Hanwha SolarOne takes hit on margins in Q2

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Tier 1 PV manufacturer, Hanwha SolarOne reported lower module ASPs, gross margins and revenue for the second quarter of 2014, while shipments increased slightly. 

The company reported revenue of US$178.5 million, down 2.7% from the first quarter of 2014, despite module shipments increasing 4.9% to 339.5MW, compared to 323.6MW in the previous quarter. 

However, Hanwha SolarOne had guided second quarter module shipments to be in the range of 350MW to 370MW.

Although module shipments to Japan (53%) remained its largest market in the second quarter, increased shipments to China which accounted for 6% of total shipments, compared to less than 1% in the first quarter led to module ASPs of US$0.67/W, down from US$0.69/W in the previous quarter.

Overall gross margins were also impacted by a significant decline in shipments to higher priced markets such as the UK, which had contributed 22% of shipments in the first quarter but due to utility-scale business decline after FiT changes, shipments to the UK only accounted for 9% of the total in the second quarter. 

As a result, gross margins slumped to 9.5%, down from 13.9% in the prior quarter. Margins would have been lower without a 2% increase in shipments to Japan. Manufacturing costs in the quarter remained flat with the prior quarter at US$0.59/W.

Seong-woo Nam, Chairman and CEO of Hanwha SolarOne said, “The second quarter of 2014 showed an increase in shipments and a significant reduction in our net loss position. Our gross margins were driven down by a lower average selling price, reflecting a decreasing proportion of sales from the higher-priced EU market, particularly the UK, and an increasing proportion from the relatively lower priced China market. We maintained our strong position in Japan and began shipments to several newer emerging markets. We continued to maintain tight control over operating expenses.”

In contrast to some of its China-based rivals, shipments to the US in the second increased, compared to the first quarter. Hanwha SolarOne reported shipments to the US accounted for 11% of the total, up from 8% in the prior quarter. 

The company noted that it shipped PV modules to 23 countries in the quarter with Europe and Africa accounting for 12% to total module shipments, Asia Pacific 70% (Japan 53%) and North America 18% US 11%).

Hanwha SolarOne reported an operating loss of US$6.4 million in the quarter, compared to an operating profit US$3.5 million in the previous quarter. Net loss was US$8.7 million.

Gross profit in the quarter was US$16.9 million, ompared to a gross profit in the first quarter of US$25.4 million. 

Manufacturing update

Hanwha SolarOne noted that it still expected to meet it manufacturing capacity expansion plans in 2014, which include expanding solar cell capacity to 1.5GW and module capacity to 2GW. Capital expenditure in the quarter was US$13.6 million, while US$80 million would be spent in 2014.

The company also noted that it expected solar cell conversion efficiencies above 18% by the end of the year.

With continued focus on automating its module assembly operations, the company expects manufacturing costs to decline by between 8% and 10%.

Ingot and wafer cost reductions were claimed to be significant and would support lower module production costs later in the year.

Due to the latest US anti-dumping duties, Hanwha SolarOne said that it would stop using Taiwanese solar cells for modules shipped to the country. 

Guidance 

The company said it expected module shipments to increase further in the third quarter, guiding shipments of approximately 400MW. Full-year shipment guidance was said to be in the range of 1.5GW o 1.6GW, with 25% to 30% of shipments related to module processing services to sister company, Hanwha Q CELLS and unchanged from previous guidance. 

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