Trina Solar makes US$31.5 million loss on higher than guided module shipments

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Significant price declines coupled with difficult project financing conditions especially for large-scale PV projects in Europe, were key reasons behind Trina Solar reporting a net loss of US$31.5 million in the third quarter. Though module shipments reached 370MW in the quarter, slightly higher than previous guidance of 360MW at the high range figure, shipments declined 6.6% sequentially. Net revenues were US$481.9 million, a decrease of 16.8% sequentially and 5.2% year-over-year.

“We experienced a challenging third quarter as a result of significant price declines and tightened financing conditions, which affected some of our customers' large European projects,” noted Jifan Gao, Chairman and CEO of Trina Solar. “During the third quarter, we paid increasing attention to customer credit risks and in some cases regulatory risks linked to the underlying project markets, which resulted in our foregoing some sales opportunities. We also continued to maintain a strong balance sheet during this quarter.”

With rapidly declining prices, Trina Solar followed the trend of making a non-cash inventory write down, though small compared to others at US$19.1 million. The company said the write down was based on the market price declines of raw materials, work-in-progress and finished goods in the quarter.

Loss from operations was US$23.5 million, compared to operating income of US$32.8 million in the second quarter of 2011 and US$113.0 million in the third quarter of 2010. Operating margin was negative 4.9%, compared to 5.7% in the second quarter of 2011 and 22.2% in the third quarter of 2010.

Trina Solar posted a net loss of US$31.5 million, compared to net income of US$11.8 million in the second quarter of 2011 and $82.9 million in the third quarter of 2010.

The company posted a net margin of negative 6.5%, compared to 2.0% in the second quarter of 2011 and 16.3% in the third quarter of 2010.

Trina Solar guided module shipments for the fourth quarter to be in the range of 320MW – 350MW, a notable decline over 370MW shipped in the third quarter, highlighting the continued weakness in the European market.

Shipment guidance

For the fourth quarter of 2011, the Company expects to ship between 320MW to 350MW of PV modules. Trina Solar guided overall gross margin of approximately 10% for the fourth quarter with module shipment guidance for 2011 to be approximately 1.4GW, representing an increase of approximately 32.5% from 2010, but down from previous guidance of between 1.75GW to 1.8GW.

Manufacturing expansion

Trina Solar said that it expected to increase its in-house PV cell and module production capacity by up to approximately 500MW by the end of the first half of 2012 to cater for its new high efficiency multicrystalline-based 'Honey' technology-based module. By the end of the first half of 2012, Trina Solar’s manufacturing capacity was guided to reach 2.4GW.

Sales refocus

With European sales waning, management highlighted that it would continue to expand into emerging markets.

“To best position Trina Solar going forward, we are refining our marketing and product strategies to address larger and more diversified distribution channels, in both established and emerging solar markets. These include the growing US residential leasing channel, where we recently signed a 60MW supply agreement in the fourth quarter,” Gao said in a statement.

“As we focus on growth, the recent establishment of our Asia Pacific regional headquarters in Singapore will help us secure new customers in the Asia Pacific region, the Middle East and South Africa. In markets such as Australia and Southern Europe, as grid parity approaches, we believe that long-term success will ultimately depend on the effective delivery of innovative solutions based on efficient manufacturing and customer-driven value-added support services,” added Gao.

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