Canadian Solar expects 50% of business to come from PV projects

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Canadian Solar’s CEO expects 50% of its revenue will be generated from its PV power plant project business in the next two years, marking a significant shift in its business model.

Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar made the claim during prepared remarks in a conference call to discuss Q3 2012 financial results.

Dr. Qu noted the impressive growth the company had achieved this year in the ramp of its Total Solutions Business unit, which is responsible for PV project development and that the success of this venture would lead to 13% of revenue soon but is planned to become 50% of revenue over the next 12-24 months.

The company is following the increasing trend of major PV manufacturers such as First Solar and SunPower in increasingly becoming reliant on project business to generate revenue but importantly, higher margins than simply selling modules, due to severe price declines and diminished margins.

Canadian Solar said gross margins were 2.2% in Q3, down from 12.4% in Q2 2012, yet would be in the range of 1.0% – 3.0% in Q4.

Michael Potter, Canadian Solar’s CFO said in the call that the Total Solutions Business was expected to generate around US$800 million in revenue over the next 18-months. Canadian Solar had 21.1MW of project business completed in Q3 2012. The company had reported modules used in projects of 8.7MW in Q2 2012.

During the call, Dr. Qu highlighted that Stonepeak Infrastructure Partners had acquired one of its utility-scale solar power plants in Canada for approximately C$48.0 million (US$48.4 million) in the quarter. However, soon after the end of the quarter, it had also finished construction of two projects: Brockville 1 and William Rutley with a combined 20MW (AC), which had subsequently been sold to TransCanada Corporation. 

Financial results

Canadian Solar reported net revenue of US$326.0 million in Q3 2012, down 6.4% from US$348.2 million in Q2, following the trend in the same quarter a year ago of revenue declining by 34.8%.

The company reported total solar module shipments of 384MW, down from 412MW in Q2 and slightly up from 355MW in the same quarter a year ago.

Gross profit in Q3 was US$7.3 million, compared to US$43.2 million in the second quarter of 2012 and US$11.9 million in the third quarter of 2011.

However, the operating margin was negative 10.6%, compared to negative 0.9% in in Q2 2012 and negative 6.1% in the same period a year ago.

Net loss was US$43.7 million, compared to net loss of US$25.5 million, in Q2.

Management noted in the call that sales in Germany were strong in Q3, with the European market making-up 47.9% of net revenue, while sales to North America represented 24.9% of net revenue, weaker than expected. Sales to Asia and all other markets represented 27.2% of net revenue in Q3 2012.

Financial guidance

 

Canadian Solar said that it expected module shipments in Q4 2011 to be flat to slightly up on Q3 figures and within the range of 380MW – 420MW.

Therefore the company revised down full-year guidance to be between 1.5GW -1.6GW, compared to its previous guidance of 1.8GW – 2.0GW.

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