March 8, 2012 / 4:16 PM / 8 years ago

Suntech, JinkoSolar hit by charges as losses mount

(Reuters) - Suntech Power Holdings STP.N and JinkoSolar Holding Co (JKS.N) became the latest solar companies to record big impairment charges, as losses mount on weak demand and a steep fall in prices.

The solar industry was hit hard last year as prices for the equipment that turns sunlight into electricity halved, pushing many companies into losses and forcing the likes of First Solar (FSLR.O), SolarWorld AG SWVG.DE, MEMC Electronic Materials WFR.N and Yingli Green Energy YGE.N to incur huge charges.

Suntech, the world’s biggest producer of photovoltaic solar panels, said on Thursday its operating expenses in the third quarter included non-cash, impairment charges of $482.9 million, while JinkoSolar took a $7.3 million hit in the fourth quarter.

“Due to the challenging solar market conditions and the significant reduction in the company’s market capitalization in the third quarter of 2011, Suntech initiated an assessment of its goodwill, intangibles, and certain investments,” the company said in a statement.

Given the reduced profitability of solar companies, more writedowns could be expected this year, Stifel Nicolaus analyst Jeff Osborne said.

Suntech shares have lost 69 percent of their value in the last one year, while JinkoSolar shares have shed about three-quarters of their value. This compares with a 66 percent decline in the broader MAC Global Solar Energy Index .SUNIDX.

JinkoSolar shares fell as much as 12 percent on Thursday morning trade on the New York Stock Exchange. Suntech shares fell 4 percent.

“I don’t expect to see a broad recovery by the end of this year, even if the end market grows significantly,” Pacific Crest Securities analyst Ben Schuman said.

TRADE WAR

To add to Chinese solar companies’ growing worries is a trade war that could see the United States imposing tariffs on imports from the Asian country.

Germany’s SolarWorld’s U.S. subsidiary and six anonymous peers filed a trade complaint in October, contending that China’s support of its solar companies breached global trade rules and that those companies were dumping equipment in the U.S. market below the cost of production.

The Chinese manufacturers have denied the charges, but many are preparing for Washington to impose tariffs.

“Our market size of course has the potential to be impacted by the outcome of the petition to impose tariffs on China-made solar cells,” Suntech Chief Commercial Officer Andrew Beebe said on a conference call with analysts.

“Ironically this case was entered by SolarWorld, a German company who has avoided providing any information on the extraordinary amount of subsidies from Germany, U.S. and governments in the Middle East,” Beebe said.

PROFITLESS GROWTH?

Suntech forecast full-year shipments of 2.1 GW to 2.5 GW, marginally higher than the 2.09 GW it shipped last year.

For 2012, JinkoSolar expects total solar module shipments of 800 megawatt (MW) to 1,000 MW, higher than last year’s 760.8 MW.

Suntech’s Beebe said the company expects growth from the United States, China, India and Japan to roughly offset decline in the European market.

“These markets are intensely competitive. So you could have a spinning wheel of volume growth for the industry offset by profitless prosperity,” Stifel’s Osborne said.

However, Suntech expects first-quarter shipments to decline by about 30 percent from the fourth.

“This could be the first year that Suntech does not gain market share in the five years we’ve covered it,” Raymond James analysts Pavel Molchanov and Alex Morris wrote in a note.

Suntech, however, said it had seen stronger-than-expected demand from Germany as customers rushed to stock up before the world’s No. 2 solar market cut its renewable energy subsidies.

Germany plans to advance cuts in solar power subsidies of up to 30 percent by almost a month to March 9.

Record solar installations in Germany in December surprised most in the industry, with an estimated 3 gigawatt of panels added in the world’s biggest solar market.

On Thursday, Suntech and JinkoSolar posted a quarterly loss.

Reporting by Swetha Gopinath and Divya Lad in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian

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