Canadian Solar adding solar cell capacity after record third quarter results

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Updated: Major PV energy provider, Canadian Solar, has reported record quarterly results for the third quarter of 2014, while guiding higher shipments and revenue for the fourth quarter.

Canadian Solar also confirmed that it would be expanding PV module capacity by 500MW but also announced plans to add 400MW of high-efficiency solar cell capacity, while upgrading existing production lines to higher efficiencies. 

Financial results 

The company reported net record revenue of US$914.4 million, compared to US$623.8 million in the second quarter of 2014 and blasted past third quarter guidance that was in the range of US$760 million to US$810 million. 

Net revenue from the total solutions business, which represents its project development operations, as a percentage of total net revenue was 53.8% compared to 32.6% in the second quarter of 2014. The company has a target of obtaining at least 50% of its revenue from its total solutions business.

The company reported a gross margin of 22.9%, compared to 19% in the second quarter of 2014, exceeding previous guidance of being in the range of 19% to 21%. Net income in the third quarter was US$104.2 million.

Gross profit in the third quarter was US$209.3 million, compared to US$118.2 million in the second quarter of 2014.

Canadian Solar’s module shipments were 770MW, compared to 646MW in the second quarter of 2014, with third quarter guidance in the range of 720MW to 750MW. 

The Americas represented 71.7% of net revenue, sales to Asia and other markets represented 20.9% of net revenue, and sales to Europe represented 7.4% of net revenue, compared to 55.5%, 29.8% and 14.7%, respectively.

Dr. Shawn Qu, chairman and CEO of Canadian Solar, remarked: “Our results for the third quarter exceeded our expectations on all financial and operating metrics, led by the strength of our utility-scale solar energy business, combined with a robust performance from our module business, which continues to benefit from our tier one brand, global scale, stable average selling price and broad-based growth in demand. Our team was able to close and recognize the sale of five utility-scale solar power projects in Canada, exceeding our target of four projects. We are pleased with our solid execution and expect our Canadian project pipeline will continue to deliver strong profit as we enter into 2015.”

Production capacity expansion 

Canadian Solar noted that due to strong demand from a number of key markets it would expand production. 

The company confirmed reports that it would expand PV module production by 500MW at its Changshu and Luoyang plants in China, which are expected to be completed in the second quarter of 2015. Capacity expansions were to come online throughout the first two quarters of next year.

Total nameplate PV module capacity would therefore stand at 3.5GW by the end of the second quarter of 2014.

However, the company also announced a major expansion of solar cell capacity with several high-efficiency developments. Firstly, Canadian Solar said it was installing its first 80MW cell line dedicated to high efficiency multicrystalline solar cell production at its plant in Funing, Jiangsu Province, which was said to be progressing well and that it expected to further expand this high efficiency cell facility to 400MW by the second quarter of 2015. 

This would increase in-house nameplate solar cell capacity to 1.9GW. 

Shawn Qu said in an earnings call that the expansion of high-efficiency cell production would result in 19% conversion efficiencies.

The company has also noted that it would start upgrading existing cell lines in Suzhou, Jiangsu Province, to bring the average cell efficiency of its multicrystalline solar cells above 18%.

Finally, Canadian Solar said that it planned to upgrade ingot furnaces at its wafering plant in Luoyang, Henan Province, taking total wafer capacity from 260MW to 400MW in 2015.

Qu also noted that company was looking at options to expand module production further in 2015, while seeking further solar cell production partnerships, due to the expected demand for its modules.

Qu responded to analyst questions on the lack of available 'duty-free' cell capacity, noting that the company could bring online more cell capacity outside of China quickly if required but were waiting for US/China negotiations to play-out. 

Capex for the expansions was said by management to be around US$110 million, primarily funded by internal resources.

Management noted that it did not require a greenfield facility for the current planned expansions. However, the expansion of cell production in an overseas location to circumvent AD duties in the US, would result in a greenfield facility being required.

Guidance

Canadian Solar guided continued strong growth for the fourth quarter of 2014 and subsequently raised full-year guidance as well. 

The company expects PV module shipments to be in the range of approximately 810MW to 860MW in the fourth quarter. Total revenue is expected to be in the range of US$925 million to US$975 million, with gross margin is expected to be between 17% and 19%. 

For full year, PV module shipment guidance is expected to be in the range of 2.73GW to 2.78GW, compared to previous guidance of being in a range of 2.5GW to 2.7GW. 

Full-year revenue guidance was raised to be in the range of approximately US$2.93 billion to US$2.98 billion, compared to a range of US$2.7 billion to US$2.9 billion previously guided. 

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