financial Results

Suntech Power has announced financial results for its first fiscal quarter ended March 31, 2010.

Total net revenues for the first quarter of 2010 were $588.0 million, a slight increase of 0.8% from $583.6 million in the fourth quarter of 2009 and an increase of 86.3% from $315.7 million in the first quarter of 2009.

For the first quarter of 2010, consolidated gross profit was $114.5 million and gross margin was 19.5% compared to consolidated gross profit of $138.7 million and gross margin of 23.8% in the fourth quarter of 2009. The sequential gross margin decline was primarily due to a lower average sales price as a result of the substantial depreciation of the Euro versus the U.S. Dollar.

Operating expenses for the first quarter of 2010 decreased to $51.0 million compared to $51.7 million in the fourth quarter of 2009.

Income from operations was $63.5 million for the first quarter of 2010 compared to $87.0 million in the fourth quarter of 2009.

Net interest expense declined to $22.6 million in the first quarter of 2010 compared to net interest expense of $24.2 million in the fourth quarter of 2009. Net interest expense in the first quarter of 2010 included $8.6 million in non-cash expenses of which $7.3 million was related to the adoption of FASB Codification 470-20-65, Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion. This compares to $12.7 million in non-cash net interest expense in the fourth quarter of 2009. The decrease in interest expenses was primarily due to the repurchase of the significant majority of the outstanding 0.25% Convertible Senior Notes due 2012, which had a put option in February 2010.

Inventory was $314.1 million as of March 31, 2010, compared with $280.1 million as of December 31, 2009. The increase in inventory was in line with the growth of production and shipments.

Accounts payable totaled $384.3 million as of March 31, 2010, compared with $264.2 million as of December 31, 2009. The increase in accounts payable was primarily due to extended credit terms from suppliers.

Foreign currency exchange loss was $24.5 million in the first quarter of 2010 compared to $13.2 million in the fourth quarter of 2009. The foreign currency loss in the first quarter was primarily related to the substantial depreciation of the Euro versus the US Dollar.

"We are pleased to announce 11% sequential growth in shipments for the first quarter of 2010," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "To meet strong global demand for Suntech's premium solar products, which we expect will continue through the rest of 2010, we maximized the utilization of our facilities and added an incremental 100MW of PV cell and module capacity during the quarter. We also maintained our focus on enhancing our regional service teams to support our growth."

"We are pleased about the solar growth trends that we are seeing across all geographies. Europe's commitment to achieving 20% renewable energy generation by 2020 is proving to be the foundation for long-term stable growth. Our North American dealer network and utility initiatives should enable us to triple our sales to that region in 2010. And, we are continuing to build our presence in emerging markets. In fact, Asia, Africa and the Middle East represented close to 21% of our sales in the first quarter, and we continued to diversify our geographic sales mix globally. Clear customer recognition of Suntech's superior track record and highly bankable products is a key driver of our demand in all of these markets."

In the second quarter of 2010, Suntech expects single digit percentage growth in shipments sequentially. Consolidated gross margin in the second quarter of 2010 is expected to be in the high teens, which is based on an assumed exchange rate of 1.23USD to the Euro. Due to strong demand, Suntech has increased its 2010 shipment target from 1.25GW to more than 1.3GW, which is 85% higher than 2009 shipments.

Suntech is on track to expand PV cell production capacity to 1.4GW by the end of the second quarter 2010 of which 450MW will be Pluto-enabled. To achieve 1.4GW capacity, Suntech expects capital expenditures of approximately $200 million.

Further details about: Suntech Power

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