July 24, 2009 / 12:46 PM / 9 years ago

UPDATE 3-China Sunergy sees reporting Q2 profit, shares soar

* Sees returning to qtrly profitability in Q2

* Sees Q2 shipments slightly exceeding prior view

* Sees Q2 margins about 9 pct

* Shares up nearly 15 pct (Recasts; adds analyst comments, updates share movement)

By Adveith Nair

BANGALORE, July 24 (Reuters) - Chinese solar cell products maker China Sunergy Co Ltd CSUN.O on Friday said it expects to return to profitability in the second quarter, sending its shares up as much as 15 percent.

The company said quarterly solar-cell shipments “slightly” exceeded its prior view of 35 megawatt (MW) to 40MW, with margins coming at about 9 percent.

Cowen and Co analyst Robert Stone said second-quarter shipments likely came in at about 41 MW, while average selling prices were down about 12 percent, compared with the company’s forecast of a 15 percent decline.

The analyst currently expects the company to just about break-even on an operating basis, and to earn 2 cents to 3 cents a share on a non-operating basis, with revenue coming in at about $59.5 million.

“That’s a huge improvement versus consensus estimates. What we’ll have to see is the trend on volumes and prices in the second half. I suspect that the trend, at least on shipments, will be higher based on the second-quarter results.”

Analysts on average currently expect China Sunergy to post a loss of 15 cents a share, before items, on revenue of about $49 million, according to Reuters Estimates.

The company’s bright outlook comes a day after SunPower Corp SPWRA.O reported second-quarter results that blew past estimates, while China’s LDK Solar Co Ltd LDK.N raised second-quarter forecasts for both shipments and revenue.

The news comes even as a dearth of financing for renewable energy projects combined with a pullback in solar tax breaks in Spain have led to a flood of solar panels on the market, driving down prices and profits across the industry.

Hurt by falling average selling prices and its inventory of high-cost wafers, China Sunergy had reported a negative gross margin of 23.7 percent for the first quarter.

“End-customers for solar systems are coming back into the market now, financing seems to be freeing up a bit, and volumes seem to be going up as these lower prices make the return pretty attractive,” Cowen’s Stone said.”

The company, which had previously guided towards second-quarter margins in the low single digits, now expects margins to come in at about 9 percent.

Stone said margins were helped by the slower-than-anticipated price erosion and a partial reversal of the inventory provision taken in the first quarter.

In May, the company began purchasing lower-cost polysilicon wafers at spot market prices, which, it said, would bring down the inventory cost in the coming quarters.

Polysilicon is a key raw material for the company which makes photovoltaic solar products that turn sunlight into electricity.

Prices of polysilicon rose to $500 a kilogram last year as solar manufacturers scrambled to buy supplies due to shortages, but new production capacity and shrinking demand has pushed those prices near the $50 mark in recent weeks.

China Sunergy, along with Solarfun Power Holdings Co Ltd SOLF.O, Canadian Solar Inc (CSIQ.O) and LDK Solar got squeezed by this steep drop in prices, forcing them to take inventory write-downs.

China Sunergy shares were up nearly 15 percent at $5.69, making it among the top percentage gainers Friday on Nasdaq. More than 1.7 million shares changed hands in intra-day trade, twice the company’s 10-day moving average.

The stock, which has so far quadrupled since touching a year-low in November 2008, is still off nearly 60 percent from its August 2008 year-high. (Reporting by Adveith Nair in Bangalore; Editing by Jarshad Kakkrakandy)

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