JinkoSolar Q3 margins squeezed by lower than expected fall in polysilicon prices

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JinkoSolar reported a loss from operations of US$30.9 million in the third quarter, due to rapidly falling module prices but not a corresponding decline in polysilicon prices that squeezed gross margins down to 3.7%, compared to 25.4% in the second quarter of 2011. Total solar product shipments were 257.7MW, compared with 254.1MW in the previous quarter. Module shipments were 218.2MW, up 5.6% on the second quarter. Total solar module shipments for Q3 were recently revised to be in the range of 210MW – 220MW, down from previous guidance of between 230MW – 250MW. Net income was US$10.7 million, a decrease of 71.1% sequentially and a decrease of 73.8% year-over-year.

“The third quarter of 2011 was clearly a challenging period for both our company and the industry as a whole as the uncertain economic environment throughout Europe pressured demand and the typical seasonal upturn in Germany failed to materialize,” commented Kangping Chen, JinkoSolar's chief executive officer. “During the quarter, we came in line with the high-end of our revised guidance for total module shipments and revenue, but significant pricing pressure in the market drove down average selling prices (ASPs) of solar products faster than we anticipated while the polysilicon prices did not fall as rapidly. Unfortunately this mismatch had a significant impact on our margins and was the primary reason behind a non-cash inventory provision. In the face of such extremely challenging market conditions, we continued to take advantage of our vertically integrated business model to find new efficiencies in our production processes and squeeze out incremental improvements in our cost structure. As a result, we were able to keep our in-house gross margin at high teens while our overall gross margin stayed positive.”

JinkoSolar reported third quarter total revenue of US$279.2 million, a decrease of 21.4% from the second quarter of 2011 and an increase of 23.8% from the third quarter of 2010.

In-house gross margin related to JinkoSolar’s in-house silicon wafer, solar cell and solar module production was down to 18.4% in the third quarter, compared with 30.5% in the second quarter of 2011 and 38.6% in the third quarter of 2010. JinkoSolar said the decline was mainly due to module ASPs which fell more rapidly than the price of polysilicon in the quarter.

Manufacturing expansion

JinkoSolar noted that it expanded its in-house silicon wafer, solar cell and solar module production capacity from approximately 100MW each in the third quarter to approximately 1,200MW. Capital expenditure was US$53.6 million, used to meet expansion plans.

Based on full-year guidance, JinkoSolar’s previous expansion plans to reach 1.5GW In the three segments is on hold as at the end of the third quarter at 1.2GW each.

As per recently revised guidance, total solar module shipments are expected to be in the range of 770MW – 800MW, compared to previous guidance of 950MW – 1000MW.

Total revenue for 2011 is projected to be in the range of US$1.1- US$1.2 billion, down from previous guidance of US$1.4 – US$1.5 billion.

JinkoSolar also noted that it was expanding further into new emerging markets, including the US and China whilst establishing an ‘on-the-ground presence’ in Canada and Australia and exploring markets such as India and South Africa.

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