Solar industry leader Suntech (NYSE: STP) has just released its latest quarterly results, which prove that times of crisis are a natural selector to separate the strong from the weak. (company announcement) While other companies have been sharply revising down their annual forecasts amid the industry’s worst ever downturn, Suntech’s revisions were far less severe, and it even forecast a sharp rebound in its gross margins in the third quarter as its situation stabilizes. The company slightly lowered its full-year revenue forecast to about $3 3 billion from a previous $3.4 billion, and actually maintained its full-year shipment target at 2.2 gigawatts worth of modules. Last month it showed it was aggressively moving to manage costs by terminating an expensive 10-year supply agreement with MEMC, negotiated five years ago when solar material prices were rising. (previous post) The company forecast more turbulence for the next few quarters, but clearly it has turned the corner by containing costs and using its market-leading position to steal sales from other weaker performers. Its strong performance contrasts sharply with LDK Solar (NYSE: LDK), one of the industry’s weakest players, which last week shocked few with a massive downward revision in many of its second-quarter forecasts, including a 63 percent downgrade in its forecast for module shipments. (previous post) Suntech shares ended Monday down slightly, possibly due to a net loss in the second quarter on some one-time charges. But with its shares now trading near a 52-week low, like most of the industry, Suntech looks like a good bet to lead the sector out of its current downturn, set to not only survive but also emerge as a possible consolidator for some of its weaker peers with attractively low valuations.
Bottom line: Suntech’s latest results show that stronger companies are starting to emerge from the solar sector’s downturn, and could lead consolidation by buying up weaker players.
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After months of talk, China has finally come out with some concrete details of how it plans to support its struggling solar panel makers, rolling out a new set of state-set electricity rates designed to make solar power generation economically attractive. Under the new rates announced earlier this week, solar power producers will be able to charge 1.15 yuan per kilowatt hour for their electricity, according to Chinese media reports. (
