JA Solar reduces losses but shipments and revenue stall

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Despite shipments exceeding guidance, JA Solar’s revenue and shipments have stalled since Q2 2012 and are expected to remain flat in Q4.

Although net losses of US$59.1 million were reported for Q3 2012, the company's losses were smaller than in Q2.

JA Solar shipped 418MW of PV products (wafers, cells and modules) in Q3 – higher than the 370MW previously guided. An increase in module shipments to China for utility-scale projects supported the increase, along with module shipments increasing to emerging markets such as Japan.

Dr. Peng Fang, CEO of JA Solar said: “In spite of tough market conditions, shipments exceeded the top end of our guidance in the third quarter, thanks to robust sales across emerging markets. The proportion of modules in our overall sales mix continued to increase, accounting for 68% of revenue and 59% of total shipments in the quarter. In light of the current slowdown in demand and ongoing trade issues in Europe, we continued to explore opportunities in nascent growth markets while stringently managing our cash position.”

However, overall shipments were flat with Q2 (418MW), while management-guided shipments in Q4 would be between 380MW and 420MW.

Weak demand within key European countries and the likelihood that emerging markets will take time to develop meant the company revised down the high-end of previous guidance for the full-year to between 1.55GW – 1.65GW, down from 1.5GW – 1.8GW.

Financials

JA Solar reported Q3 2012 net revenue of US$260.9 million, a decline of 9.2% from US$287.5 million in Q2. Lower ASPs (13% decline), notably for utility-scale projects in China and the highly competitive German market were responsible for the revenue decline.

Gross margin was negative 5.9%, compared with positive 4.8% in the second quarter of 2012. The company noted that an inventory provision of US$8.2 million and a reversal of prior provisions for anti-dumping and countervailing duties in the US were factors in the margin decline, though if excluded, the JA Solar would have reported a negative gross margin of 3.7%.

Markets

JA Solar management said it believed the company had successfully completed the transition from being a solar cell supplier to a module supplier. The next phase would be to move further downstream.

“Right now we have not announced any strategy on this front. However, we are actively working with our partners in downstream both in China and also in Japan and in other regions,” said Dr Fang in a conference call to discuss financial results.

Dr. Fang later said that it could develop projects directly, instead of just being a module supplier to utility-scale plants in the country. He said that the company had a provisional project pipeline of between 100MW and 200MW, located in Western China, but had not committed to construction at this time. 

“I think the geographical distribution of our shipment in Q4 will be similar to Q3 and China still a positive market here and also the US is increased slightly and Europe is stabilising,” noted Dr. Fang. “And of course in Japanese market we are one of the leading providers over there with a higher ASP. We see some growth in [the] Japanese market and also probably next year we’ll be the major increase in Japanese market.”

However, Dr. Fang also noted that many more PV module suppliers had entered the Japanese market in recent months with the results that greater competition was impacting prices.

With greater transparency in the US market after anti-dumping duties were officially announced, JA Solar management expected the market to improve in the coming quarters.

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