Monday, 23 November 2009

Suntech, Trina Expand Output as Profits Top Estimates
November 19, 2009

SunTech Power Holdings Co, and Trina Solar Ltd, plan to increase production of solar energy modules next year after third-quarter sales and profits beat analyst estimates. The companies rose in U.S, trading.

SunTech Chief Executive Officer Zhengrong Shi intends to boost capacity 40% to 1,400 MWs by mid-2010. Trina aims to increase cell and module production to 600 MWs by the end of this year and to as much as 950 MWs next year. "The market is gaining momentum faster than anyone expected," SunTech's Shi said today in a phone interview from China. "We have to expand really fast. In the third quarter, we couldn't keep up with demand."

Manufacturers slashed prices in half over the past year to weather slumping demand and gain market share as project financing resumes. Third-quarter orders surged from Germany, the world's biggest solar market, as developers sought to finish projects before the government cut incentives.

Wuxi, China-based SunTech rose 90 cents, or 6%, to $15.99 in New York Stock Exchange composite trading. The shares are up 37% this year. Trina's ADRs, which have more than quadrupled this year, rose $2.82, or 6.6%, to $45.57.

"Solid demand growth is returning as markets pick up in the U.S, and China," said Sanjay Shrestha, an analyst at Lazard Capital Markets in New York who has a "buy" rating on Trina and a "hold" on SunTech. "During the downturn these guys did a really good job taking their foot off the pedal."

Raising Forecasts
China's Canadian Solar Inc, this week also raised shipment and production forecasts after reporting third-quarter profit growth, and China Sunergy Co, raised the low end of its output forecast. Shi forecasts the global market for solar energy will jump 50% next year to as much as 10,000 MWs. The U.S, and Japan may account for 10% each, and Shi expects China will install about 500 MWs.

SunTech, the world's largest maker of polysilicon solar energy modules, today reported net income fell 30% to $29.8 million, or 16 cents per American depositary receipt, as module prices dropped. That beat the 8 cent average estimate of 16 analysts polled by Bloomberg.

Shi last year halted expansion plans in response to a drop in demand for solar panels caused by the credit crunch. After the surge in orders from Germany, as well as improving markets in the U.S., France and Japan, he raised his shipments forecast this year to 640 MWs to 660 MWs from an earlier estimate of 600 MWs.

New Factory
To increase sales in the U.S., SunTech plans to open a new factory near Phoenix that will be able to assemble 30 MWs of solar modules annually when completed next year. Trina, based in Changzhou, China, today reported third-quarter profit rose 25% to $40.1 million, or $1.29 a share. The company was expected to earn 90 cents. Germany will make up one third of the company's sales this year, up from 24% in 2008.

Trina's gross margin climbed to 29% from 22% a year earlier as production costs fell to 82 cents per watt from $1.13 a year earlier. Module prices declined 50% to $2.03 per watt. Shipments of solar modules reached a record 122.6 MWs during the quarter, above the company's guidance of 90 to 110 MWs and up 85% from 66.4 MWs a year earlier as Trina expanded output.