UPDATE 2-Suntech sees quarterly loss, shrinking margin

Fri Aug 6, 2010 11:15am EDT

* Sees net loss for quarter due to one-time charges

* Margins to shrink, but revenues to top Wall St view

* Will shut down thin-film output

* Shares down 4.9 percent (Rewrites; adds analyst comment, details, updates shares)

NEW YORK, Aug 6 (Reuters) - China's Suntech Power Holdings Co STP.N said charges to shut down its thin-film solar production and from an investment would push it to a net loss for the second quarter, knocking its shares lower.

The company, the largest Chinese photovoltaic solar panel maker, also said its second-quarter revenues would rise to between $620 million to $630 million, beating Wall Street forecasts, but it expected its gross margins to soften.

Solar companies have seen sales surge this year on robust demand in Europe, but weakness in the euro during the first half and continued pressure to cut production costs have weighed on their profits.

Suntech, which is in midst of sharply increasing its solar panel production, said its gross margins would slip to between 17.5 percent and 18.5 percent in the quarter, down from 19.5 percent in the first quarter.

"Gross margin was a little lower that we thought. We were expecting a kind of a price stabilization," said Adam Krop, analyst with Ardour Capital Investments.

Including one-time charges, net loss for the quarter would be between $147 million and $179 million, or 82 cents to $1.00 per American Depositary share. A year ago the company posted net income of $10 million, or 6 cents per American Depositary Share.

The company is due to report quarterly earnings on Aug. 18.

Suntech will take a $50 million to $55 million charge to shut down its thin-film amorphous silicon panel operation at its plant in Shanghai, which it will convert to manufacture crystalline silicon solar cells.

Amorphous silicon solar cells, which are typically used in calculators, are cheaper to produce than crystalline silicon cells, but are less efficient at turning sunlight into electricity.

The steep declines in polysilicon prices over the past 18 months has eroded amorphous silicon's price advantage, and also prompted peer Applied Materials to shut down its thin film production last month. [ID:nSGE66K0IJ]

Suntech will record another charge of $106 million to $126 million from its investment in ingot and wafer maker Shunda Holdings Co, likely because of difficulty that company has had ramping up production of polysilicon, Krop said.

Suntech acquired a minority stake in Shunda in 2008 for $99 million and signed a long-term wafer purchase agreement from the company.

Shares of Suntech tumbled 4.9 percent to $9.55 on the New York Stock Exchange, bringing its year-to-date decline to 43 percent.

(Reporting by Matt Daily, editing by Dave Zimmerman)

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