China Sunergy Announces Second Quarter 2015 Financial Results

China Sunergy Co., Ltd., a specialized solar cell and module manufacturer, recently announced its financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Financial Highlights

–  Total revenue was US$87.5 million, a decrease of 4.3% from US$91.5 million in the first quarter of 2015. The revenue for self-branded products totaled US$86.6 million and the revenue for the products processed under the OEM arrangement was US$0.9 million.
– Shipments totaled 184.5MW, a decrease of 3.8% (7.4MW) from 191.9MW in the first quarter of 2015. Module shipments, including module processed under OEM arrangement of 16.8MW, were 148.9MW. Cell shipments were 35.6MW.
– Average selling price (“ASP”) for the Company’s modules, excluding those processed under OEM arrangements, was US$0.58 per watt, unchanged from the previous quarter.
– Gross profit was US$6.1 million and gross margin was 6.9%, compared with gross profit of US$10.3 million on gross margin of 11.3% in the first quarter of 2015.
– Net lossattributable to ordinary shareholders was US$10.5 million, compared with US$12.2 million in the first quarter of 2015.
– Net loss attributable to ordinary shareholders per ADS was US$0.71, compared with US$0.82 in the first quarter of 2015.
– Cash, cash equivalents and restricted cash totaled US$148.5 million as of June 30, 2015.

Second Quarter 2015 Financial Review

Total Revenue and Shipments

For the second quarter of 2015, total revenue was US$87.5 million, compared with US$91.5 million in the first quarter of 2015. The decrease in revenue was mainly due to lower shipments in OEM arrangement for solar modules. Revenue from the Company’s self-brand modules and cells business totaled US$86.6 million or 99.0% of the total revenue, while revenue generated from the modules processed under OEM arrangement, was US$0.9 million, or 1.0% of total revenue. Since self-branded module and cell businesses are more profitable than OEM arrangements, and the Company managed to obtain more self-branded orders in the second quarter of 2015, the Company actively utilized more capacity for self-branded modules and cells other than OEM arrangements during the period.

Total shipments for the second quarter of 2015 were 184.5MW, a decrease of 3.8% from 191.9MW in the previous quarter. The decrease in total shipments was primarily resulted from less OEM arrangement for solar modules. Total module shipments, including modules processed under OEM arrangement of 16.8MW, were 148.9MW for the second quarter of 2015. Total self-branded cell shipments were 35.6MW for the second quarter of 2015. The Company did not arrange OEM orders for solar cells in the second quarter of 2015.Sales revenue derived from Asian market accounted for 39.3% of total revenue in the second quarter of 2015 as a result of lower shipments to China, Japan and India markets, while revenue generated from American market dramatically increased and accounted for 34.4% of total revenue. In addition, sales to European market represented 25.2% of total revenue in the quarter ended June 30, 2015.

ASP

ASP for the Company’s self-branded modules for the second quarter of 2015 was US$0.58 per watt, unchanged from the previous quarter. ASP for the Company’s self-branded cells during the second quarter of 2015 was US$0.26 per watt, compared with $0.27 per watt in the previous quarter.

Wafer and Conversion Costs

Blended wafer costs in the second quarter of 2015 were US$0.20 per watt, a decrease of two cents as compared to previous quarter. Conversion costs of cells and modules manufactured in the second quarter of 2015 were US$0.14 and US$0.18 per watt, respectively, compared with US$0.13 and US$0.18 per watt, respectively, in the previous quarter. The one-cent increase in the conversion costs of cells was primarily due to the lower output.

Gross Profit and Gross Margin

Gross profit for the second quarter of 2015 was US$6.1 million on gross margin of 6.9%, compared with gross profit of US$10.3 million on gross margin of 11.3% for the first quarter of 2015. The decrease in gross profit and gross margin was primarily due to the decreased average selling price and increased unit cost for the modules shipped from the Company’s plants in mainland China.

Operating Expenses, Operating Income (Loss) and Net Loss

Operating expenses increased to US$13.9 million in the second quarter of 2015, from US$4.8 million in the first quarter of 2015. The sequential increase in operating expenses was primarily due to the increase in selling expenses and general and administration expenses. During the second quarter of 2015, selling expenses were US$4.2 million, an increase of US$1.5 million as compared to previous quarter. The increase was mainly due to higher shipping costs occurred at the Company’s Turkey plant as a result of its higher shipments. General and administration expenses were US$8.7 million during the second quarter of 2015, increased by US$7.3 million as compared to US$1.4 million in the first quarter of 2015. The increase was attributable to the increase in bad debt provision and insurance expenses. The Company reversed approximately US$4.4 million of bad debt provision in the first quarter of 2015 caused by the depreciation of Euro against RMB, which significantly lowered the total amount of general and administration expenses.

Loss from operations was US$7.8 million in the second quarter of 2015, compared with income from operations of US$5.5 million in the first quarter of 2015. In addition, the Company had other income of US$1.7 million versus other expenses of US$14.3 million in the previous quarter, which was primarily due to the foreign exchange gain incurred from the depreciation of RMB against Euro.Correspondingly, net loss attributable to ordinary shareholders was US$10.5 million in the second quarter of 2015, compared with US$12.2 million in the previous quarter.

Amount Due from/to Related Parties

Amount due from related parties totaled US$90.5 million as of June 30, 2015, an increase of US$1.1 million compared to US$89.4 million as of March 31, 2015. Amount due to related parties totaled US$3.6 million as of June 30, 2015, a decrease of US$3.5 million compared to US$7.1 million as of March 31, 2015.

Inventory

Inventories at the end of the second quarter of 2015 totaled US$85.9 million, an increase of US$5.5 million from US$80.4 million at the end of March 31, 2015, which is mainly due to lower shipment during the quarter.

Cash Position

As of June 30, 2015, the Company had cash and cash equivalents of US$38.5 million, and restricted cash of US$110.0 million.