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Suntech Power Holdings Co. Ltd. Q1 2010 Earnings Call Transcript

Suntech Power Holdings Co. Ltd. Q1 2010 Earnings Call Transcript

Suntech Power Holdings Co. Ltd. (STP)

Q1 2010 Earnings Call

June 3, 2010 8:00 a.m. ET

Executives

Rory Macpherson - Director, IR

Zhengrong Shi - Chairman & CEO

Steven Chan - President of America and CSO

Stuart Wenham - CTO

Amy Zhang - CFO

Ian Tu - Senior Financial Analyst

Analysts

Burt Chao - Simmons Incorporated

Vishal Shah - Barclays Capital

Rob Stone - Cowen & Company

Sanjay Shrestha - Lazard

Nitin Kumar - Nomura Singapore

Edwin Mok - Needham & Company

Gary Hsueh - Oppenheimer & Company

Pranab Sarmah - Daiwa Capital Markets

Sunil Gupta - Morgan Stanley

Dan Ries - Collins Stewart

Gordon Johnson - Hapoalim

Sam Dubinsky - Wells Fargo

Pavel Molchanov - Raymond James

TheStreet Recommends

Paul Leming - Soleil Securities

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the first quarter 2010 Suntech Power earnings conference call. (Operator Instructions)

I would now like to turn the call over to Mr. Rory Macpherson, Investor Relations Director. Please proceed.

Rory Macpherson

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Hello, everyone and welcome to Suntech's first quarter 2010 earnings conference call. My name is Rory Macpherson, Suntech's Director of Investor Relations. From Suntech, we have Dr. Zhengrong Shi, Suntech's Chairman and CEO; Steven Chan, President of America and Chief Strategy Officer; Dr. Stuart Wenham, Suntech's Chief Technology Officer; Amy Zhang, our Chief Financial Officer. Also, Senior Financial Analyst, Ian Tu, will participate in the Q&A following Dr. Shi's closing remarks.

Before we continue, during the conference call, we will make certain forward-looking statements in an effort to assist you in understanding the company and its results. The forward-looking statements will be made under the Safe Harbor provisions of the U.S. Private Securities Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, Suntech's future results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our earnings release issued today and our SEC filings. Suntech does not undertake any obligation to update any forward-looking statements except as required under applicable law.

To enhance our presentation of information and data during this conference call, we have provided a set of PowerPoint slides which we will refer to as management delivers their prepared remarks. This presentation is posted on the main page of the Investors section of our website.

As a reminder, this conference call is being recorded and a webcast replay will also be available on the Investor Relations section of Suntech's website after this call. Please make note that all figures mentioned during the conference call are in U.S. dollars.

I will now turn the call over to Suntech's Chairman and CEO, Dr. Zhengrong Shi.

Zhengrong Shi

Hello and thank you for joining us.

Please turn to slide 3. We are pleased to deliver top-line revenue of $588 million in the first quarter of 2010, slightly higher than the revenue in the fourth quarter of 2009 and over 86% higher than the first quarter of 2009. This was driven by a 11% sequential increase in Pluto shipments, as we added incremental capacity to work our middle-year target of 1.4 gigawatts. Blended gross margin was 19.5% at the high end of guidance. Earnings came in at $20.7 million or $0.11 per diluted ADS.

Today, I would like to start by giving an overview of the first quarter as well as our expectations for market demand in Europe and Asia over the next few quarters. I will then discuss our strategy that we are implementing to improve our operations and the best solar customers in different regions. Steven will discuss recent developments in North America. Stuart will give you an update on our technology, and Amy will provide color on our financial results.

As you can see on slide 4, during the first quarter, we reached another important milestone for the company as we shipped over 10 million solar panels. Solar energy generated from Suntech's panels alone is enough to power over 1 million households, which is a huge contribution towards gridding of our energy supply, although it is small when compared to the task ahead.

For solar to truly make a difference, we need to expand the industry several times over and develop channel to countries all over the world. We are confident that Suntech has the strategy in place to maintain our leadership position and to drive this energy evolution.

The current level of demand driven by productive national solar policies is an encouraging sign that governments recognize the need to develop alternative energy sources. With attractive investment return in solar projects in most markets, we expect the strong demand to continue throughout the rest of 2010.

Turning to slide 5, our extensive European value-added reseller network (audio gap) for Suntech, with all of our panels across Europe having achieved significant growth in the first quarter. The outlook of our VAR clients for the second quarter and the rest of the year remains very robust. This is partly due to the fact that VARs serve (more go-to) markets, giving them the flexibility to shift emphasis with changed market condition.

Furthermore, Suntech continues to build strong relationships and the dividend for blue-chip clients within the utility and the project sector. These companies have a combination of excellent track records and experience in energy infrastructure business, access to both existing and emerging markets, as well as carrying a secure, strong financial base and the global footprint.

One of these clients is Solarhybrid that recently connected the 24.5 megawatt Finnow Tower project at the former military airbase in Germany that we have been working for over a year. This project employed over 90,000 Suntech panels and is one of the five biggest PV projects in Germany.

Sales to Europe represented 68% of the Pluto shipments compared to 73% in the fourth quarter of 2009. This is reflective of the trend towards global certification of solar market, driven primarily by a rapidly increasing demand in North America and Asia. This is a welcome trend, particularly in light of fast and a dramatic depreciation of the euro against other major currencies.

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