Friday, March 28, 2008
Leshan Electric Power Tianwei Polysilicon Project broke ground on March 28th 2008
March 28th 2008 Leshan Electric Power Tianwei 3,000 ton Polysilicon Project broke ground, the total investment is 2.2 billion RMB. It will take about 24 months to complete this project.
Solarfun Reports 2007 Full-Year and Fourth Quarter Results
SHANGHAI, China, Mar 27, 2008 (BUSINESS WIRE) -- Solarfun Power Holdings Co., Ltd. ("Solarfun" or "the Company") (NASDAQ:SOLF), a vertically integrated manufacturer of silicon ingots and photovoltaic cells and modules in China, today reported its unaudited financial results for the fourth quarter and the year ended December 31, 2007.
2007 ANNUAL RESULTS
* Net revenue was RMB 2.395 billion (US$ 328.3 million), up 280% from 2006
* Total PV module shipments as reported were 78.4 MW, up 310% from 19.1 MW in 2006 (Note: Full year shipments were actually 80.6 MW. However, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q 07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.)
* The average selling price was $3.74 for 2007
* Gross profit reached RMB 397.8 million (US$54.5 million), rising over 116% from 2006
* Gross margins reached 16.6% for the full year 2007, showing continuing improvement beginning in 2Q07
* Net income was RMB 148.0 million (US$20.3 million), rising 40% from 2006
* Earnings per basic ADS were RMB 3.081 (US$ 0.42), down from RMB 4.76(US$0.60) in 2006. There was a 132% increase in basic shares outstanding as a result of the Company's initial public offering in December 2006
Mr. Yonghua Lu, Chairman of Solarfun commented, "The year 2007 was a period of significant progress for the Company and I believe established a foundation for further growth in the burgeoning PV industry. Our financial results met our expectations and showed progress in key measures such as revenue and profit growth. They are also a reflection of our increased scale, vertical integration, broadened customer base, and successful ability to secure supply of key raw materials to meet our growth objectives."
"Specifically, we expanded manufacturing capacity to a year-end level of 240 MW, acquired and began production of ingots at our 52 %-owned ingot manufacturing facility - Jiangsu Yangguang Solar Technology Co. Ltd., increased our customer base more than six-fold, and signed five significant supply contracts totaling $1.4 billion, four of which were with suppliers outside of China."
"We also achieved a few other significant milestones over the past year. We significantly strengthened our senior management team with a group of executives with relevant industry experience and global expertise and improved our internal management structure and discipline to keep pace with our rapid growth. Additionally, we believe that the increased share ownership of Good Energies provides us with access to significant additional industry expertise and will contribute to the long-term success of our business," concluded Chairman Lu.
FOURTH QUARTER 2007 HIGHLIGHTS
* Net revenue was RMB 987.8 million (US$ 135.4 million), a 304% increase over 4Q06 and a 31% increase from the 3Q07
* PV module shipments as reported totaled 28.1 MW, which was nearly three times higher than 4Q06 and continued successive quarter-over-quarter shipment increases. Module shipments were 27.3 MW in 3Q07 (Note: 4Q07 shipments were actually 30 MW. However, as mentioned above, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.)
* The average selling price ("ASP") was $3.85, which rose from $3.66 in 3Q07
* Gross profit rose 45.3 % from 3Q07 to RMB 174.5 million (US$ 23.9 million)
* Gross margin reached 17.7%, the third consecutive quarter-over-quarter increase.
* Operating expenses as a percent of sales were 8.3%, which was a decrease from 12.4% in 4Q06, but a rise from 7.0% in 3Q07.
* Exchange losses of RMB 3.3 million (US $ 0.5 million) were up from RMB 2.2 million in 4Q06 and RMB 0.70 million in 3Q07.
* Net income was RMB 66.4 million (US$ 9.1 million), a rise of 101% over 4Q06.
* Earnings per basic ADS were RMB 1.38 (US$ 0.19), an increase of 4.2% from RMB 1.32 (US$ 0.18 in 3Q07.
Harold Hoskens, CEO of Solarfun, noted "The fourth quarter concluded an outstanding year for the Company with sequential momentum in shipments, ASP's and gross margins. We had a non-recurring trend of increased G&A expenses during the quarter, due largely to a ramp-up in our infrastructure costs, including the consolidation of Yangguang, legal expenses associated with becoming a public company, including SOX compliance and audit fees, as well as a larger management infrastructure and non-cash items such as stock-based compensation."
FINANCIAL POSITION
As of December 31, 2007 the Company had cash and cash equivalents of RMB 273 million (US$ 37.4 million) and working capital of RMB 959.8 million (US$ 131.6 million). Total bank borrowings were RMB 980 million (US$ 134.3 million). Note that on January 29, 2008 the Company placed US $172.5 million of Convertible Senior Notes due 2018.
Net accounts receivable decreased to RMB 430.69 million (US$ 59 million) due to continued focus on cash management practices. Days sales outstanding (DSO's) improved to 51 days from 62 days in 3Q07.
MANAGEMENT CHANGES
On January 3, 2008 the Company announced the appointment of Harold Hoskens as CEO beginning on February 25, 2008. Mr. Hoskens joins Solarfun from TPO Displays Corporation, Chunan, Taiwan, where he recently served as Deputy CEO. Harold began his career with Royal Philips in 1988, and moved to the Royal Philips' Mobile Display Systems division in Hong Kong, serving as CEO beginning in 2003.
Mr Lu continues to serve as Chairman and will remain actively involved in areas of strategic importance to Solarfun.
BUSINESS OUTLOOK
FIRST QUARTER 2008
Based on current operating trends and other conditions, Solarfun is providing first quarter 2008 and full year 2008 guidance as follows:
* Although the first quarter is not yet concluded, management believes that shipments for 1Q08 will continue to improve. Volumes are expected to be at least 35 MW. ASP's should remain strong and relatively constant.
* The Company was affected by the winter weather in China in February and continues to be affected by the relatively tight supply and increasing costs of polysilicon. Therefore, management would expect these factors to have some downward pressure on gross margins for the first quarter of 2008.
FULL YEAR 2008
* Based on existing sales and pricing, contracted supply agreements, and other expected business and industry conditions, management provided the following guidance for the full year 2008: The Company has sales contracts totaling over 160 MW (a level that is over double last year's 78.4MW) and expects prices to be flat or slightly higher from the $3.74 recorded for the full year 2007. Solarfun has secured supply of polysilicon on a contracted basis slightly exceeding its contracted sales volume.
* Capacity will increase from 240 MW to 360 MW by mid-year 2008.
* Management has seen a continued tightness of polysilicon supply and escalating prices on the spot market. With these conditions expected to exist throughout most or all of 2008, management believes some continued negative impact on gross margins from the level achieved in 2007.
CEO Harold Hoskens concluded, "2008 is a mix of opportunities and challenges. We believe Solarfun is well-positioned to continue to gain market share, expand scale, improve our manufacturing efficiencies, penetrate new markets, and develop and expand our supply chain in both China and elsewhere. Our management team, Board of Directors, and key shareholders are determined and committed to building shareholder value over the long term "
2007 ANNUAL RESULTS
* Net revenue was RMB 2.395 billion (US$ 328.3 million), up 280% from 2006
* Total PV module shipments as reported were 78.4 MW, up 310% from 19.1 MW in 2006 (Note: Full year shipments were actually 80.6 MW. However, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q 07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.)
* The average selling price was $3.74 for 2007
* Gross profit reached RMB 397.8 million (US$54.5 million), rising over 116% from 2006
* Gross margins reached 16.6% for the full year 2007, showing continuing improvement beginning in 2Q07
* Net income was RMB 148.0 million (US$20.3 million), rising 40% from 2006
* Earnings per basic ADS were RMB 3.081 (US$ 0.42), down from RMB 4.76(US$0.60) in 2006. There was a 132% increase in basic shares outstanding as a result of the Company's initial public offering in December 2006
Mr. Yonghua Lu, Chairman of Solarfun commented, "The year 2007 was a period of significant progress for the Company and I believe established a foundation for further growth in the burgeoning PV industry. Our financial results met our expectations and showed progress in key measures such as revenue and profit growth. They are also a reflection of our increased scale, vertical integration, broadened customer base, and successful ability to secure supply of key raw materials to meet our growth objectives."
"Specifically, we expanded manufacturing capacity to a year-end level of 240 MW, acquired and began production of ingots at our 52 %-owned ingot manufacturing facility - Jiangsu Yangguang Solar Technology Co. Ltd., increased our customer base more than six-fold, and signed five significant supply contracts totaling $1.4 billion, four of which were with suppliers outside of China."
"We also achieved a few other significant milestones over the past year. We significantly strengthened our senior management team with a group of executives with relevant industry experience and global expertise and improved our internal management structure and discipline to keep pace with our rapid growth. Additionally, we believe that the increased share ownership of Good Energies provides us with access to significant additional industry expertise and will contribute to the long-term success of our business," concluded Chairman Lu.
FOURTH QUARTER 2007 HIGHLIGHTS
* Net revenue was RMB 987.8 million (US$ 135.4 million), a 304% increase over 4Q06 and a 31% increase from the 3Q07
* PV module shipments as reported totaled 28.1 MW, which was nearly three times higher than 4Q06 and continued successive quarter-over-quarter shipment increases. Module shipments were 27.3 MW in 3Q07 (Note: 4Q07 shipments were actually 30 MW. However, as mentioned above, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.)
* The average selling price ("ASP") was $3.85, which rose from $3.66 in 3Q07
* Gross profit rose 45.3 % from 3Q07 to RMB 174.5 million (US$ 23.9 million)
* Gross margin reached 17.7%, the third consecutive quarter-over-quarter increase.
* Operating expenses as a percent of sales were 8.3%, which was a decrease from 12.4% in 4Q06, but a rise from 7.0% in 3Q07.
* Exchange losses of RMB 3.3 million (US $ 0.5 million) were up from RMB 2.2 million in 4Q06 and RMB 0.70 million in 3Q07.
* Net income was RMB 66.4 million (US$ 9.1 million), a rise of 101% over 4Q06.
* Earnings per basic ADS were RMB 1.38 (US$ 0.19), an increase of 4.2% from RMB 1.32 (US$ 0.18 in 3Q07.
Harold Hoskens, CEO of Solarfun, noted "The fourth quarter concluded an outstanding year for the Company with sequential momentum in shipments, ASP's and gross margins. We had a non-recurring trend of increased G&A expenses during the quarter, due largely to a ramp-up in our infrastructure costs, including the consolidation of Yangguang, legal expenses associated with becoming a public company, including SOX compliance and audit fees, as well as a larger management infrastructure and non-cash items such as stock-based compensation."
FINANCIAL POSITION
As of December 31, 2007 the Company had cash and cash equivalents of RMB 273 million (US$ 37.4 million) and working capital of RMB 959.8 million (US$ 131.6 million). Total bank borrowings were RMB 980 million (US$ 134.3 million). Note that on January 29, 2008 the Company placed US $172.5 million of Convertible Senior Notes due 2018.
Net accounts receivable decreased to RMB 430.69 million (US$ 59 million) due to continued focus on cash management practices. Days sales outstanding (DSO's) improved to 51 days from 62 days in 3Q07.
MANAGEMENT CHANGES
On January 3, 2008 the Company announced the appointment of Harold Hoskens as CEO beginning on February 25, 2008. Mr. Hoskens joins Solarfun from TPO Displays Corporation, Chunan, Taiwan, where he recently served as Deputy CEO. Harold began his career with Royal Philips in 1988, and moved to the Royal Philips' Mobile Display Systems division in Hong Kong, serving as CEO beginning in 2003.
Mr Lu continues to serve as Chairman and will remain actively involved in areas of strategic importance to Solarfun.
BUSINESS OUTLOOK
FIRST QUARTER 2008
Based on current operating trends and other conditions, Solarfun is providing first quarter 2008 and full year 2008 guidance as follows:
* Although the first quarter is not yet concluded, management believes that shipments for 1Q08 will continue to improve. Volumes are expected to be at least 35 MW. ASP's should remain strong and relatively constant.
* The Company was affected by the winter weather in China in February and continues to be affected by the relatively tight supply and increasing costs of polysilicon. Therefore, management would expect these factors to have some downward pressure on gross margins for the first quarter of 2008.
FULL YEAR 2008
* Based on existing sales and pricing, contracted supply agreements, and other expected business and industry conditions, management provided the following guidance for the full year 2008: The Company has sales contracts totaling over 160 MW (a level that is over double last year's 78.4MW) and expects prices to be flat or slightly higher from the $3.74 recorded for the full year 2007. Solarfun has secured supply of polysilicon on a contracted basis slightly exceeding its contracted sales volume.
* Capacity will increase from 240 MW to 360 MW by mid-year 2008.
* Management has seen a continued tightness of polysilicon supply and escalating prices on the spot market. With these conditions expected to exist throughout most or all of 2008, management believes some continued negative impact on gross margins from the level achieved in 2007.
CEO Harold Hoskens concluded, "2008 is a mix of opportunities and challenges. We believe Solarfun is well-positioned to continue to gain market share, expand scale, improve our manufacturing efficiencies, penetrate new markets, and develop and expand our supply chain in both China and elsewhere. Our management team, Board of Directors, and key shareholders are determined and committed to building shareholder value over the long term "
Huaneng to boost renewable energy
03/26/2008 15:28 EST (0148 GMT)
China Huaneng Group, the country's largest power producer, said it will boost the development of new energy such as wind and solar power, in line with the government's thrust for renewable energy.
The company has accelerated its development of wind power in Guangdong, Jilin, Shandong, Inner Mongolia and Hainan, said Huaneng President Li Xiaopeng.
"The company's wind power projects in operation or under construction now have a total capacity of 1,347 mW," said Li. "We are also developing solar power projects in the Northwest and biomass power projects in Jilin province in Northeast China."
Besides wind, solar and biomass power, the company will also increase its capacity of hydropower, thermal and nuclear power, said Li.
Last year, the company's Yuhuan power plant in Zhejiang started commercial operation. With four 1,000 mW ultra supercritical units, it is one of the world's most energy-efficient and environmentally friendly power generating projects in the world.
The company is also developing China's first nuclear plant using high-temperature, gas-cooled technology. The 200 mW Shidaowan plant in Shandong involves a total investment of 3 billion yuan.
Huaneng has launched the GreenGen project, the first near-zero-emission integrated gasification combined cycle power plant in China. Located in Tianjin, the project has a capacity of 250 mW. Last year, US coal company Peabody became an equity partner in the project.
Along with giving a push to new energy, Huaneng will accelerate closures of small-scale power generating units. In the first two months of this year, the company has closed down power units with a total capacity of 100 mW. By the end of 2007, the company closed down a number of small-scale power units with a total capacity of 2,391 mW.
In 2007, the company's sulfur dioxide emissions were reduced by 8.88 percent. By the end of last year, 57 percent of the company's power units had been installed with de-sulfur equipments.
Last year, the company signed an agreement with the Commonwealth Scientific and Industrial Research Organisation, Australia's national science agency, to develop clean-coal power generation and carbon capturing and storage technologies.
The collaboration includes capturing power plants' flue gases, coal gasification, coal gas purification and other generation technologies. It will also include a post-combustion capture pilot project at Huaneng Beijing thermal power plant. Post-combustion capture traps carbon dioxide from flue gases of power plants.
Source: China Daily
China Huaneng Group, the country's largest power producer, said it will boost the development of new energy such as wind and solar power, in line with the government's thrust for renewable energy.
The company has accelerated its development of wind power in Guangdong, Jilin, Shandong, Inner Mongolia and Hainan, said Huaneng President Li Xiaopeng.
"The company's wind power projects in operation or under construction now have a total capacity of 1,347 mW," said Li. "We are also developing solar power projects in the Northwest and biomass power projects in Jilin province in Northeast China."
Besides wind, solar and biomass power, the company will also increase its capacity of hydropower, thermal and nuclear power, said Li.
Last year, the company's Yuhuan power plant in Zhejiang started commercial operation. With four 1,000 mW ultra supercritical units, it is one of the world's most energy-efficient and environmentally friendly power generating projects in the world.
The company is also developing China's first nuclear plant using high-temperature, gas-cooled technology. The 200 mW Shidaowan plant in Shandong involves a total investment of 3 billion yuan.
Huaneng has launched the GreenGen project, the first near-zero-emission integrated gasification combined cycle power plant in China. Located in Tianjin, the project has a capacity of 250 mW. Last year, US coal company Peabody became an equity partner in the project.
Along with giving a push to new energy, Huaneng will accelerate closures of small-scale power generating units. In the first two months of this year, the company has closed down power units with a total capacity of 100 mW. By the end of 2007, the company closed down a number of small-scale power units with a total capacity of 2,391 mW.
In 2007, the company's sulfur dioxide emissions were reduced by 8.88 percent. By the end of last year, 57 percent of the company's power units had been installed with de-sulfur equipments.
Last year, the company signed an agreement with the Commonwealth Scientific and Industrial Research Organisation, Australia's national science agency, to develop clean-coal power generation and carbon capturing and storage technologies.
The collaboration includes capturing power plants' flue gases, coal gasification, coal gas purification and other generation technologies. It will also include a post-combustion capture pilot project at Huaneng Beijing thermal power plant. Post-combustion capture traps carbon dioxide from flue gases of power plants.
Source: China Daily
China Sunergy Announces Financial Results for the Fourth Quarter and Full Year 2007
NANJING, China, March 26 --China Sunergy Co., Ltd. (Nasdaq: CSUN), ("China Sunergy" or the "Company") a specialized solar cell manufacturer based in Nanjing, China, announced today its financial results for the fourth quarter and full year 2007.
Fourth Quarter Financial Results
-- Revenues were US$71.5 million, representing a 1.1% increase compared to the same period last year, and a 46.0% increase compared to the previous quarter; core cell revenue increased 46.1% sequentially from US$46.3 million to US$67.7 million.
-- Gross profit and gross margin were US$4.6 million and 6.4%, respectively compared to US$1.0 million and 2.1% during the third quarter of 2007.
-- Quarterly net loss was US$2.3 million, compared to a net loss of US$4.4 million in the third quarter and a US$10.5 million net profit for the fourth quarter of 2006.
-- GAAP basic and diluted net loss attributable to holders of ordinary shares was US$0.06 per ADS in the fourth quarter compared to a net loss per ADS of US$0.11 in the third quarter 2007.
-- Quarterly production of 22.3 megawatts ("MW") of solar cells represented a 12.6% increase on a year-over-year basis and a 25.3% increase sequentially.
-- Shipments amounted to approximately 23.2 MW, representing an 8.9% increase year-over-year and a 39.8% increase sequentially.
Full Year Financial Results
-- Revenues were US$234.9 million, a 57.1% increase from US$149.5 million in 2006.
-- Gross profit of US$18.0 million, a decline from US$26.6 million in 2006, and gross margin of 7.7% compared to 17.8% in 2006.
-- Full year net loss was US$4.9 million, compared to net profit of US$11.8 million in 2006, mainly due to lower gross margins in 2007.
-- GAAP basic and diluted net loss attributable to holders of ordinary shares was $0.21 per ADS.
-- Full year production of 80.3 MW of solar cells represented a 67.6% increase compared to 47.9 MW in 2006.
-- Shipments amounted to approximately 74.0 MW, representing a 59.5% increase from 46.4MW in 2006.
Commenting on the quarter, Allen Wang, CEO of China Sunergy remarked: "During the quarter we began commercial production of our selective emitter cells and increased production levels beyond what we had guided for in November. At the same time we expanded our presence in Europe by signing noteworthy sales agreements and opening an office in Munich. I have been pleased by the response many of our customers have shown towards our high efficiency cells and believe that these products will help drive revenue growth in Europe's new solar markets."
Fourth Quarter and Recent Operational Highlights:
-- Commercial mass production of high-efficiency selective emitter cells ("SE") commenced in mid-November. A total of 2.4 MW was produced with 0.8MW shipped during the fourth quarter.
-- Average SE cell efficiency continued to improve from 16.5% in the third quarter to an average efficiency of 17.3% in the fourth quarter. A maximum conversion efficiency of 18.2% was achieved on pilot runs of selective emitter cells during November 2007.
-- The signing of the following agreements for 2008; a 30MW solar cell agreement with aleo solar, a 25MW sales agreement with Canadian Solar and a 10.2MW agreement with asola.
-- Revenue from overseas grew from 20.3% for the full-year 2006 to 35.7% for the full-year 2007.
-- In the quarter we began developing HP cells, a more efficient version of our current P-type cells. The limited pilot run of 0.3 MW in the fourth quarter achieved an average conversion efficiency rate of over 17%, higher than the 16.1% achieved with P-type cells during the same period. "During 2008 we will focus on improving margins and profitability by deriving a greater proportion of overall revenues from our high efficiency solar cell products," continued Mr. Wang. "We remain confident that as we expand production of our SE and HP products, margins can improve further during the coming year. Our confidence in achieving this objective is based on strong indications of customer preference for our high-efficiencycells."
Key Sales Agreements
During the quarter, the Company recently signed significant salescontracts with:
-- aleo solar AG ("aleo"), a leading German solar module manufacturer, to supply at least 30 MW of high quality silicon solar cells in 2008.
-- Canadian Solar Inc., a leading China-based module manufacturer, for a total volume of 25MW of solar cells for delivery in 2008.
-- asola, a reputable German module manufacturing company to supply a total volume of 10.2MW of solar cells during 2008.
Technological Developments
During the quarter the Company continued to make significant progress with the production of its high efficiency cell technology.
Average selective emitter efficiency continued to improve from 16.5% in the third quarter to 17.3% in the fourth quarter of 2007. A maximum conversion efficiency of 18.2% was achieved on pilot production runs during November 2007.
The Company is now enhancing its current P-type cell production facilities by converting existing lines to high-efficiency P-type (or "HP") lines. HP cells are a more efficient version of our standard P-type cells and achieve a higher conversion efficiency ratio as a result of an enhanced production process. HP cells of mono-crystalline 125 millimeter achieved anaverage conversion efficiency rate of over 17% on a 0.3 MW limited pilot run during the fourth quarter, and maximum conversion efficiency of 17.5%.
The development of the Company's patented N-type cells continues to move along smoothly. During 2008, China Sunergy intends to invest US$8 million in an R&D centre in Shanghai aimed at further developing N-type and other types of high efficiency cells. The center is expected to house 100 research employees. Construction of the center is scheduled to be completed by early 2009.
Fourth Quarter 2007 Financial and Business Review
Revenue, shipment and production
During the fourth quarter of 2007, revenues grew 1.1% on a year-over-year basis, and increased 46.0% compared to the previous quarter to US$71.5 million.
Sales from solar cells, polysilicon, and modules accounted for 94.7%, 1.0% and 4.3%, of total revenue respectively. Shipments, including 0.8MW for module sales, amounted to approximately 23.2 MW, compared to 21.3MW during the fourth quarter of 2006 and 16.6MW during the third quarter of 2007.
Revenue and Shipment Comparison between Q4 and Q3 2007
Q4 Q3
Value Value
Volume* (US$mm) Volume* (US$mm)
Core cell sales 22.4 67.7 16.2 46.3
Polysilicon sales 0.8 0.7 4.5 1.1
Module sales 0.8 3.1 0.4 1.5
* All volumes are expressed in MW except for Polysilicon sales expressed in metric tons.
During the fourth quarter the Company increased its quarter-on-quarter sales of core cell products by 46.1% as compared to the previous quarter. The percentage of overall cell sales in overseas markets declined in percentage terms from 47.7% to 40.6% compared to the previous quarter, particularly in Europe where sales declined from 42.7% to 35.0% sequentially even though in absolute terms cell sales to Europe increased from 6.7 MW to 7.6 MW sequentially.
In terms of MW volumes, mono-crystalline 125-millimeter cells accountedf or a proportion of overall production and cell sales at 57.1% and 57.5%(in terms of volume) respectively as we increased production and sale of multi- crystalline to cater for the increasing demands of European customers.
Gross profit, gross margin and Average Selling Price ("ASP")
Gross profit for the quarter was US$4.6 million, which led to a blended gross margin of 6.4%, up from 2.1% in the third quarter, as a result of the gross margin contribution from high efficiency cell products.
Margin Breakdown
Gross margin
Q4 Q3
Core cell sales 6.3% 1.5%
Polysilicon sales 12.2% 27.0%
Module sales 7.8% 0.8%
Blended 6.4% 2.1%
The sequential gross margin expansion on core cell sales from 1.5% to6.3% was mainly attributed to higher ASP as a result of a greater proportion of sales coming from high-efficiency cells.
Blended ASP for the fourth quarter rose from US$2.85 per watt in the previous quarter to US$3.02 per watt due to strong product demand and the strengthening of the Renminbi.
Wafer costs continued to account for a large portion of overall manufacturing costs. In the fourth quarter, wafer costs rose to US$2.54 per watt compared to US$2.45 per watt in the third quarter. Wafer costs per watt as a percentage of total production costs per watt increased from 89.2% in the third quarter to 90.1% in the fourth quarter. Other productioncosts, which mainly consisted of other raw materials, labor, depreciation and utilities, were US$0.28 per watt and largely the same as the first three quarters of this year.
SG&A and net income
Our SG&A expenses increased from US$4.2 million to US$5.3 million sequentially mainly due to an increase in professional expenses.
Due primarily to higher gross margin, the Company reduced its sequential operating loss to US$1.2 million. This compares to an operating profit of US$11.4 million and an operating loss of US$3.6 million for the fourth quarter 2006 and third quarter of 2007, respectively.
With higher gross margin, the Company reduced its sequential net lossfor the quarter to US$2.3 million.
Balance sheet
As of December 31, 2007, the Company had cash and cash equivalents of US$60.5 million. Net operating cash outflow for the fourth quarter was US$5.3 million. In the fourth quarter of 2007 depreciation was US$1.2 million and capital expenditures were US$7.0 million. The capital expenditures were related to prepayments made for equipment relating to the phase III expansion of our SE lines.
Full Year 2007 Financial and Business Review
Revenue, shipment and production
Revenues in 2007 grew 57.1% to US$234.9 million, compared to US$149.5 million in 2006.
Sales from solar cells, polysilicon, modules and OEM business during the year accounted for 87.0%, 9.9%, 2.5% and 0.6% of total revenue respectively. Shipments, including 1.6MW for module sales, amounted to approximately 74.0 MW, compared to 46.4MW during 2006.
Revenue and Shipment Comparison between 2007 and 2006
Year 2007 Year 2006
Value Value
Volume* (US$mm) Volume* (US$mm)
Core cell sales 70.0 204.3 46.4 147.7 OEM 2.4 1.5 -- --
Polysilicon sales 97.9 23.3 10.9 1.8
Module sales 1.6 5.8 -- --
* All volumes are expressed in MW except for Polysilicon sales expressed in metric tons.
During 2007 the Company increased its sales of core cell products by38.3% to US$204.3 million. The percentage of overall cell sales in overseas markets, particularly Europe, increased from 14.5% in 2006 to 38.3% in2007, primarily driven by an overall strengthening of our European presence during 2007. The overall percentage of sales in the China market for 2007 was 64.3% compared to 79.7% in 2006.
In terms of MW volume, mono-crystalline 125-millimeter cells accountedfor 71% and 78% of overall production and sales respectively.
Gross profit, gross margin and ASP
Gross profit for the year was US$18.0 million, a decline from US$26.6million in 2006, and gross margin of 7.7% compared to 17.8% in 2006.
Margin Breakdown
Gross margin
2007 2006
Core cell sales 7.1% 17.2% OEM 48.6% --
Polysilicon sales 11.1% 74.2%
Module sales 4.7% --
Blended 7.7% 17.8%
Blended ASP was US$2.92 per watt during 2007 compared to US$3.22 per watt during 2006.
Wafer costs continued to account for a large portion of overall manufacturing costs. In 2007, wafer costs rose to US$2.43 per watt compared to US$2.42 per watt in 2006. Wafer costs per watt as a percentage of total production costs per watt declined from 91.8% in 2006 to 89.9% in 2007 due to improvements in operational efficiency. Other production costs, which mainly consisted of; other raw materials, labor, depreciation and utilities, were US$0.28 per watt in 2007.
SG&A and net income
Our SG&A expenses were US$15.3 million for 2007, compared to US$10.9 million in 2006 mainly due to the expansion of the business and additional expenses relating to our operation as a public company after our initial public offering in May 2007.
The Company incurred an operating income of US$0.16 million for 2007. This compares to an operating profit of US$15.2 million in 2006. Full year net loss was US$4.9 million, compared to net profit of US$11.8 million in 2006, mainly due to lower gross margins in 2007. GAAP basic and diluted net loss attributable to holders of ordinary shares was US$0.21 per ADS in 2007 compared to a GAAP basic and diluted net loss of US$2.16 per ADS in 2006.
Balance sheet
As of December 31, 2007, the Company had cash and cash equivalents ofUS$60.5 million. Net operating cash outflow for 2007 was US$62.8 million. In 2007 depreciation was US$4.3 million and capital expenditures were US$16.8 million.
Commenting of the financial results, Kenneth Luk, CFO of China Sunergy,said: "We intend to ensure that margin improvements translate into profitability during the coming year. Based on the margins we are achieving on our SE and HP type cells I believe that we will be able to achieve a blended gross margin of at least 7.5% during the first quarter of 2008. In addition, a core focus is on implementing strict cost control measures and better cash management to ensure that we are able to maximize internal cashflow and liquidity during 2008 and that at an operational level we should be cashflow positive during the first quarter of 2008."
Outlook
Given the success of our pilot HP cell production run, the company has decided to convert all of its four existing P-type lines to HP. This conversion will be completed by the end of the first half of 2008. In addition, all four of our new SE lines are expected to be in mass production during the fourth quarter of 2008. In the current pricing environment, we expect to achieve an additional margin improvement over traditional P-type cells of 8- 10% on HP cells, and 12% on SE cells.
As a result of the conversion of P-type production lines and a delay in the delivery of equipment required for SE production lines, as well as some impact from the bad weather we experienced during the first quarter, the Company is revising its 2008 production target to 125-145 MW with approximately 65 to 85 MW expected to come from high efficiency cell products (which we define as cells that yield a higher than 17% conversion efficiency rate). This is projected to comprise of approximately 25-35 MW of SE cells and 40-50 MW of HP cells.
The Company anticipates its gross margin for first quarter of 2008 tobe between 7.5% and 8.5%.
Management Updates
During the quarter, China Sunergy announced that it appointed Mr.Kenneth Luk as its new Chief Financial Officer ("CFO") as of December 17th. Mr. Luk brings over 25 years experience in finance and accounting to China Sunergy, having previously worked at Motorola Semiconductors for 14 yearsand most recently for 3 years for Freescale Semiconductor. Mr. Luk began his career with HSBC, where he worked for 7 years as Resident Officer.
Additionally, as of March 24th, 2008 Mr. Guangyou Yin, a Director and Vice President of Operations has resigned to pursue other opportunities.There are no plans to fill the COO role at this time and a search for a new Board member is ongoing.
Fourth Quarter Financial Results
-- Revenues were US$71.5 million, representing a 1.1% increase compared to the same period last year, and a 46.0% increase compared to the previous quarter; core cell revenue increased 46.1% sequentially from US$46.3 million to US$67.7 million.
-- Gross profit and gross margin were US$4.6 million and 6.4%, respectively compared to US$1.0 million and 2.1% during the third quarter of 2007.
-- Quarterly net loss was US$2.3 million, compared to a net loss of US$4.4 million in the third quarter and a US$10.5 million net profit for the fourth quarter of 2006.
-- GAAP basic and diluted net loss attributable to holders of ordinary shares was US$0.06 per ADS in the fourth quarter compared to a net loss per ADS of US$0.11 in the third quarter 2007.
-- Quarterly production of 22.3 megawatts ("MW") of solar cells represented a 12.6% increase on a year-over-year basis and a 25.3% increase sequentially.
-- Shipments amounted to approximately 23.2 MW, representing an 8.9% increase year-over-year and a 39.8% increase sequentially.
Full Year Financial Results
-- Revenues were US$234.9 million, a 57.1% increase from US$149.5 million in 2006.
-- Gross profit of US$18.0 million, a decline from US$26.6 million in 2006, and gross margin of 7.7% compared to 17.8% in 2006.
-- Full year net loss was US$4.9 million, compared to net profit of US$11.8 million in 2006, mainly due to lower gross margins in 2007.
-- GAAP basic and diluted net loss attributable to holders of ordinary shares was $0.21 per ADS.
-- Full year production of 80.3 MW of solar cells represented a 67.6% increase compared to 47.9 MW in 2006.
-- Shipments amounted to approximately 74.0 MW, representing a 59.5% increase from 46.4MW in 2006.
Commenting on the quarter, Allen Wang, CEO of China Sunergy remarked: "During the quarter we began commercial production of our selective emitter cells and increased production levels beyond what we had guided for in November. At the same time we expanded our presence in Europe by signing noteworthy sales agreements and opening an office in Munich. I have been pleased by the response many of our customers have shown towards our high efficiency cells and believe that these products will help drive revenue growth in Europe's new solar markets."
Fourth Quarter and Recent Operational Highlights:
-- Commercial mass production of high-efficiency selective emitter cells ("SE") commenced in mid-November. A total of 2.4 MW was produced with 0.8MW shipped during the fourth quarter.
-- Average SE cell efficiency continued to improve from 16.5% in the third quarter to an average efficiency of 17.3% in the fourth quarter. A maximum conversion efficiency of 18.2% was achieved on pilot runs of selective emitter cells during November 2007.
-- The signing of the following agreements for 2008; a 30MW solar cell agreement with aleo solar, a 25MW sales agreement with Canadian Solar and a 10.2MW agreement with asola.
-- Revenue from overseas grew from 20.3% for the full-year 2006 to 35.7% for the full-year 2007.
-- In the quarter we began developing HP cells, a more efficient version of our current P-type cells. The limited pilot run of 0.3 MW in the fourth quarter achieved an average conversion efficiency rate of over 17%, higher than the 16.1% achieved with P-type cells during the same period. "During 2008 we will focus on improving margins and profitability by deriving a greater proportion of overall revenues from our high efficiency solar cell products," continued Mr. Wang. "We remain confident that as we expand production of our SE and HP products, margins can improve further during the coming year. Our confidence in achieving this objective is based on strong indications of customer preference for our high-efficiencycells."
Key Sales Agreements
During the quarter, the Company recently signed significant salescontracts with:
-- aleo solar AG ("aleo"), a leading German solar module manufacturer, to supply at least 30 MW of high quality silicon solar cells in 2008.
-- Canadian Solar Inc., a leading China-based module manufacturer, for a total volume of 25MW of solar cells for delivery in 2008.
-- asola, a reputable German module manufacturing company to supply a total volume of 10.2MW of solar cells during 2008.
Technological Developments
During the quarter the Company continued to make significant progress with the production of its high efficiency cell technology.
Average selective emitter efficiency continued to improve from 16.5% in the third quarter to 17.3% in the fourth quarter of 2007. A maximum conversion efficiency of 18.2% was achieved on pilot production runs during November 2007.
The Company is now enhancing its current P-type cell production facilities by converting existing lines to high-efficiency P-type (or "HP") lines. HP cells are a more efficient version of our standard P-type cells and achieve a higher conversion efficiency ratio as a result of an enhanced production process. HP cells of mono-crystalline 125 millimeter achieved anaverage conversion efficiency rate of over 17% on a 0.3 MW limited pilot run during the fourth quarter, and maximum conversion efficiency of 17.5%.
The development of the Company's patented N-type cells continues to move along smoothly. During 2008, China Sunergy intends to invest US$8 million in an R&D centre in Shanghai aimed at further developing N-type and other types of high efficiency cells. The center is expected to house 100 research employees. Construction of the center is scheduled to be completed by early 2009.
Fourth Quarter 2007 Financial and Business Review
Revenue, shipment and production
During the fourth quarter of 2007, revenues grew 1.1% on a year-over-year basis, and increased 46.0% compared to the previous quarter to US$71.5 million.
Sales from solar cells, polysilicon, and modules accounted for 94.7%, 1.0% and 4.3%, of total revenue respectively. Shipments, including 0.8MW for module sales, amounted to approximately 23.2 MW, compared to 21.3MW during the fourth quarter of 2006 and 16.6MW during the third quarter of 2007.
Revenue and Shipment Comparison between Q4 and Q3 2007
Q4 Q3
Value Value
Volume* (US$mm) Volume* (US$mm)
Core cell sales 22.4 67.7 16.2 46.3
Polysilicon sales 0.8 0.7 4.5 1.1
Module sales 0.8 3.1 0.4 1.5
* All volumes are expressed in MW except for Polysilicon sales expressed in metric tons.
During the fourth quarter the Company increased its quarter-on-quarter sales of core cell products by 46.1% as compared to the previous quarter. The percentage of overall cell sales in overseas markets declined in percentage terms from 47.7% to 40.6% compared to the previous quarter, particularly in Europe where sales declined from 42.7% to 35.0% sequentially even though in absolute terms cell sales to Europe increased from 6.7 MW to 7.6 MW sequentially.
In terms of MW volumes, mono-crystalline 125-millimeter cells accountedf or a proportion of overall production and cell sales at 57.1% and 57.5%(in terms of volume) respectively as we increased production and sale of multi- crystalline to cater for the increasing demands of European customers.
Gross profit, gross margin and Average Selling Price ("ASP")
Gross profit for the quarter was US$4.6 million, which led to a blended gross margin of 6.4%, up from 2.1% in the third quarter, as a result of the gross margin contribution from high efficiency cell products.
Margin Breakdown
Gross margin
Q4 Q3
Core cell sales 6.3% 1.5%
Polysilicon sales 12.2% 27.0%
Module sales 7.8% 0.8%
Blended 6.4% 2.1%
The sequential gross margin expansion on core cell sales from 1.5% to6.3% was mainly attributed to higher ASP as a result of a greater proportion of sales coming from high-efficiency cells.
Blended ASP for the fourth quarter rose from US$2.85 per watt in the previous quarter to US$3.02 per watt due to strong product demand and the strengthening of the Renminbi.
Wafer costs continued to account for a large portion of overall manufacturing costs. In the fourth quarter, wafer costs rose to US$2.54 per watt compared to US$2.45 per watt in the third quarter. Wafer costs per watt as a percentage of total production costs per watt increased from 89.2% in the third quarter to 90.1% in the fourth quarter. Other productioncosts, which mainly consisted of other raw materials, labor, depreciation and utilities, were US$0.28 per watt and largely the same as the first three quarters of this year.
SG&A and net income
Our SG&A expenses increased from US$4.2 million to US$5.3 million sequentially mainly due to an increase in professional expenses.
Due primarily to higher gross margin, the Company reduced its sequential operating loss to US$1.2 million. This compares to an operating profit of US$11.4 million and an operating loss of US$3.6 million for the fourth quarter 2006 and third quarter of 2007, respectively.
With higher gross margin, the Company reduced its sequential net lossfor the quarter to US$2.3 million.
Balance sheet
As of December 31, 2007, the Company had cash and cash equivalents of US$60.5 million. Net operating cash outflow for the fourth quarter was US$5.3 million. In the fourth quarter of 2007 depreciation was US$1.2 million and capital expenditures were US$7.0 million. The capital expenditures were related to prepayments made for equipment relating to the phase III expansion of our SE lines.
Full Year 2007 Financial and Business Review
Revenue, shipment and production
Revenues in 2007 grew 57.1% to US$234.9 million, compared to US$149.5 million in 2006.
Sales from solar cells, polysilicon, modules and OEM business during the year accounted for 87.0%, 9.9%, 2.5% and 0.6% of total revenue respectively. Shipments, including 1.6MW for module sales, amounted to approximately 74.0 MW, compared to 46.4MW during 2006.
Revenue and Shipment Comparison between 2007 and 2006
Year 2007 Year 2006
Value Value
Volume* (US$mm) Volume* (US$mm)
Core cell sales 70.0 204.3 46.4 147.7 OEM 2.4 1.5 -- --
Polysilicon sales 97.9 23.3 10.9 1.8
Module sales 1.6 5.8 -- --
* All volumes are expressed in MW except for Polysilicon sales expressed in metric tons.
During 2007 the Company increased its sales of core cell products by38.3% to US$204.3 million. The percentage of overall cell sales in overseas markets, particularly Europe, increased from 14.5% in 2006 to 38.3% in2007, primarily driven by an overall strengthening of our European presence during 2007. The overall percentage of sales in the China market for 2007 was 64.3% compared to 79.7% in 2006.
In terms of MW volume, mono-crystalline 125-millimeter cells accountedfor 71% and 78% of overall production and sales respectively.
Gross profit, gross margin and ASP
Gross profit for the year was US$18.0 million, a decline from US$26.6million in 2006, and gross margin of 7.7% compared to 17.8% in 2006.
Margin Breakdown
Gross margin
2007 2006
Core cell sales 7.1% 17.2% OEM 48.6% --
Polysilicon sales 11.1% 74.2%
Module sales 4.7% --
Blended 7.7% 17.8%
Blended ASP was US$2.92 per watt during 2007 compared to US$3.22 per watt during 2006.
Wafer costs continued to account for a large portion of overall manufacturing costs. In 2007, wafer costs rose to US$2.43 per watt compared to US$2.42 per watt in 2006. Wafer costs per watt as a percentage of total production costs per watt declined from 91.8% in 2006 to 89.9% in 2007 due to improvements in operational efficiency. Other production costs, which mainly consisted of; other raw materials, labor, depreciation and utilities, were US$0.28 per watt in 2007.
SG&A and net income
Our SG&A expenses were US$15.3 million for 2007, compared to US$10.9 million in 2006 mainly due to the expansion of the business and additional expenses relating to our operation as a public company after our initial public offering in May 2007.
The Company incurred an operating income of US$0.16 million for 2007. This compares to an operating profit of US$15.2 million in 2006. Full year net loss was US$4.9 million, compared to net profit of US$11.8 million in 2006, mainly due to lower gross margins in 2007. GAAP basic and diluted net loss attributable to holders of ordinary shares was US$0.21 per ADS in 2007 compared to a GAAP basic and diluted net loss of US$2.16 per ADS in 2006.
Balance sheet
As of December 31, 2007, the Company had cash and cash equivalents ofUS$60.5 million. Net operating cash outflow for 2007 was US$62.8 million. In 2007 depreciation was US$4.3 million and capital expenditures were US$16.8 million.
Commenting of the financial results, Kenneth Luk, CFO of China Sunergy,said: "We intend to ensure that margin improvements translate into profitability during the coming year. Based on the margins we are achieving on our SE and HP type cells I believe that we will be able to achieve a blended gross margin of at least 7.5% during the first quarter of 2008. In addition, a core focus is on implementing strict cost control measures and better cash management to ensure that we are able to maximize internal cashflow and liquidity during 2008 and that at an operational level we should be cashflow positive during the first quarter of 2008."
Outlook
Given the success of our pilot HP cell production run, the company has decided to convert all of its four existing P-type lines to HP. This conversion will be completed by the end of the first half of 2008. In addition, all four of our new SE lines are expected to be in mass production during the fourth quarter of 2008. In the current pricing environment, we expect to achieve an additional margin improvement over traditional P-type cells of 8- 10% on HP cells, and 12% on SE cells.
As a result of the conversion of P-type production lines and a delay in the delivery of equipment required for SE production lines, as well as some impact from the bad weather we experienced during the first quarter, the Company is revising its 2008 production target to 125-145 MW with approximately 65 to 85 MW expected to come from high efficiency cell products (which we define as cells that yield a higher than 17% conversion efficiency rate). This is projected to comprise of approximately 25-35 MW of SE cells and 40-50 MW of HP cells.
The Company anticipates its gross margin for first quarter of 2008 tobe between 7.5% and 8.5%.
Management Updates
During the quarter, China Sunergy announced that it appointed Mr.Kenneth Luk as its new Chief Financial Officer ("CFO") as of December 17th. Mr. Luk brings over 25 years experience in finance and accounting to China Sunergy, having previously worked at Motorola Semiconductors for 14 yearsand most recently for 3 years for Freescale Semiconductor. Mr. Luk began his career with HSBC, where he worked for 7 years as Resident Officer.
Additionally, as of March 24th, 2008 Mr. Guangyou Yin, a Director and Vice President of Operations has resigned to pursue other opportunities.There are no plans to fill the COO role at this time and a search for a new Board member is ongoing.
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