Leading ‘Silicon Module Super League’ (SMSL) member Trina Solar exceeded PV module shipment guidance in the second quarter of 2016, partially driven by increased shipments to China. China became the largest contributor with external shipments growing 150.1% sequentially and 118.7% year-over-year. Quarterly module shipments were the second highest on record.
Despite a significant slowdown in PV installations in China expected through to the end of 2016, Trina Solar reiterated full-year module shipment guidance of 6.30GW to 6.55GW. With less dependence on the China market, Trina Solar is targeting to meet strong demand in key markets such as the US and India in the second-half of the year.
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With the ramp of its new cell and module facility in Thailand, Trina Solar noted that it had already benefited from improved gross margins, which increased to 18.3%, compared with 17.1% in the first quarter of 2016. The sequential increase in gross margin was said to be mainly due to lower blended costs as a result of a significant decrease in antidumping and countervailing duties in the US with the Thailand production ramp.
Management noted that it expected strong growth in demand from India in the second half of the year which was expected to continue in 2017.
Financials
Trina Solar reported second quarter 2016 net revenue of US$961.6 million, compared with US$816.9 million in the first quarter of 2016 and US$722.9 million in the second quarter of 2015. Gross profit was US$176.3 million, compared with US$139.7 million in the first quarter of 2016 and $144.9 million in the second quarter of 2015.
Operating income in the quarter was US$83.7 million, compared with US$44.8 million in the first quarter of 2016 and US$60.7 million in the second quarter of 2015.
Jifan Gao, Chairman and CEO of Trina Solar, commented, “We had another solid quarter with major financial and operational metrics improving across the board. Module shipments during the quarter increased on a sequential and year-over-year basis to 1.66 GW. Module shipments were driven mainly by continued demand from China ahead of the expected subsidy policy adjustment. Our new production facility in Thailand is ramping up its capacity on schedule and is helping to strengthen our competitiveness in the U.S.
“Our downstream business performed well in China's rapidly growing market as we connected 292.8 MW of utility projects and 28.0 MW of DG projects during the quarter. We also made progress overseas with the sale of 11.2 MW of projects in the U.K. and Italy during the quarter,” added Gao
Shipments
Second quarter PV module shipments totalled 1,658.3MW, consisting of 1,619.0MW of external shipments, recognized in revenue and 39.3MW of shipments to its downstream power projects.
Total shipments were the second highest for the company, which shipped a record 1,776.3MW in the fourth quarter of 2015.
This compares with total shipments of 1,423.3MW in the first quarter of 2016, consisting of 1,370.4MW of external shipments and 52.9MW of shipments to its downstream power projects.
The sequential increase in revenues and shipments was primarily driven by growth from China as a result of rush orders before June 30 in anticipation of an expected subsidy policy adjustment, which more than offset the decline of shipments to the US, Europe, Japan and the rest of Asia in the quarter.
Guidance
Trina Solar said that it expected to ship between 1.55GW and 1.65GW of PV modules in the third quarter of 2016, which is expected to include 30MW to 50MW of PV modules to its downstream PV projects.
The company highlighted that around 30% of shipments in the third quarter would be to India, while the US would account for 23% to 27% of shipments.
However, management reiterated concerns of a developing PV module overcapacity scenario and noted that it expected accelerated module ASP decline in the second half of 2016, with a faster ASP decline in China, which could exceed a 10% decline in the latter half of the year.
Management noted that it expected global PV demand in 2017 to be around 70GW, slightly below its 2016 forecast of 67GW to 72GW in 2016. However, global module capacity could reach 80GW to 100GW by the end of 2017, subject to capacity expansions planned continuing or whether more rational curtailments materialise.
Challenges in China grid curtailments and delays in FiT payments are hampering further PV project developments, according to Trina Solar. The company expects its own solar power project connections to reach 400MW to 500MW in 2016, including 15% to 20% of projects in China being from the distributed generation (DG) sector.
In reporting first quarter 2016 financial results, Trina Solar revised down its project completions guidance for the year from 750MW to 850MW, without providing an explanation for the reduction in its financial statement.