Suntech Power Holdings Co., Ltd. (NYSE: STP) today released preliminary financial results for 4Q08 that show how the company has restructured its balance sheet in the tough economic environment.
Suntech expects total net revenues to be in the range of $405 million to $420 million, above previously issued guidance of revenues in the range of $345 million to $360 million. Full year 2008 total net revenues are expected to be in the range of $1.91 billion to $1.93 billion and full year 2008 PV product shipments are expected to be in the range of 493MW to 496MW.
However, as a result of the rapid decline in silicon prices in 4Q, Suntech expects to make an inventory provision in the range of $46 million to $58 million, which would have a negative impact to the gross margin of 11% to 14%. 4Q08 consolidated GAAP gross margin is expected to be in the range of -1% to 2%.
During the fourth quarter of 2008, Suntech conducted open market repurchases of Suntech’s 0.25% Convertible Senior Notes due 2012. Through December 31, 2008, Suntech re-purchased $93.8 million aggregate principal amount of the Convertible Senior Notes for a total cash consideration of $61.0 million. As a result, Suntech said it realized a net gain of approximately $30 million.
Suntech may from time to time seek to make additional repurchases of its Convertible Senior Notes.
The Company also announced that it had reduced the workforce by
approximately 800 employees as a result of ongoing performance
evaluation in 4Q08. In addition, Suntech suspended the hiring of a
further 2,000 new staff in line with the Company’s decision to maintain
production capacity at 1GW as a result of the difficult economic
environment.
Due to the rapid decline in silicon prices and difficult financing environment, Suntech expects to incur an expense related to the impairment of Suntech’s investments in Nitol Solar and Hoku Materials. The total value of the investment impairment is expected to be in the range of approximately $49 million to $52 million.
As of December 31, 2008, Suntech’s cash and cash equivalents balance was approximately $508 million, which is approximately $113 million higher than the cash and cash equivalents balance at the end of 3Q08. Cash and cash equivalents increased primarily due to the liquidation of some short term investments and the accelerated collection of some Value Added Tax Recoverable.
Amy Zhang, Suntech’s Chief Financial Officer, said, "The prudent restructuring of our balance sheet enabled us to simultaneously reduce our Convertible Senior Notes commitment and increase our cash balance during the fourth quarter. With our relatively strong financial status, we believe we are well positioned to weather the global economic downturn and capitalize on the long term growth potential of the solar industry."
Suntech will consider further expansion and hiring when market conditions improve. Suntech’s headcount as of December 31, 2008 was 9,070.
"We are pleased to have exceeded our revised revenue and shipment
guidance for the 4Q and full year 2008," said Dr. Zhengrong Shi,
Suntech’s Chairman and CEO. "While the weakening macro-economic
environment and limited availability of credit has led to rapid changes
in market conditions and reduced visibility, we believe that there is
relatively strong underlying demand for Suntech products."
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