Catalogue of woes hits Trina Solar

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Following recently revised second quarter financial results, Trina Solar produced a long-list of issues that contributed to growing losses and a meaningful reduction in its full-year shipment guidance. A major shake-up of its senior management structures have been made that included the exit of its short-stay chief commercial officer, Mark Kingsley.

Net revenues for the second quarter of 2012 were US$346.1 million, down 1.1% sequentially but quarterly net losses climbed to US$92.1 million, compared to US$29.8 million in the first quarter of 2012. Net margin was negative 26.6%.

Solar module shipments increased 10.2% sequentially to 419MW, meeting the high-end of lowered guidance of between 390MW-420MW.

Quarterly woes

Increased losses and deepening negative margins underlined growing concerns over the failure of the PV industry to tackle chronic overcapacity. Trina Solar reported a non-cash inventory write-down of US$26.1 million and impairment for property, plant and equipment of US$12.8 million. The Impact of non-cash inventory write-down to gross margin was 7.5%, according to the company, while property and plant contributed 3.7%.

Trina Solar also reported a loss from operations that included an accounts receivables provision of US$44.1million, which had a 12.7% impact on its operating margin. Terry Wang, Chief Financial Officer of Trina Solar said in a statement, that overdue payments from certain unidentified customers were the reason behind operational losses. 

“Industry overcapacity and demand constraints in newer and traditional PV markets contributed to deflationary pricing pressures in the second quarter, which adversely affected our operating margins and profitability,” commented Jifan Gao, Chairman and CEO of Trina Solar. “Market demand challenges included uncertainty caused by changes in the system of feed-in-tariffs in markets such as Italy, the influence of potential anti-dumping tariffs in the United States, inventories due to project delays from U.S. customers that made purchases under the U.S. federal government's 1603 Program and project start-up delays by certain of our customers in China due to revised network planning and related bid award delays and financing limitations.”

Guidance

Trina Solar expects to increase module shipments to between 450MW to 480MW in the third quarter . However, gross margins will remain under pressure as the company expects margins to be in the ‘middle-single digits.’

Weaker than expected demand or over optimistic guidance earlier in the year has led to the company meaningfully reducing its shipment guidance for the full-year. Trina Solar said that it expected shipments to be in a tight-range between 1.75GW-1.80GW, compared to previous guidance of between 2.0-2.1GW.
 

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