Suntech Power Holdings Co., Ltd. (NYSE: STP) (“Suntech” or the “Company”) today announced that in order to reduce production cost and operating expenses, the Company has temporarily closed a portion of its solar cell production capacity in Wuxi, China and will continue to optimize its organization.
David King, Suntech’s CEO, said, “In this rapidly evolving solar market, it is crucial to evaluate market trends and adapt our business to suit. In light of the preliminary U.S. anti-dumping tariff, the European anti-dumping investigation, and oversupply of solar modules, we have decided to right-size our production capacity and continue to optimize our organization. With a smaller manufacturing base we will be able to lower production cost, increase utilization rates and improve product performance. With these and other initiatives we target to create a sustainable business model and return to positive operating cash flow in 2013.”
Post the restructuring, Suntech’s operational solar cell capacity will temporarily be reduced to 1.8GW, module capacity will remain at 2.4GW and wafer capacity will remain at 1.6GW. The consolidation of solar cell capacity is expected to affect approximately 1,500 employees in China. The majority of employees will be offered positions at other production facilities and severance packages will be provided to all others. The restructuring initiatives are expected to substantially improve the utilization rate of solar cell production facilities. In addition, Suntech’s panel cost is expected to improve as production will be concentrated at the Company’s highest efficiency, lowest cost manufacturing facilities.
Suntech is on track to reduce its operating expenses (excluding non-recurring items) by 20% in 2012 compared with 2011. Impairments related to the closure of facilities, severance payments and other related expenses are currently being assessed and will be disclosed in the Company’s third quarter 2012 earnings report.