Declines in inventory value have plagued the results of solar companies including LDK Solar Co. Ltd. (NYSE: LDK) and Canadian Solar, Inc. (Nasdaq: CSIQ), both of which have all felt the crunch from the write downs they have to take because of cancellations and postponed orders that have resulted from current market conditions.
Another key contributor to the lackluster performance of solar companies is a pullback in solar subsidies in Germany and Spain and a strengthening U.S. dollar against the euro, which has sent prices of solar products tumbling.
Our Buzz Stock of the Day, China Sunergy Co., Ltd. (Nasdaq: CSUN) is no exception.
“China Sunergy has faced the same unprecedented and volatile environment as many of our peers across the solar sector, as a result of the ongoing global financial crisis,” according to China Sunergy Chief Executive Dr. Allen Wang.
Excluding items, China Sunergy reported an adjusted loss of 42 cents per ADS, wider than analysts’ estimates of a loss of 32 cents. Revenue fell nearly 40 percent to $43.2 million. Weak demand and prices hit China Sunergy’s gross margins, which came in at negative 33.1 percent for the quarter.
But “expectations were pretty low,” according to Jeffries’ analyst Paul Clegg, who doubted that investors would be”deeply disappointed relative to expectation.”
Clegg said there was a lot of uncertainty on when demand in the end markets would recover and investors “would be well served to take a conservative outlook in 2009.”
Despite the dim results, there is a ray of sunshine in China Sunergy’s future.
The company said it expects margins to be “definitively” positive in the second quarter and sees it in the range of 15 percent to 20 percent for the second half of the year.
The number of solar cells the company shipped in 2008 increased 45 percent over 2007. China Sunergy said it will continue to focus on growing sales of its high efficiency cells as a percentage of total shipments to benefit from increased margins.
China Sunergy remained cash flow positive despite a 39 percent decline in overall shipments, to 14.1 megawatts (MW). The company expects to shipments of between 150 MW to 200 MW for 2009.
“We expect conditions to remain difficult in the coming quarter, however we retain our belief and confidence that our advanced solar cell offerings, coupled with our R&D, engineering and manufacturing capabilities will ensure the Company fulfills its long-term potential,” Wang said.
