Tier-one integrated PV manufacturer ReneSola, already shifting its business model away from OEM production supply to bundled services as well as shifting its module sales to higher margin markets and away from the US and China with greater focus on its downstream project business.
ReneSola’s main module markets were Europe, primarily the UK and in Asia, primarily Japan, in the first quarter of 2015. Module shipments in the quarter to Europe accounted for 44.4% of total module shipments, up from 30.5% in the prior year period and up from 39.2% in the fourth quarter of 2014.
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Shipments to Japan also remained strong, increasing to 30.4% of total first quarter module shipments, compared to 22.5% in the prior year period and up from 26.8% in the previous quarter.
In contrast, module shipments to the US only accounted for 3.3% of total shipments in the first quarter of 2015, down from 13.6% in the prior year period. Although never its strongest market, ReneSola’s shipments in China declined to 4.8% of total shipments in the quarter, compared to 11.4% in the prior year period.
Total solar module shipments were 496.4MW in the first quarter, representing an increase of 1.6% from the prior quarter.
“Amidst a first quarter backdrop with a number of macroeconomic challenges and lingering foreign exchange volatility, we continued with our strategy to transition our business into the downstream project and services segment of the market,” said Xianshou Li, ReneSola's chief executive officer. “We are leveraging the flexibility in our business model to quickly respond to changing market dynamics and to capture market opportunities. At the beginning of 2015, we began to scale back our global OEM capacity and focus more on our downstream project opportunities. We have completed over 70MW of projects in the UK and expect to monetise in the near-term while expanding into a larger portfolio of downstream projects in the second half of 2015. As we continue with this strategic transition into the downstream services and project area, we believe we will be better positioned to achieve long-term profitability.”
According to Li’s earnings call prepared remarks: “In the second half of the year, we have planned to continue to scale back our OEM capacity, while focusing on expanding to our larger portfolio of downstream projects.”
CFO, Daniel Lee also noted in the earnings call that the company would be markedly reducing its exposure to the international OEM module business in subsequent quarters and would be curtailing OEM capacity requirements.
“At the end of Q1, we had about 580MW of international OEM capacity. So over next two quarters, we expect to pretty aggressively scaling them back by 200MW to 300MW per quarter. So by year end, we pretty much are exciting this international OEM capacity, unless there [is] some favourable international trade policies that will allow us to come back to the market.”
ReneSola said in March that it would exit the minimum import price (MIP) undertaking between China and the European Union. The company had OEM deals with Jabuil Circuit in Poland.
Financial results
ReneSola reported net revenues of US$349.0 million in the first quarter of 2015, representing a decrease of 9.8% from US$387.0 million in prior quarter. The company said that the decline was primarily due to falling module ASPs and lower wafer shipments as it shifts its business focus.
Gross profit was US$36.7 million with a gross margin of 10.5%, compared to gross profit of US$51.2 million with a gross margin of 13.2% in the prior quarter. The company reported an operating loss of US$9.5 million with an operating margin of negative 2.7%, compared to an operating loss of US$2.2 million with an operating margin of negative 0.6% in the prior quarter.
PV projects
Although ReneSola does not expect to release PV project pipeline information until “later this year” it currently has a total of approximately 96.1MW of existing projects, including four utility-scale projects totalling 71MW in the UK and four utility-scale projects totalling 25.1MW in Eastern Europe.
ReneSola said that it expected to complete the sale for all 71MW UK projects in coming quarters.
Guidance
For Q2 2015, the Company expects its net revenues to be in the range of US$250 million to US$300 million, and gross margin to be in the range of 16% to 18%, a significant decline of the first quarter.
