Yingli Green hit by polysilicon write downs: Q4 module shipments guided lower

Financials

  • YGE
    NYSE
    4.14
    -0.08 (-1.90%)
    4:04PM EDT

Polysilicon price declines on the spot market have finally taken their toll on Yingli Green and its polysilicon operations, Fine Silicon. An asset write down of US$361 million has been made on Fine Silicon assets of which a US$43 million impairment of goodwill is to be made in its fourth quarter financial statements. However, Yingli also said it would make a provision of approximately US$135 million on its polysilicon inventory as a result of the continuing decline in the purchase price.

Polysilicon spot prices over the last few months have declined to around US$30/kg and have already forced some higher cost producers to close plants. The trend, due to continued overcapacity is to continue to decline though at a slower rate than experienced in 2011.

The company also guided a higher than expected decrease in module shipments for the fourth quarter. Instead of a previously guided shipment decline in the range of low to middle twenty percent range, shipments are expected to be close to a thirty percent decline, compared to the third quarter. The PV module manufacturer had reported record quarterly shipments for the third quarter, up 21.9% from the previous quarter to an estimated 500MW.

According to Jeffries analyst, Jesse Pichel in an investor note, the decline in shipments was due to Yingli changing its revenue recognition policy from shipment arrival to payment reception for some customers in the US and Europe. The move is seen as a better method of controlling financial risk.

Yingli also noted that lower shipments and impairment charges would also contribute to lower gross margins. Yingli guided margins to fall to approximately 3% percent, compared to its previously provided guidance of approximately 10%. The company noted that in excluding the non-cash inventory provision, margins for its PV modules for the fourth quarter would be approximately 12%.

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