ReneSola’s revenue and shipments take a hit in Q1; company opts for cautious approach on Q2 outlook

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ReneSola has released its unaudited financial results for its first quarter 2011, which ended on March 31. Overall, the company saw its solar shipments, particularly module shipments, and its net revenues take a downturn during the first quarter. Q1 revenues were reported at US$328.2 million, which did fall within previously released ReneSola guidance, but was also a 15.1% decrease from the US$386.4 million posted in the fourth quarter 2010.

ReneSola attributes its dip in revenues from Q4 2010 to Q1 2011to a drop in the average selling price (ASP) of solar wafers and modules to US$0.87 and US$1.72, respectively. Furthermore, the company saw its module shipments decline, which also affected its revenues for the quarter. Solar product shipments in Q1 reached 330.4MW. Although, this surpassed company guidance, solar product shipments were still down 5.4% from the 349.4MW in Q4 2010.

Module shipments took the largest hit in the solar shipment division. The first quarter saw ReneSola ship 86.9MW, compared to 2010’s fourth quarter shipment of 126.8MW. The ASPs for solar module shipments during Q1 were US$1.72 per watt. Wafer shipments however, saw a 9.4% improvement from Q4 to Q1, posting a finalized shipment total of 243.5MW in Q1, compared to 222.6MW from Q4. ReneSola’s wafer business also saw a 30% gross profit margin for its fourth consecutive quarter. During Q1, the company’s non-silicon wafer processing cost was US$0.24 per watt and was able to keep its polysilicon raw material cost below market spot rate at US$60 per kilogram. 

Gross profit during Q1 accumulated to US$100.6 million with a gross margin of 30.7%. Compared to Q4’s US$119.3 million in gross profit and a gross margin of 30.9%, the Q1 results were in line with ReneSola’s guidance, but still saw its gross profit reduce by 15.1%. The company cites its decrease in gross margin as a result of a decline in solar module ASPs and increases in polysilicon prices.

“Despite a relatively cautious market in terms of demand, we delivered a good set of results in the first quarter of 2011, especially in terms of gross profit margin and operating margin,” said Xianshou Li, ReneSola's chief executive officer. “We have witnessed a sharp decline in module ASPs but wafer pricing held strong during the quarter and our cost-reduction efforts allowed us to maintain a healthy gross margin of 30.7%. We made significant gains in reducing polysilicon cost during the quarter and are on target to increasing production towards the plant's annual capacity of 3,500MT. As part of our cost-reduction initiatives, we have also ventured horizontally into wafer consumables and expect to launch steel wire production in the second half of this year. Though we hold a cautious outlook for demand in Europe, particularly due to the uncertainty and policy changes in Italy, we will continue to build out our capacities and are confident in our ability to drive down costs and remain an industry leader in low-cost wafers.”

ReneSola noted that its Sichuan polysilicon plant produced 750MT in Q1, a 23% growth from the 610MT produced in Q4. During Q2 2011, the company anticipates producing between 750MT to 800MT with an average production cost of US$40 per kilogram. With this projection, ReneSola maintains that it is on track to generate 3,500MT with a US$35 per kilogram production cost by the end of the year. It also has plans to inflate its polysilicon production from 3,500MT to 8,500MT so that it can sustain the growing demand of polysilicon as its wafer capacities increase in 2011.

Plans for the rest of 2011 include ReneSola investing US$350 million for the expansion of its wafer production capacity from 1.3GW to 1.9GW. The company also intends to escalate its module production capacity from 400MW to 600MW. ReneSola acknowledges that it will be taking a more cautious outlook on market demand since worldwide government policies for the solar industry are in a state of flux. The company does anticipate total solar wafer and module shipments for Q2 2011 to reach between 330MW and 350MW with revenues totaling anywhere from US$280 million to US$300 million.  ReneSola predicts that its gross profit margin for Q2 will range from 25% to 27%.

Julia Xu, ReneSola's chief financial officer, commented, “Rigorous cost controls, prudent polysilicon purchasing and the replenishing of our balance sheet were our main initiatives during the first quarter. As a result, we were able to maintain our gross profit margin while increasing our operating margin despite a soft macro market in which ASPs declined but raw material prices increased. Our average polysilicon price during the quarter was approximately US$60/kg, and we expect it to remain at a similar level during the second quarter. During the quarter, we also successfully issued a seven-year convertible note of US$200 million, including a US$25 million over-allotment option exercised in the second quarter, to strengthen our balance sheet for long-term expansion requirements as we build out our capacities to match market demand and gain market share.”

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