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Solar Shipments Rise as Prices Fall to ‘Unsustainable’ Levels

Solar manufacturers expect shipments to increase this year as a global glut drives prices to “unsustainable” levels.

Suntech Power Holdings Co. (STP), the world’s largest solar panel company, expects shipments of as much as 2.5 gigawatts this year, up 19 percent from 2.09 gigawatts in 2011, according to a statement today. Canadian Solar Inc. (CSIQ) said yesterday that shipments will increase as much as 51 percent to 2 gigawatts.

Profits won’t rise at the same pace because solar-panel prices fell 50 percent last year, squeezing gross margins to 9.9 percent in the fourth quarter at Suntech, from 17 percent a year earlier. Jinko Solar Holding Co. (JKS) reported today gross margin of negative 4.4 percent in the fourth quarter, compared to 29 percent a year earlier.

“The challenge is profitability,” Suntech Chief Executive Officer Zhengrong Shi said during a conference call. “Excess capacity in the global industry has pushed the international solar companies to sell at unsustainable pricing levels in an effort generate cash and maintain viability.”

The growth in shipments will be driven in part by demand in China, where total installations may more than double to 5 gigawatts this year, Shi said.

Suntech, based in Wuxi, China, posted a net loss of $136.9 million, or 76 cents an American depositary receipt, in the fourth quarter. That’s more than double the 33-cent loss analysts were expecting, the average of 7 estimates compiled by Bloomberg. Each Suntech ADR is worth one ordinary share.

‘Unprofitable’ Solar Companies

Jinko’s net loss was $58.3 million, or $2.58 an ADR. Each ADR for the Jiangxi, China-based company is worth four ordinary shares.

Canadian Solar’s net loss was $59.9 million, or $1.39 a share. The company is based in Kitchener, Canada, and most of its production is in China.

“What we are seeing is optimistic manufacturers continue to expand, but they are unprofitable,” Jesse Pichel, an analyst at Jefferies Group Inc. in New York, said in an interview yesterday. “What these companies should be doing is raising prices and taking lower volume, while writing off low end lines or product.”

Suntech is seeking to boost margins by cutting expenses. “Driving down production costs is our top priority in 2012,” Shi said.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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