Suntech Cleans House As Rebound Nears 光伏行业或年中回

By newsdoug on February 20, 2012

Brightening prospects for Suntech Leading solar panel maker Suntech (NYSE: STP) has put out a broadly positive pre-earnings announcement, showing the struggling market may be nearing bottom in its current downcycle as the company also took major moves to control costs. Investors seemed to like what they saw, bidding up Suntech shares more than 8 percent in Friday trading after the news came out, even though shares are still at about a quarter of their levels from 2 years ago. In its earnings pre-announcement, Suntech said its shipments declined 10 percent in the fourth quarter from the third, a bit better than the 20 percent decline it originally expected. (company announcement) At the same time, its shipments for all of 2011 came in at 2.09 gigawatts, also a bit better than its previous forecast for 2 gigawatts. On the cost side, the company said it made major progress in reducing its debt and accounts receivable in the fourth quarter, both of which should help strengthen its balance sheet and make it more efficient. Investors seem to have focused on the better-than-expected revenue numbers that may reflect a broader industry rebound, with solar shares all logging sharp gains on Friday. Leading the pack was Canadian Solar (Nasdaq: CSIQ), which jumped 17 percent, while JA Solar (Nasdaq: JASO) was up 9 percent. Trina (NYSE: TSL) and Yingli (NYSE: YGE) also both logged nice gains of more than 5 percent. Of course, all of these stocks are still at a fraction of their level from 2 years ago, as the industry struggles with a big supply glut resulting from its rapid expansion over the last few years. In another positive sign for the industry, Trina has announced a new $100 million loan facility from Britain’s Standard Chartered (London: STAN) in what looks like a clear signal to the markets that private commercial banks are still confident enough to lend to these stronger solar companies even though most are now currently losing money. (previous post) By comparison, some of the weaker players like LDK Solar (NYSE: LDK) have had to resort to funding from Chinese banks and other local investors, which often provide funds for reasons that more political than commercial. Recent media reports indicate the sector is cautiously optimistic that demand will pick up later this year, with many companies hoping to restart idle capacity if prices rise above a certain level. Despite the upbeat signs, one of the big question marks in all this the current US anti-dumping investigation into Chinese solar panels, which could result in punitive tariffs in the near future. (previous post) But China has made recent signs that it is willing to discuss the issue and its broader subsidies for exporters in general, meaning the trade war might be short lived, perhaps being resolved after upcoming US presidential elections in November. If that happens and signs of stabilization continue, look for a rebound in both the sector and company share prices starting around the middle of the year.

Bottom line: The latest results from Suntech and broader industry comments point to a fledgling rebound for the solar battered sector starting around the middle of the year.

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