Yingli Green’s solar module shipments set to plummet in Q3

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Key challenges with plummeting shipments is the likelihood the company will revert to a net loss for the third and fourth quarters as margin erosion continues on ASP and production utilisation rate declines along with revenue. Image: Yingli Green

Struggling ‘Silicon Module Super League’ (SMSL) member Yingli Green Energy has reported better than guided module shipments in the second quarter of 2016, due to strong sales in China. However, due to the significant decline in downstream project development in China in the second half of the year, Yingli Green guided shipments could halve in the third quarter.

Yingli Green Energy reported second quarter total PV module shipments of 662MW, exceeding previously raised guidance of 580MW to 620MW, up from 508.1MW in the previous quarter, a 30% increase, quarter-on-quarter.

The company noted that shipments in China increased by around 100%, compared the first quarter of 2016, due to strong downstream PV installations, as a result of at least 18GW being installed in the country ahead of FiT changes at the end of June. 

The increased China shipments meant module ASP’s were much lower in the quarter. The company reported a gross profit US$69.2 million, while gross margin declined to 18.2%, compared to 20% in the previous quarter. Gross margin on sales of PV modules was 18.1%.

Yingli Green reported second quarter 2016 revenue of US$379.8 million, compared to US$364.6 million in the previous quarter. 

Operating income was US$23.8 million in the second quarter, compared to US$28.9 million in the first quarter of 2016. Operating margin was 6.3% in the second quarter of 2016, compared to 7.9% in the first quarter of 2016 and negative 6.6% in the second quarter of 2015.

Liansheng Miao, chairman and CEO of Yingli Green Energy said: “We saw robust demand from China in the second quarter of 2016 as PV projects that were operational before June 30, 2016 are entitled to a higher feed-in tariff, and we increased our PV module shipments to China by more than 100% from the first quarter of 2016 by leveraging our cooperative relationships with certain large clients such as state-owned enterprises controlled by central and local governments in China as well as influential privately owned enterprises with strong financial background. Internationally, Japan continued to be the most important international market for us and our shipments to Japan accounted for more than 20% of our total PV module shipments in the second quarter of 2016, which was the seventh straight quarter that our shipments to Japan exceeded 120 MW.”

Shipment decline and impact

Yingli Green noted that module shipments in the third quarter of 2016 would be in the range of 300MW to 400MW, while gross margins would decline further to a range of 12.5% to 14%.

Key challenges with plummeting shipments is the likelihood the company will revert to a net loss for the third and fourth quarters as margin erosion continues on ASP and production utilisation rate declines along with revenue. 

Inventory levels have already increased quarter-on-quarter. The company noted that inventory stood at US$230.2 million at the end of the second quarter, up from US$219.6 million at the end of the first quarter of 2016.

As result of the expected declines, renewed strains on Yingli Green’s fragile liquidity position could emerge. The company had US$89.8 million in cash and cash equivalents at the end of the second quarter, up from US$53.1 million at the end of the previous quarter.

Although the company noted some of its subsidiaries in China had been able to partially extend bank loans and gain slightly lower interest rates on those extensions, Yingli Green has remained unable to get agreements on rescheduling partially defaulted bonds. 

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