Inauspicious color: Top Chinese solar companies wade through red ink in latest quarterly results

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Tom Cheyney
Tom Cheyney
Tom Cheyney, former senior editor of PV-Tech and Photovoltaics International, is now chief curator of SolarCurator.com and director of Impress Labs’ solar practice.

In Chinese culture, the color red signifies happiness, joy and good fortune. Wedding dresses shimmer in crimson, and flush-with-cash gift envelopes often bear a distinctive scarlet tint. But there was no ruby-hued joy in the just-completed round of quarterly financial announcements from the leading Chinese solar companies, as sales revenues fell, margins evaporated, and inauspicious red ink flowed in Yangtze-like volumes. Comparisons of certain key indicators among the top 10 firms reveal a profitless sector largely reeling from plummeting PV module prices and urgent attempts to balance capacity with demand and rein in costs.     

Although the collective shipments of solar products (wafers, cells, modules) for the companies did rise nearly 8.7% to 3.641GW in the recently closed quarter, the total revenues fell 7.8% to US$4.158 billion during the period. Seen another way, for every megawatt shipped, an average of US$1.15 million was accrued, compared to US$1.35 million per MW in the previous quarter.

Canadian Solar and China Sunergy were the only two firms to increase quarter-on-quarter revenues, while Hanwha SolarOne, LDK Solar, and Trina Solar represented the minority that did not grow shipments over the previous three-month period. Trina also took the largest single revenue and shipments hits, as sales slid nearly $98 million and module deliveries dropped 26.4MW

Looking ahead, almost every company has guided lower shipment volumes for the year-end quarter, with an estimated range between 2.864GW to 3.24GW, a drop of between 401.15MW and 777.15MW compared to the just-announced period. As a result, all but one firm have reduced their annual shipment guidance figures; only Canadian Solar (listed here as a Chinese company for the purposes of comparison, since most of its production resides in the PRC) has said it might meet its previously announced numbers. Suntech, JA Solar, and Yingli all expect to see shipments squeezed by north of 100MW during the final quarter of 2011.  

Note that the seemingly wide forecast gap is largely caused by LDK Solar, which has stated cumulative wafer and module guidance figures of between 380MW and 540MW (with the ratio between wafers and modules moving downstream), while the other companies’ numbers show a range of a few tens of megawatts.  

If LDK hits the high end of its very-ballpark, loosey-goosey forecast, it would be the only one on the list, with the possible exception of Canadian Solar, to meet or exceed its previous quarter’s amounts. But if LDK trends toward the low end of its quarterly guidance, the vertically integrated firm may see its shipment numbers drop in the neighborhood of 100MW. The glaring disparity prompts the question: is this any way to model a guidance forecast?

A look at quarterly gross margins shows the dectet evenly split between positive and negative ground, though all except Suntech saw those margins fall from the previous quarter. ReneSola and Jinko Solar experienced the most precipitous quarterly margin declines, 22.4% and 21.7%, respectively, with ReneSola going from 18.4% to negative 4%.

The three top revenue earners—Suntech, Yingli, and Trina—all maintained positive low-double-digit margins during the period, with Sunergy and Hanwha topping the negative margins’ leaders board at the other extreme.

Recurring themes among the financials include nearly across-the-board reductions in capital expenditures and resultant slowdowns or stoppages of capacity expansion plans, continuing internal manufacturing and other operational cost-reduction efforts, accelerated technology roadmaps, and of course, significantly lower (20-30%-plus) average selling prices for modules compared to the previous quarter.

A bright spot for some companies: a rapidly growing domestic appetite for modules, as Chinese projects and deployments take off.  Yingli said its homegrown “shipment volume in the third quarter alone exceeded [its] cumulative shipments as of June 30.”

Another common thread: the Chinese top 10ers’ results paled in comparison to First Solar’s most recent quarterly results.

The market-leading US-based company saw its revenues skyrocket from nearly $533 million in Q2 to $1 billion in Q3, its factory run-rate ratchet up from 483MW to 551MW (only Suntech bested that number), and its gross margins inch 1.1% higher to an industry-best 37.7%. The thin-film panel and EPC company also showed a proper net profit – US$196.5 million—something none of its crystalline Chinese counterparts were able to achieve.

Whether or not the Chinese firms are dumping modules below cost and engaging in unfair trade practices in cahoots with the color-me-red government in Beijing, as the CASM crowd has alleged and the ITC is investigating, one thing’s for sure: the leading companies’ latest quarterly results are down in the dumps.

 

Company

 

 

Q3 Revenues

 

 

Q2 Revenues

 

 

Q3 Shipments

 

 

Q2 Shipments

 

 

Q3 Gross Margin

 

 

Q2 Gross Margin

 

 

Q4 Shipment Guidance

 

Canadian Solar

$499.6M

$481.8M

355MW

287MW

2.4%

13.2%

340-360MW

Hanwha SolarOne

225.4

277.1

200.9

205.9

(10.8)

   9.1

160-180

JA Solar

388

418.5

445

401

(4.3)

(2.7)

310-330

Jinko Solar

279.2

350.6

257.7

254.1

3.7

25.4

180-210

LDK Solar

471.9

499.4

484.6

508.6

(3.6)

2.2

380-540

ReneSola

189.1

249.3

328.5

295.5

(4.0)

18.4

280-300

Sunergy

145.8

144

116.2

89.3

(13.7)

2.6

95-110

Suntech

809.8

830.7

572.25*

493.25*

13.3

4.1

459-460*

Trina Solar

481.9

579.5

370

396.4

10.8

17

320-350

Yingli Solar

667.7

680.6

511*

419.33*

10.8

22.1

340-400*

Totals

4158.4

4511.5

3641.15

3350.38

3.48 (avg.)

11.14 (avg.)

2864-3240

*Suntech and Yingli do not provide quarterly shipment data; numbers provided are based on estimates from Stifel Nicolaus and Daiwa (Suntech), and Maxim Group, Credit Suisse, and Collins Stewart (Yingli).

 

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