Suntech earns rise sharply, stock rallies

LOS ANGELES Tue Mar 8, 2011 6:31pm EST

LOS ANGELES (Reuters) - Suntech Power Holdings Co Ltd, the world's top solar panel maker, posted sharply higher quarterly net earnings due to a better-than-expected 62 percent rise in revenue and a $250 million increase in the value of certain project investments.

The company's shares rose 4.4 percent in extended trade following the announcement.

Suntech also reiterated its 2011 revenue outlook, which was above analysts' estimates, assuaging investor concerns that a revision in government subsidies for solar power in Italy would hurt demand for panels this year.

"These guys still have some pretty good visibility to come out here and say, 'Hey look, we're going to do better than the Street expected,'" Auriga USA analyst Mark Bachman said. He has a "buy" rating on Suntech shares.

Demand for solar panels has exploded in Europe due to generous government incentives in Germany, Italy, France, Spain and other large markets. Pullbacks in those subsidies, however, have stoked concerns about a dramatic falloff in demand in the subsidy-dependent sector.

Last week, Suntech Chief Executive Zhengrong Shi told Reuters that the company would still sell half its production in Europe this year.

The Chinese company said on Tuesday that net income for the fourth quarter was $383.4 million, or $2.02 per share, up from $33.1 million, or 18 cents per share, a year ago.

Fourth-quarter revenue rose to $945.1 million from $583.6 million last year. Analysts had been expecting revenue of $843.7 million, according to Thomson Reuters I/B/E/S.

The earnings include a $250 million increase in the fair value of the Global Solar Fund's project investments. GSF is a project developer and Suntech customer in which the company has a majority stake.

The value of the GSF projects grew because 95 megawatts of projects were completed in the fourth quarter, Suntech said.

"The eventual sale of these projects should be a source of cash for Suntech going forward," Chief Executive Zhengrong Shi said in a statement.

EXPANDING MARGINS

The results also included $24 million in income from the company's new wafer business. Suntech has been ramping up production of polysilicon wafers, which are used to make cells that are incorporated in the solar modules.

The addition of wafer manufacturing is expected to lift Suntech's gross margins to 20 percent to 22 percent this year and make its costs more competitive with rivals. In 2010, the company's gross margin was 17.4 percent.

Suntech said first-quarter shipments of photovoltaic solar equipment would be about the same as in the fourth quarter.

The company still expects shipments of at least 2.2 gigawatts of solar products for the year and revenue of $3.4 billion to $3.6 billion, in line with a prior forecast but above Wall Street analysts' average estimate of $3.36 billion, according to Thomson Reuters I/B/E/S.

For the first quarter, the company forecast a margin of 20 percent.

Suntech shares rose to $9.40 in extended trade after closing at $9 on the New York Stock Exchange. The stock had slid 8.3 percent in the past four trading sessions, and is still 42 percent below its 52-week high of $15.55.

"It's been a long time coming that Suntech has actually been able to report a clean quarter with positive news," Bachman said.

(Reporting by Nichola Groom; Editing by Richard Chang)