Canadian Solar saw sequential declines in revenues and shipments during the second quarter ended June 30, although net income rose slightly and internal solar-cell production capacity continued to ramp. The vertically integrated photovoltaics manufacturer expects shipments to increase during the third quarter and is sticking to its full-year guidance numbers.
Net revenues for the second quarter slipped to $328.7 million, compared to $336.9 million for the first quarter and rose significantly compared to the $114.2 million in revenues posted for the second-quarter 2009.
The company’s net income for the second quarter rose to $3.2 million, compared to $1.5 million for the previous period.
PV module shipments for the second quarter reached 181.2MW, a small drop from 185MW in the first quarter of 2010 and well up from the 48.2MW shipped in the second quarter last year. The company said that Europe continued to be the largest contributing geographic market, accounting for nearly 63% of sales, with Asia/ROW (~26%) and the Americas (11.5%) contributing the remaining revenues.
Canadian Solar said it expects to ship between 190MW and 200MW during the third quarter, achieving a gross margin of 14.5-15.5%. For the year, the company reiterated its shipments guidance of 700-800MW.
Internal PV cell production is forecast to expand, with an annual capacity of 800MW expected to come online by the end of the third quarter. A third cell-making facility will be completed in early 2011, which will push total internal capacity to 1.3GW, with almost half of that amount—620MW—comprised of higher-efficiency capability, according to Canadian Solar.
“Demand and pricing continued to be strong for the quarter, a situation we expect to continue throughout 2010,” stated chairman/CEO Shawn Qu (pictured). “Q2 shipments were above prior guidance. We reduced our purchase of third-party solar cells in order to improve our gross margin, a practice we will continue in Q3 and Q4. The rapid expansion of our internal capacity made this strategy possible. We manufactured 110 MW of cells internally in Q2 and purchased the balance. We expect to increase our internal quarterly cell output to 127 MW in Q3 and 180 MW in Q4.”
“We also continue to build on our brand reputation for technology innovation and excellence,” he said. “Since March, we have been shipping several new products, including enhanced selective-emitter modules and our New Edge modules. Our enhanced selective-emitter cells significantly increase the unit power output of our solar modules, while the New Edge modules permit rapid and inexpensive rooftop installation of solar systems. These products have been well received by our customers, and we expect that these products will help us gain market share and give us better pricing power going forward.”
“We are seeing improvements in many aspects of our operations,” continued Qu. “Our ingot and wafer costs have come down substantially and are now in line with leading wafer companies, and our cell conversion efficiencies using our proprietary enhanced selective emitter technology have exceeded 18%.
“We expect module pricing to remain relatively stable for the balance of the year. We expect that these factors, as well as our increased internal cell production, to support continued margin improvement through the fourth quarter.
“We also expect our increased internal cell production early next year to enable us to substantially improve our margin structure. Finally, we expect our solar system business to start generating meaningful income in Q4 and continue to grow in 2011,” he concluded.
Addressing some specific items in the financial results, CFO Arthur Chien commented that “this quarter’s results included a $9.0 million net foreign exchange charge, which is slightly less than predicted. Currency hedging reduced the impact of foreign exchange losses by $21.6 million. Q2 general and administrative expenses included additional legal and additional auditing costs of approximately $4.8 million related to the SEC subpoena and the internal audit committee investigation.”