Is 2015 the year of reckoning for Yingli Green?

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Recent history has not been kind to PV manufacturers that climb the rankings chart to become the global leader. Since 2007 when the industry really started to breakout of being a cottage industry and scale production, Sharp began a slow fall from the top, Suntech and First Solar both had short stays at the top and more recently, Yingli Green. After two years as the leading PV manufacturer, measured by module shipments, the company lost the top spot to Trina Solar in 2014. 

That was not the plan Yingli Green set itself at the beginning of 2014. It had lost over US$1.2 billion in the last three years getting and maintaining its position at the top and with continued rising demand, initially guided shipments of 3.6GW to 3.8GW, indicating an annual growth rate of between 15% to 20%, in line with overall global market growth projections. 

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However, Trina Solar had guided exactly the same figures that would have correlated to growth of 40% to 42%, outstripping global market growth projections. 

It became very clear, very quickly that Trina Solar’s momentum was stronger than that of Yingli Green’s, though the shipment battle was close throughout the year, Yingli Green effectively put the brakes on market share gains at any cost in the third quarter. 

The company lowered shipment guidance to 3.3GW to 3.35GW, effectively giving the crown to Trina Solar, even though Trina Solar also lowered it guidance to 3.61GW to 3.66GW

When full-year shipment figures were revealed, Trina Solar had shipped 3.66GW in 2014, while Yingli Green had shipped 3.36GW. 

Looking at the shipment guidance figures of the top five companies for 2015 indicates that two other companies could push past Yingli Green, dropping the company to fourth position in the rankings. 

Rather than a fight back from Yingli Green, momentum at Trina Solar, Canadian Solar and JA Solar from 2014 looks ominous. 

Looking at actual first quarter shipments from the top five companies based on full-year shipment guidance would seem to confirm the trend. Granted, we have taken shipment guidance figures of Yingli Green for the first quarter (700MW to 750MW) but the company is expected to release results tomorrow (June 7). We will update the chart relating to this after the company release. 

However, from first quarter shipment figures, Canadian Solar is soaring, having been the only company to actually exceed shipment guidance in the quarter and also topped the shipment rankings. 

Canadian Solar reported shipments of 1.23GW, while Trina Solar reported 1.02GW of shipments in the first quarter. 

As a result, Canadian Solar exceeded its average quarterly shipment requirement (1GW) to meet the low-end of its annual guidance, while Trina Solar just missed its figure (1.1GW) by a whisker. 

In contrast, Yingli Green would need to hit 900MW of shipments on a quarterly average basis and already is guiding well below that run-rate. 

Of course this is simply the math talking as shipment momentum typically builds through the year, although in recent years, strong growth markets such as Japan and the UK have meant that total first quarter shipments are not as markedly down as other quarters, especially when Germany dominated the market. 

Unless Yingli Green surprises in reporting higher shipment figures than guided, first quarter shipments of the top five companies highlight that Yingli Green and JA Solar have already come under pressure to build shipment momentum in subsequent quarters. 

With many of the top 10 ranked companies in 2014 actually lowering shipment forecasts when issuing third quarter financial results last year, the threat to those guided shipments comes sooner than many realise. 

Therefore strong shipment guidance from the likes of Yingli Green for the second quarter is required. However, JA Solar guided total cell and module shipments in the second quarter were expected to be in the range of 680MW to 720MW, indicating execution in the second half of the year would need to exceed the average quarterly shipment requirements to meet the low-end of annual shipment guidance, which the company did not revise. 

In contrast, Trina Solar guided second quarter shipments to be between 1.1GW to 1.14GW, well in line with the average quarterly shipment requirements to meet the low-end of annual guidance. 

The other company to keep a close eye on in 2015 is Canadian Solar, which is tracking Trina Solar as closely as Trina Solar did Yingli Green in 2014. 

It is interesting to note that Canadian Solar guided second quarter shipments to be in the range of 950MW to 1000MW, again closely tracking the average quarterly shipment requirements to meet the low-end of annual guidance. 

Canadian Solar also has the advantage over its closest rivals of having a shipment figure advantage from exceeding its average quarterly shipment requirements needed to meet full-year guidance. 

Is the US Yingli’s Achilles heel? 

Yingli Green’s shipments from 2013 through 2014 were basically flat and therefore lost overall market share to its main rivals. 

There is no question that end markets continued to diversify in 2014, yet the key markets remained as they were in 2013. China, Japan and the US were the biggest country markets over the last two years and are projected to be the same in 2015. 

To be number one or a major top five industry player having a strong market presence in the top three markets is not a bad idea. 

Yingli Green has been strong in all three markets in the past and clearly has been strong in China and Japan last year as the regional chart on the left shows.  

However, it would seem that the US market is proving Yingli Green’s Achilles heel, not surprisingly perhaps due to anti-dumping duties imposed last year. 

Management touted in its last conference call that it had achieved eight straight quarters of shipments to the US above 100MW. 

However, excluding 260MW of module shipments to its downstream business last year, the chart provides a shipment figure of around 496MW to the US in 2014. This compares to a shipment of around 652MW in 2013, again excluding shipments of 128MW of Yingli Green’s total shipments for its downstream business that year. 

So the eight straight quarters of shipments to the US that were above 100MW may be correct but it disguises that fact that shipments fell significantly year-on-year. 

Yingli Green also touted at its analyst day event last year that the US market had grown significantly since 2010, citing independent research data from the likes of GTM Research that the US market had 30% growth rate in 2014 and that the CAGR of the utility PV market increased, 64% and the residential market increase by 46%. 

Therefore, Yingli Green’s US market share decline is bigger than the shipment decline would suggest. 

Even in 2015 there would seem to be something amiss about Yingli Green’s recent press releases regarding US customer activity. 

In May, it announced a new module supply agreement with Borrego Solar, which said that it expected the US installer to use up to 40MW of its modules in 2015. 

PV Tech data indicates that in 2010, Yingli Green supplied up to 20MW of modules to Borrego Solar, accounting for the majority of the installers 23.7MW of total installations in that year. 

Moving to 2015, Borrego Solar confirmed to PV Tech that its installation target this year was around 100MW, indicating that Yingli Green’s share of Borrego Solar’s business has significantly declined. 

Only the other day, (June 2), Yingli Green announced that it had renewed its ‘Preferred Supplier’ status with another major US installer, Vivint Solar. 

Curiously, no module supply deal quantities were provided in the release, except Robert Petrina, managing director of Yingli Americas stating the following: 

“With the US residential solar market poised to reach nearly 3GW by the end of 2016, we are thrilled to expand our partnership with Vivint Solar, one of the nation's top home solar companies.”

With the benefit of Vivint Solar being a publically listed company, SEC filings state that historically, Trina Solar, Yingli Green and Canadian Solar had been the principle module suppliers to the company and that in 2014, Trina Solar and Yingli Green had accounted for the majority of module purchases. 

However, Vivint Solar’s approved module suppliers also include SolarWorld, ReneSola, Suniva and Upsolar. 

Other historical Vivint Solar data in SEC filings indicates that Yingli Green had been responsible for around 20% of module requirements for the installer with around 40% attributed to Trina Solar. 

The impression given by Yingli Green in recent releases and its previous earnings and analyst day events is not in sync with the facts. 

Clearly getting any better insight in to it US shipments in the first quarter and possible guidance on US shipments for the year would help clear up the inconsistencies or confirm in contrast to its closest rivals that are making more inroads into the booming US market and could be the key contributor to Yingli Green’s expected market ranking decline in 2015. 

Of course one of the key clouds overhanging Yingli Green this year relates to its financial position and ‘going concern’ issues relayed in its recently released annual report for 2014. 

Tackling its well-known debt issues, while remaining a leading company may be too much for Yingli Green in 2015 and therefore possibly the year of reckoning. 

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