Trina Solar revenues, shipments fall, as company feels pain of Italian market uncertainty

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Another major photovoltaics manufacturer saw its first-quarter results take a hit, as Trina Solar experienced sequential declines in revenues, module shipments, profits, and margins. Manufacturing costs remained flat during the period, while cell and module production capacity grew to 1.6GW. Despite the weaker-than-expected results, the Chinese company said it did gain in market share in several regions and expects the geographical diversification of its business to continue.    

Net revenues in Q1 2011 were $550.9 million, a decrease of 14.2% sequentially and an increase of 63.5% year-over-year. Net income was $47.7 million, a decrease from $145.3 million in the previous quarter and an increase from $44.5 million in Q1 2010.

Total shipments were 320.4MW, compared to Trina’s previous guidance of slightly higher than the approximately 351MW shipped in Q4 2010. The company attributed the sequential decrease in shipments to demand uncertainties linked to Italy’s solar investment policy revisions announced in March.

Production capacity for cells and modules rose from 1.2GW at the end of 2010 to 1.6GW as of April 30, while internal wafer and ingot remained at 750MW on an annualized basis.

The total in-house blended mono- and multicrystalline cost per watt (including depreciation) stayed at $1.16, with silicon costs rising from 42 cents to 43 cents sequentially, and nonsilicon costs dropping a penny from 74 cents to 73 cents during the period.

Gross profit in Q1 was $151.3 million, compared to $201.8 million in Q4 2010 and $104.2 million in Q1 2010, while gross margin was 27.5% in Q1, compared to the company's previous guidance of mid- to high-20s in percentage terms. The latest gross margin compares to 31.4% in Q4 of 2010 and 30.9% in the first quarter of last year. The gross profit per watt produced fell from 66 cents to 55 cents quarter over quarter.  

Gross margin relating to the Trina’s in-house wafer production to module production was 32.2% in the first quarter of 2011, compared to the previous guidance of approximately 30%, and 36.5% in the earlier period. The sequential decline was primarily caused by a drop in the average selling price of modules, according to the company.

Operating expenses in the first quarter of 2011 were $66.8 million, an increase of 17.8% sequentially and 136.5% year-over-year, primarily due to continued expansion of the company's global management structure to meet its strategic growth objectives and increased investment in R&D initiatives, offset by expense control measures implemented in 2010.

The company sees module shipments reaching 1.75–1.8GW in 2011. To meet the expected demand, Trina plans to raise its annualized in-house ingot and wafer production capacity and PV cell and module production capacity to approximately 1.2GW and 1.9GW, respectively, in the second half of 2011, based on actual manufacturing yield.

By the end of 2011, the company said it expects nonsilicon manufacturing cost to decline to approximately 70 cents through the continuation of technology and manufacturing process improvements involving proprietary processes for ingot, wafer, cell, and module production, higher cell conversion efficiencies, and supply chain and logistics management initiatives under testing or in development.

Trina forecasts that its gross margin relating to in-house wafer production to module production will be in the mid-20s in percentage terms during the current period. The company believes its overall gross margin for Q2, taking into account wafer and cell requirements outsourced to third-party suppliers to meet demand in excess of its internal capacity, will be in the low-20s in percentage terms.

Jifan Gao, Trina’s chairman/CEO, made the following statements in conjunction with the announcement of the company’s financial results.

“Amidst a challenging macroenvironment and winter season conditions, we maintained relatively strong shipment volumes in the first quarter. Despite decreased sequential demand linked to Italy's solar regulatory revisions, we realized notable market-share gains in Germany, the rest of Europe, and on a global basis. This included high-profile customer additions in Europe, North America, and Asia, which we believe reflect the strength of our leading brand, the quality and performance of our products, and the increased localized service we provide to our customers.

“Building off our quality-performance and manufacturing efficiency leadership, in 2011 we are increasingly focused on elevating our technology innovation, customer orientation, and corporate social responsibility advantages. As we further differentiate our brand, we believe such enhancements are directly responsible for our recent successes in supplying large commercial and utility-scale segments in Italy, Germany, and the United States.

“We are also pleased with our efforts and progress on environmental, health, and safety. In January 2011, we received TUV's globally-recognized Occupational Health & Safety Management System OHSAS18001 certification. We were also ranked the number-two global PV manufacturer for environmental and social performance on SVTC's ‘2011 Solar Company Scorecard,’ which reflects our commitment to the sustainable development of our company and the solar industry.

“As we continue to diversify our customer base across geographic regions, we are excited to announce the opening this month of our sales and business development office in Sydney to support our growing base of Australian customers. This new office will also help us seek out business development opportunities in the fast growing Australian solar PV market.

Lastly, in our efforts to raise our organizational capabilities to deliver innovative market-driven solutions, product value, and world-class customer service, we are happy to welcome Mark Kingsley, who has been appointed to our newly-created chief commercial officer position,” he concluded.

 

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