Trina Solar’s margins hit but gigawatts ship

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Major PV manufacturer Trina Solar took a hit on margins in the second quarter of 2014, while module shipments soared as China and US markets rebounded strongly.

The company actually reported shipments slightly below guidance at 943.3MW, compared to 558.0MW in the first quarter, an increase of 69.1%. Shipment to its own downstream PV projects were 148.7MW, primarily in China and the UK.

Trina Solar reported net revenue of US$519.4 million, only an increase of 16.8% from the first quarter of 2014, due primarily to softer ASPs in China, the partial impact of lowered ASPs in the US due to the preliminary US anti-dumping duties and a small increase in polysilicon prices.

Margins fell in the second quarter to 15.4%, compared to 20.6% in the first quarter of 2014, while its operating margin fell to only 3.0%, compared to 8.6% in the first quarter of 2014.

However, significantly higher shipments led to a gross profit of US$80.2 million, a 12.3% decline from the previous quarter.

Jifan Gao, Chairman and Chief Executive Officer of Trina Solar said, “In our module business, demand from both the China and overseas markets has picked up dramatically. Notably, we continue to see robust demand for our products from our many valued long-term customers in the U.S., thanks to Trina Solar's established market position and superior product offerings. Following a relatively weak first quarter in China, we saw strong growth in demand for Trina Solar's products in the second quarter.”

However, Trina Solar also benefited in the US market from having the lowest duties imposed in 2012 and 2014, compared to it rivals.

Shipment guidance

Trina Solar said that it expected module shipments in the third quarter of 2014 to be in the range of 1,060MW and 1,120MW, which management noted would be similar again in the fourth quarter of 2014.

As a result, shipment guidance for the year was reiterated at between 3.6GW and 3.8GW, of which 400MW to 500MW of PV modules would be shipped for its downstream projects.

The margin squeeze would remain through the second half of the year, though management noted in the earnings call that the reported quarter would be the lowest margins would fall this year. This was said to be due to stable pricing in China and polysilicon prices also being stable, coupled to production cost reductions and high utilisation rates for the rest of the year.

Of those 1,060 to 1,120MW of PV modules, 130 MW to 150 MW will be shipped to its downstream PV projects. Revenues will not be recognized for the modules shipped to its own developed projects as required by US GAAP. The Company expects its blended gross margin for 2014 to be at mid-teens in percentage terms with slightly lower gross margin expected for the third quarter of 2014.

The Company reiterates its 2014 guidance of total PV module shipments between 3.6GW and 3.8GW, of which 400MW to 500MW of PV modules will be shipped to the Company's own downstream projects. Revenues will not be recognized for the modules shipped to its own projects as required by US GAAP. The Company maintains its guidance of completed downstream PV projects of between 400 MW and 500 MW for the year of 2014.

Manufacturing update

Trina Solar noted that at the end of the second quarter, annualized in-house ingot production reached 2GW, while wafer capacity reached 1.6GW. Solar cell capacity had reached 2.7GW, while module capacity had reached 3.6GW.

By the end of 2014, Trina Solar reiterated capacity expansion plans that would lead to in-house ingot production capacity of 2.2GW, wafer capacity of 1.7GW and solar cell capacity reaching 3GW. PV module capacity would reach 3.8GW, effectively inline with full-year shipment guidance.

Yingli Green, Trina Solar’s nearest rival had previously guided shipments for 2014 of 4GW to 4.2GW.

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