Hanwha SolarOne at full capacity: expects profitability in 2014

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Citing the first quarter of 2013 as an inflection point for the company, PV module manufacturer, Hanwha SolarOne reported an increase in revenue, shipments and ASPs, with promise of returning to profitability in 2014.

The company reported first quarter 2012 revenue of US$179.2 million, an increase of 33.0% from the fourth quarter of 2012, bucking the seasonally weak first quarter trend.

The increase in revenue was supported by higher module shipments, which reached 289.1MW, up from 198.9MW in the prior quarter and an increase from 160.7 MW in the same period a year ago.

Management noted in a call to discuss financial results that ASPs increased by 10% in the first quarter to US$0.66/W, up from US$0.60/W in the prior quarter.

The company reported that gross margin was positive by 2.6%, compared with a negative gross margin of 31.3% in the fourth quarter of 2012. . On a GAAP basis, the company narrowed the net loss to US$36.4 million for the quarter. The operating loss was US$20.6 million.

Ki-Joon Hong, Chairman and CEO of Hanwha SolarOne, stated, “The first quarter was an important inflection point for both the solar industry and the Company, with a number of positive signs developing for further progress ahead. Both revenues (+33%) and shipments (+45%) rose sharply, prices improved from the prior quarter and appear to have now stabilized, we returned to positive gross profit, our plants are running at full utilization favorably impacting our cost structure, and although we still recorded negative operating income and cash flow, the amounts were relatively small and substantially improved from prior periods.”

Management reiterated its strategy to diversify sales away from Europe, noting in the call that 33% of shipments in the first quarter went to Japan, its largest market in the quarter, which was supported by its highest ASPs of US$0.70/W.

Due to previously securing module supply contracts for several major utility-scale PV power plants being built in South Africa, 21% of shipments in the quarter went to the country, which offered similar ASPs to Japan, according to the company.

Less that 30% of shipments were to Europe in the quarter and only 13% to Germany. The US represented 9% of shipments, up from 6% in the prior quarter. The UK, Portugal and China accounted for 5%, 4% and 3% of shipments respectively.

Manufacturing update

Hanwha SolarOne said that capital expenditures were US$32.4 million in the first quarter, while CapEx for the full-year was expected to be around US$50 million, reiterating previous management comments that the company had no near-term plans to increase spending for capacity reasons.

Production capacity therefore remained unchanged at 800MW for ingot and wafers, while solar cell capacity stood at 1.3GW and 1.5GW for modules. 

Cost reductions had primarily been supported by higher efficiency gains as it migrated lines to a ‘copy smart’ approach Hanwha Group member Hanwha Q-Cells.

Guidance

Management guided that it expected second quarter 2013 module shipments to be in the range of 330 – 350MW and reiterated that full-year shipments would be in the range of 1.3 – 1.5GW, effectively operating at full capacity for the rest of the year.

“We continue to see gradual improvement in the solar industry for the remainder of 2013 and for those who remain large company like us with a scale, trend, technology and low cost structure, are much better and profitable 2014 and 2015,” noted Hong in the conference call. 

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