Now Gareth will walk us through the details of the 2010 fourth quarter.Gareth Kung Thanks Paul, good morning everyone. As you can see from our results, we recorded another solid quarter for the company. If you’re following the presentation file, slide three through seven cover my comments. Before covering the highlights, I would like to briefly comment on the situation, resulting in a 4.1 MW and 5.4 million euro shortfall in shipments and revenue respectively from our preannouncement dated February 24. Subsequent to our preannouncement on February 24, we received notification from a single customer that they were canceling an order. These modules were shipped during the fourth quarter. Due to the rapidly changing regulatory conditions in Europe, the customer notified us they could not complete the sales contract. The goods will be sold to other customers in a later period. Slide 3 and 4 outline the financial highlights of the fourth quarter and full year 2010. We remain sold out during the fourth quarter, and we are able to ship volumes a little higher than projected, as we bought more externally sourced, and managed our downtime from selective and metered [ph] conversion quite well. Revenues for the fourth quarter fell slightly from the prior quarter, as our volume was slightly less due to the order cancellation, and the mix of module processing business was higher. Revenues for the quarter reached 220.1 million US, and ASPs increased from $1.79, as compared to $1.75 in the prior quarter. Total shipments, including module processing services, reached 218.8 megawatts in the fourth quarter. Module processing services accounted for approximately 8% of total revenue for the quarter. As illustrated in the pie chart on slide five, you can see that we made continued progress in diversifying our business away from Germany to other new large growth markets such as Italy, China and US. Peter will have additional comments on this topic later on. Based on shipment data and excluding module processing services, for the fourth quarter of 2010 Germany declined from 53% to 25% of shipments compared to the third quarter. Italy increased from 15% to 19%, China from 5% to 13%, and US accounted for 11% of shipments, an increase from 7% in the prior quarter. Other important markets were Australia at 9%, and France and the Netherlands at 7% of shipment each.
Gross profit totaled 64.9 million US for the fourth quarter, and was down 13.6% from the third quarter, due primarily to lower gross margin of 20.3%, as compared to 22.7% of the prior quarter.Slide 6 highlights our cost structure. Raw materials along with the value chain remained relatively tight, and increasingly more expensive. This explains the increase in the blended COGS per watt, excluding module processing services, from $1.35 to $1.35 for the quarter just reported. The blended COGS takes into account the production cost, both silicon and non-silicon, using internal wafers, sales, and the cost of externally sourced wafer and cells, plus freight costs. For modules made with internal wafers and cells, we experienced an increase in the production cost per watt to $1.20 from $1.16 in the third quarter, largely due to higher polysilicon costs. Operating profit totaled 44.9 million US, with operating margins falling in the fourth quarter to 14% from 18% recorded during the third quarter. This is largely the result of higher selling and R&D expenses for the quarter. Interest expense remained relatively flat at 6.2 million. Note that our tax rate was higher in the fourth quarter at 28.6%. Let me spend a few minutes explaining the underlying reason. In accordance with the People's Republic of China income tax laws, an enterprise awarded with a High and New Technology Enterprise status may be eligible for a reduced tax rate of 15% instead of 25% income tax rate, subject to an annual assessment to whether the company continued to qualify for the lower tax status. Read the rest of this transcript for free on seekingalpha.com