Suntech CEO sees margin expansion, to keep stake

Thu Jun 9, 2011 3:01am EDT

* Sees margins, market share up this year - CEO

* No plans to sell stake of about 30 percent - CEO

* Open to all possibilities in sector consolidation - CEO

By Christoph Steitz

MUNICH, June 9 (Reuters) - Suntech Power STP.N, the world's largest solar cell maker, expects its margins to expand this year, its chief executive said, adding he had no plans to sell his stake of about 30 percent in the company.

At a time when solar companies such as SunPower SPWRA.O, LDK Solar LDK.N and SMA Solar (S92G.DE) forecast shrinking profit margins due to falling module prices and oversupply, Suntech's Zhengrong Shi said he was confident the company could buck the trend. [ID:nN07174923] [ID:nLDE74P0ST]

The company is ramping up output of polysilicon wafers needed for solar cells, thereby lowering manufacturing costs that would occur if the product had to be sourced from a third party. [ID:nN0228684]

"We're going to be expanding our margin and market share," Shi, who is also Suntech's chairman and founder, told reporters in Munich late on Wednesday when asked about margin development in the ongoing business year.

According to Thomson Reuters I/B/E/S estimates, the company's gross margin is seen at 18.5 percent this year, up from 17.4 percent in 2010.

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Graphic on EPIA's growth estimates through 2015:

r.reuters.com/ryw39r

Graphic on the world's top solar cell makers:

r.reuters.com/buz49r

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Suntech in late May cut its 2011 sales outlook range to $3.3-3.5 billion from $3.4-3.6 billion due to a strong decline in module prices. According to Thomson Reuters I/B/E/S, 2011 sales are seen at $3.36 billion. [ID:nL3E7GP1J0]

The solar industry has been hit by concerns about Italy -- which last year grew to become the world's second-largest solar market -- where support for the subsidy-dependent sector was lowered last month.

Uncertainty over what shape the new subsidy rules would take led to a near standstill of the Italian market in the first-quarter, hurting revenues and volumes of solar companies around the world and Suntech has warned about a challenging set of quarters ahead. [ID:nL3E7GP1J0]

The company expects low single-digit percentage growth in shipments and relatively flat gross margins in the second quarter, compared with the first three months.

Shi said the company had to be "open to all possibilities" in the sector's consolidation, which has started to speed up as Japan's nuclear disaster has accelerated a rethink of governments and large energy groups.

"A partnership across the value chain is inevitable in the long-term, it's quite feasible," Shi said, when asked whether the company could remain independent in the long-term, adding he intended not to lower his stake of about 30 percent.

"I have no plans to sell." he said.

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