TRINA SOLAR ANNOUNCES FIRST QUARTER 2011 RESULTS
CHANGZHOU, China, May 17, 2011 /PRNewswire via COMTEX/ --
Trina Solar Limited (NYSE: TSL) ("Trina Solar" or the "Company"), a leading integrated manufacturer of solar photovoltaic products from the production of ingots, wafers and cells to the assembly of PV modules, announced today its financial results for the first quarter of 2011.
First Quarter 2011Financial and Operating Highlights
Solar module shipments were approximately 320 MW for the first quarter of 2011, compared to the Company's previous guidance of slightly higher than the approximately 351 MW shipped in the fourth quarter of 2010, representing a decrease of 8.7% sequentially and an increase of 66.4% year-over-year
Net revenues were $550.9 million, a decrease of 14.2% sequentially and an increase of 63.5% year-over-year
Gross profit was $151.3 million, a decrease of 25.0% sequentially and an increase of 45.1% year-over-year
Gross margin was 27.5%, compared to the Company's previous guidance of mid to high 20s in percentage terms, compared to 31.4% in the fourth quarter of 2010 and 30.9% in the first quarter of 2010
Gross margin relating to the Company's in-house wafer production to module production was 32.2%, compared to the Company's previous guidance of approximately 30%
Operating income was $84.5 million, compared to $145.1 million in the fourth quarter of 2010 and $76.0 million in the first quarter of 2010
Operating margin was 15.3%, compared to 22.6% in the fourth quarter of 2010 and 22.6% in the first quarter of 2010
Net income was $47.7 million, which included a net foreign currency exchange loss of $24.1 million, compared to net income of $145.3 million in the fourth quarter of 2010 and $44.5 million in the first quarter of 2010
Earnings per fully diluted American Depositary Share ("ADS") were $0.63, compared to $1.87 in the fourth quarter of 2010 and $0.66 in the first quarter of 2010
"Amidst a challenging macro environment and winter season conditions, we maintained relatively strong shipment volumes in the first quarter," said Mr. Jifan Gao, Chairman and CEO of Trina Solar.
"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 No. 2 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 Mr. Mark Kingsley, who has been appointed to our newly-created Chief Commercial Officer position."
Recent Business Highlights
During the first quarter of 2011, the Company:
Announced the signing of a supplemental long-term wafer and polysilicon product supply agreement with GCL (Changzhou) Solar Energy Technology Company Limited, a subsidiary of GCL-Poly Energy Holdings ("GCL-Poly"). Under the terms of the supplemental agreement and existing agreements, GCL-Poly is expected to supply Trina Solar with wafers and polysilicon sufficient to produce approximately 7,500 MW of solar modules in aggregate over five years;
Entered into a sales agreement with an Italy-based utility customer to supply 50 MW of module products, which were delivered during the first quarter;
Announced the signing of a licensing, sales and marketing partnership agreement with Zep Solar, Inc., a US-based manufacturer of the first comprehensive platform for module-integrated installation hardware. This hardware is expected to deliver significant reductions to total system costs for residential and commercial roof applications; and
Successfully received TUV's globally-recognized Occupational Health & Safety Management System "OHSAS18001" certification. The successful audit confirmed our establishment of systematic processes to identify hazards, assess risks, and implement effective control measures to eliminate and minimize occupational health and safety risks. The certification extends the Company's earlier Environmental Health and Safety recognition for Environmental Management System "ISO14001" received in December 2008.
Subsequent Events
Subsequent to the first quarter of 2011, the Company
Announced that it was ranked No. 2 globally for environmental and social performance in the 2011 Solar Company Scorecard, an award system established by the Silicon Valley Toxics Coalition;
Announced that its subsidiary, Trina Solar (U.S.) Inc., signed a sales agreement to supply solar modules to US-based FRV AE Solar, LLC ("FRV"), a subsidiary of Fotowatio Renewable Ventures, Inc., a global independent solar power producer. Under the terms of the agreement, the Company is expected to supply approximately 35 MW of the Company's powerful utility-scale solar modules to FRV for one of the largest solar PV systems located just outside of Austin, Texas;
Announced through its subsidiary, Changzhou Trina Solar Energy Co. Ltd., the extension of its national distribution agreement with Australia's leading renewable energy distributor, RF Industries Pty Ltd. ("RFI") through December 31, 2012. Under the terms of the agreement, Trina Solar recognizes RFI as their exclusive distributor in Australia, and is expected to supply RFI with up to 40 MW of PV modules during 2011;
Announced through its subsidiary, Changzhou Trina Solar Energy Co. Ltd., the signing of a three year research agreement with the Australian National University ("ANU"). Under the terms of the agreement, Trina Solar will collaborate with ANU to develop high efficiency n-type silicon solar cells with conversion efficiencies of 20% for mass production by leveraging existing and proven processing tools currently used for p-type cells;
Announced the opening of its new sales and business development office in Sydney, Australia, to support its growing base of customers and to seek out business development opportunities in the region;
Announced through its subsidiary, Trina Solar (Germany) GmbH, the signing of a sales agreement to supply 130 MW of modules products to Mohring Energie GmbH ("Mohring"), a well-established German-based project developer and engineering, procurement and construction ("EPC") services company, with deliveries commencing in the second quarter of 2011; and
The appointment of Mr. Mark Kingsley to the new position of Chief Commercial Officer. His joining is expected to enhance the Company's first class customer service and product management in an increasing number of end-markets and distribution channels worldwide as well as help the Company to realize its anticipated market share increases in 2011 and beyond.
First Quarter 2011 Results
Net Revenues
Net revenues in the first quarter of 2011 were $550.9 million, a decrease of 14.2% sequentially and an increase of 63.5% year-over-year. Total shipments were 320.4 MW, compared to the Company's previous guidance of slightly higher than the approximately 351 MW shipped in the fourth quarter of 2010 and 192.6 MW in the first quarter of 2010. The sequential decrease in total shipments was primarily due to demand uncertainties linked to Italy solar investment policy revisions announced in March 2011.
Gross Profit and Margin
Gross profit in the first quarter of 2011 was $151.3 million, compared to $201.8 million in the fourth quarter of 2010 and $104.2 million in the first quarter of 2010.
Gross margin was 27.5% in the first quarter of 2011, compared to the Company's previous guidance of mid to high 20s in percentage terms. The first quarter gross margin compares to 31.4% in the fourth quarter of 2010 and 30.9% in the first quarter of 2010.
Gross margin relating to the Company's in-house wafer production to module production was 32.2% in the first quarter of 2011, compared to the Company's previous guidance of approximately 30%, and 36.5% in the fourth quarter of 2010. The sequential decline was primarily due to lower average selling price.
Operating Expense, Income and Margin
Operating expenses in the first quarter of 2011 were $66.8 million, an increase of 17.8% sequentially and 136.5% year-over-year. The Company's operating expenses represented 12.1% of its first quarter net revenues, an increase from 8.8% in the fourth quarter of 2010 and 8.4% in the first quarter of 2010. The sequential and annual percentage increases were primarily due to continued expansion of the Company's global management structure to meet its strategic growth objectives, and increased investment in Research and Development initiatives, offset by expense control measures implemented in 2010. Operating expenses in the first quarter of 2011 also included $1.6 million in share-based compensation expenses, compared to $1.8 million in the fourth quarter of 2010 and $1.0 million in the first quarter of 2010.
As a result of the foregoing, operating income in the first quarter of 2011 was $84.5 million, compared to $145.1 million in the fourth quarter of 2010 and $76.0 million in the first quarter of 2010. Operating margin was 15.3% in the first quarter of 2011, compared to 22.6% in both the fourth quarter of 2010 and the first quarter of 2010.
Net Interest Expense
Net interest expense in the first quarter of 2011 was $6.7 million, compared to $6.6 million in the fourth quarter of 2010 and $9.0 million in the first quarter of 2010. The year-over-year decrease was primarily due to decreased average short-term borrowing balances and the increase in interest income as a result of higher cash and cash equivalents in bank accounts.
Foreign Currency Exchange
The Company had a foreign currency exchange loss of $24.1 million in the first quarter of 2011, which was net of changes in fair value of derivative instruments. This compares to a net gain of $25.3 million in the fourth quarter of 2010 and a net loss of $14.5 million in the first quarter of 2010. This net loss was primarily due to the loss from foreign currency forward contracts used by the Company to hedge its foreign currency risk exposure, which was partially offset by gains from the appreciation of the Euro against U.S. dollar.
The Company continued foreign currency hedging during the first quarter of 2011 using foreign currency forward contracts between the Euro and the U.S. dollar, with the goal of mitigating the effects of exchange rate volatility.
Income Tax
The effective tax rate for the Company during the first quarter of 2011 period was 20.54%, due to the fact that one major subsidiary in China is under the renewal process of obtaining a preferential tax rate from local tax authority. This compares to 13.4% for fiscal year 2010, at which time the company benefited from the preferential tax rate of High and New Technology Enterprises status.
Net Income and EPS
Net income was $47.7 million in the first quarter of 2011, a decrease from $145.3 million in the fourth quarter of 2010 and an increase from $44.5 million in the first quarter of 2010. The net foreign currency exchange loss included in net income was $24.1 million in the first quarter of 2011, compared to a net foreign currency exchange gain of $25.3 million in the fourth quarter of 2010 and a net foreign currency exchange loss of $14.5 million in the first quarter of 2010, respectively.
Net margin was 8.7% in the first quarter of 2011, compared to 22.6% in the fourth quarter of 2010 and 13.2% in the first quarter of 2010.
Earnings per fully diluted ADS were $0.63 in the first quarter of 2011. The effects of the net first quarter foreign currency exchange net loss was approximately $0.30 per fully diluted ADS.
Financial Condition
As of March 31, 2011, the Company had $554.6 million in cash and cash equivalents and restricted cash and a working capital balance of $769.9 million. Total bank borrowings stood at $448.9 million, of which $295.7 million were long-term borrowings. The Company reduced its short-term borrowings by $5.4 million to approximately $153.3 million as of March 31, 2011.
Shareholders' equity was $1.22 billion as of March 31, 2011, an increase from $1.17 billion at the end of the fourth quarter of 2010.
Second Quarter and Fiscal Year 2011 Guidance
For the second quarter of 2011, the Company expects to ship between 430 MW to 450 MW of PV modules.
The Company expects its gross margin relating to its in-house wafer production to module production to be in the mid 20s in percentage terms during the second quarter of 2011. The Company believes its overall gross margin, taking into account wafer and cell requirements outsourced to third party suppliers to meet demand in excess of its internal capacity, for the second quarter will be in the low 20s in percentage terms. Such guidance is based on the exchange rate between the Euro and U.S. dollar as of May 17, 2011. For the full year of 2011, the Company expects total PV module shipments between 1.75 MW to 1.80 GW, representing an increase of 65.6% to 70.3% from 2010.
Operations and Business Outlook
Non-Silicon Cost
In the first quarter of 2011, the Company's non-silicon manufacturing cost for its core raw materials to module production was approximately $0.73 per watt, a sequential decrease of $0.01. By the end of 2011, the Company expects its non-silicon manufacturing cost to decline to approximately $0.70 through the continuation of technology and manufacturing process improvements involving proprietary processes for ingot, wafer, cell and module manufacturing, higher cell conversion efficiencies, and supply chain and logistics management initiatives currently under testing or development.
Silicon Procurement
Through its diversified range of short, medium, and long-term supply contracts, the Company will continue to maintain competitive silicon costs relative to the current market price.
2011 Capacity Expansion
As of April 30, 2011, the Company's annualized in-house ingot and wafer production capacity was approximately 750 MW and its PV cell and module production capacities was approximately 1.6 GW.
To meet expected demand for its PV solar modules, the Company expects to raise its annualized in-house ingot and wafer production capacity and PV cell and module production capacity to approximately 1.2 GW and 1.9 GW, respectively, in the second half of 2011, based on actual manufacturing yield.
CHANGZHOU, China, May 17, 2011 /PRNewswire via COMTEX/ --
Trina Solar Limited (NYSE: TSL) ("Trina Solar" or the "Company"), a leading integrated manufacturer of solar photovoltaic products from the production of ingots, wafers and cells to the assembly of PV modules, announced today its financial results for the first quarter of 2011.
First Quarter 2011Financial and Operating Highlights
Solar module shipments were approximately 320 MW for the first quarter of 2011, compared to the Company's previous guidance of slightly higher than the approximately 351 MW shipped in the fourth quarter of 2010, representing a decrease of 8.7% sequentially and an increase of 66.4% year-over-year
Net revenues were $550.9 million, a decrease of 14.2% sequentially and an increase of 63.5% year-over-year
Gross profit was $151.3 million, a decrease of 25.0% sequentially and an increase of 45.1% year-over-year
Gross margin was 27.5%, compared to the Company's previous guidance of mid to high 20s in percentage terms, compared to 31.4% in the fourth quarter of 2010 and 30.9% in the first quarter of 2010
Gross margin relating to the Company's in-house wafer production to module production was 32.2%, compared to the Company's previous guidance of approximately 30%
Operating income was $84.5 million, compared to $145.1 million in the fourth quarter of 2010 and $76.0 million in the first quarter of 2010
Operating margin was 15.3%, compared to 22.6% in the fourth quarter of 2010 and 22.6% in the first quarter of 2010
Net income was $47.7 million, which included a net foreign currency exchange loss of $24.1 million, compared to net income of $145.3 million in the fourth quarter of 2010 and $44.5 million in the first quarter of 2010
Earnings per fully diluted American Depositary Share ("ADS") were $0.63, compared to $1.87 in the fourth quarter of 2010 and $0.66 in the first quarter of 2010
"Amidst a challenging macro environment and winter season conditions, we maintained relatively strong shipment volumes in the first quarter," said Mr. Jifan Gao, Chairman and CEO of Trina Solar.
"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 No. 2 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 Mr. Mark Kingsley, who has been appointed to our newly-created Chief Commercial Officer position."
Recent Business Highlights
During the first quarter of 2011, the Company:
Announced the signing of a supplemental long-term wafer and polysilicon product supply agreement with GCL (Changzhou) Solar Energy Technology Company Limited, a subsidiary of GCL-Poly Energy Holdings ("GCL-Poly"). Under the terms of the supplemental agreement and existing agreements, GCL-Poly is expected to supply Trina Solar with wafers and polysilicon sufficient to produce approximately 7,500 MW of solar modules in aggregate over five years;
Entered into a sales agreement with an Italy-based utility customer to supply 50 MW of module products, which were delivered during the first quarter;
Announced the signing of a licensing, sales and marketing partnership agreement with Zep Solar, Inc., a US-based manufacturer of the first comprehensive platform for module-integrated installation hardware. This hardware is expected to deliver significant reductions to total system costs for residential and commercial roof applications; and
Successfully received TUV's globally-recognized Occupational Health & Safety Management System "OHSAS18001" certification. The successful audit confirmed our establishment of systematic processes to identify hazards, assess risks, and implement effective control measures to eliminate and minimize occupational health and safety risks. The certification extends the Company's earlier Environmental Health and Safety recognition for Environmental Management System "ISO14001" received in December 2008.
Subsequent Events
Subsequent to the first quarter of 2011, the Company
Announced that it was ranked No. 2 globally for environmental and social performance in the 2011 Solar Company Scorecard, an award system established by the Silicon Valley Toxics Coalition;
Announced that its subsidiary, Trina Solar (U.S.) Inc., signed a sales agreement to supply solar modules to US-based FRV AE Solar, LLC ("FRV"), a subsidiary of Fotowatio Renewable Ventures, Inc., a global independent solar power producer. Under the terms of the agreement, the Company is expected to supply approximately 35 MW of the Company's powerful utility-scale solar modules to FRV for one of the largest solar PV systems located just outside of Austin, Texas;
Announced through its subsidiary, Changzhou Trina Solar Energy Co. Ltd., the extension of its national distribution agreement with Australia's leading renewable energy distributor, RF Industries Pty Ltd. ("RFI") through December 31, 2012. Under the terms of the agreement, Trina Solar recognizes RFI as their exclusive distributor in Australia, and is expected to supply RFI with up to 40 MW of PV modules during 2011;
Announced through its subsidiary, Changzhou Trina Solar Energy Co. Ltd., the signing of a three year research agreement with the Australian National University ("ANU"). Under the terms of the agreement, Trina Solar will collaborate with ANU to develop high efficiency n-type silicon solar cells with conversion efficiencies of 20% for mass production by leveraging existing and proven processing tools currently used for p-type cells;
Announced the opening of its new sales and business development office in Sydney, Australia, to support its growing base of customers and to seek out business development opportunities in the region;
Announced through its subsidiary, Trina Solar (Germany) GmbH, the signing of a sales agreement to supply 130 MW of modules products to Mohring Energie GmbH ("Mohring"), a well-established German-based project developer and engineering, procurement and construction ("EPC") services company, with deliveries commencing in the second quarter of 2011; and
The appointment of Mr. Mark Kingsley to the new position of Chief Commercial Officer. His joining is expected to enhance the Company's first class customer service and product management in an increasing number of end-markets and distribution channels worldwide as well as help the Company to realize its anticipated market share increases in 2011 and beyond.
First Quarter 2011 Results
Net Revenues
Net revenues in the first quarter of 2011 were $550.9 million, a decrease of 14.2% sequentially and an increase of 63.5% year-over-year. Total shipments were 320.4 MW, compared to the Company's previous guidance of slightly higher than the approximately 351 MW shipped in the fourth quarter of 2010 and 192.6 MW in the first quarter of 2010. The sequential decrease in total shipments was primarily due to demand uncertainties linked to Italy solar investment policy revisions announced in March 2011.
Gross Profit and Margin
Gross profit in the first quarter of 2011 was $151.3 million, compared to $201.8 million in the fourth quarter of 2010 and $104.2 million in the first quarter of 2010.
Gross margin was 27.5% in the first quarter of 2011, compared to the Company's previous guidance of mid to high 20s in percentage terms. The first quarter gross margin compares to 31.4% in the fourth quarter of 2010 and 30.9% in the first quarter of 2010.
Gross margin relating to the Company's in-house wafer production to module production was 32.2% in the first quarter of 2011, compared to the Company's previous guidance of approximately 30%, and 36.5% in the fourth quarter of 2010. The sequential decline was primarily due to lower average selling price.
Operating Expense, Income and Margin
Operating expenses in the first quarter of 2011 were $66.8 million, an increase of 17.8% sequentially and 136.5% year-over-year. The Company's operating expenses represented 12.1% of its first quarter net revenues, an increase from 8.8% in the fourth quarter of 2010 and 8.4% in the first quarter of 2010. The sequential and annual percentage increases were primarily due to continued expansion of the Company's global management structure to meet its strategic growth objectives, and increased investment in Research and Development initiatives, offset by expense control measures implemented in 2010. Operating expenses in the first quarter of 2011 also included $1.6 million in share-based compensation expenses, compared to $1.8 million in the fourth quarter of 2010 and $1.0 million in the first quarter of 2010.
As a result of the foregoing, operating income in the first quarter of 2011 was $84.5 million, compared to $145.1 million in the fourth quarter of 2010 and $76.0 million in the first quarter of 2010. Operating margin was 15.3% in the first quarter of 2011, compared to 22.6% in both the fourth quarter of 2010 and the first quarter of 2010.
Net Interest Expense
Net interest expense in the first quarter of 2011 was $6.7 million, compared to $6.6 million in the fourth quarter of 2010 and $9.0 million in the first quarter of 2010. The year-over-year decrease was primarily due to decreased average short-term borrowing balances and the increase in interest income as a result of higher cash and cash equivalents in bank accounts.
Foreign Currency Exchange
The Company had a foreign currency exchange loss of $24.1 million in the first quarter of 2011, which was net of changes in fair value of derivative instruments. This compares to a net gain of $25.3 million in the fourth quarter of 2010 and a net loss of $14.5 million in the first quarter of 2010. This net loss was primarily due to the loss from foreign currency forward contracts used by the Company to hedge its foreign currency risk exposure, which was partially offset by gains from the appreciation of the Euro against U.S. dollar.
The Company continued foreign currency hedging during the first quarter of 2011 using foreign currency forward contracts between the Euro and the U.S. dollar, with the goal of mitigating the effects of exchange rate volatility.
Income Tax
The effective tax rate for the Company during the first quarter of 2011 period was 20.54%, due to the fact that one major subsidiary in China is under the renewal process of obtaining a preferential tax rate from local tax authority. This compares to 13.4% for fiscal year 2010, at which time the company benefited from the preferential tax rate of High and New Technology Enterprises status.
Net Income and EPS
Net income was $47.7 million in the first quarter of 2011, a decrease from $145.3 million in the fourth quarter of 2010 and an increase from $44.5 million in the first quarter of 2010. The net foreign currency exchange loss included in net income was $24.1 million in the first quarter of 2011, compared to a net foreign currency exchange gain of $25.3 million in the fourth quarter of 2010 and a net foreign currency exchange loss of $14.5 million in the first quarter of 2010, respectively.
Net margin was 8.7% in the first quarter of 2011, compared to 22.6% in the fourth quarter of 2010 and 13.2% in the first quarter of 2010.
Earnings per fully diluted ADS were $0.63 in the first quarter of 2011. The effects of the net first quarter foreign currency exchange net loss was approximately $0.30 per fully diluted ADS.
Financial Condition
As of March 31, 2011, the Company had $554.6 million in cash and cash equivalents and restricted cash and a working capital balance of $769.9 million. Total bank borrowings stood at $448.9 million, of which $295.7 million were long-term borrowings. The Company reduced its short-term borrowings by $5.4 million to approximately $153.3 million as of March 31, 2011.
Shareholders' equity was $1.22 billion as of March 31, 2011, an increase from $1.17 billion at the end of the fourth quarter of 2010.
Second Quarter and Fiscal Year 2011 Guidance
For the second quarter of 2011, the Company expects to ship between 430 MW to 450 MW of PV modules.
The Company expects its gross margin relating to its in-house wafer production to module production to be in the mid 20s in percentage terms during the second quarter of 2011. The Company believes its overall gross margin, taking into account wafer and cell requirements outsourced to third party suppliers to meet demand in excess of its internal capacity, for the second quarter will be in the low 20s in percentage terms. Such guidance is based on the exchange rate between the Euro and U.S. dollar as of May 17, 2011. For the full year of 2011, the Company expects total PV module shipments between 1.75 MW to 1.80 GW, representing an increase of 65.6% to 70.3% from 2010.
Operations and Business Outlook
Non-Silicon Cost
In the first quarter of 2011, the Company's non-silicon manufacturing cost for its core raw materials to module production was approximately $0.73 per watt, a sequential decrease of $0.01. By the end of 2011, the Company expects its non-silicon manufacturing cost to decline to approximately $0.70 through the continuation of technology and manufacturing process improvements involving proprietary processes for ingot, wafer, cell and module manufacturing, higher cell conversion efficiencies, and supply chain and logistics management initiatives currently under testing or development.
Silicon Procurement
Through its diversified range of short, medium, and long-term supply contracts, the Company will continue to maintain competitive silicon costs relative to the current market price.
2011 Capacity Expansion
As of April 30, 2011, the Company's annualized in-house ingot and wafer production capacity was approximately 750 MW and its PV cell and module production capacities was approximately 1.6 GW.
To meet expected demand for its PV solar modules, the Company expects to raise its annualized in-house ingot and wafer production capacity and PV cell and module production capacity to approximately 1.2 GW and 1.9 GW, respectively, in the second half of 2011, based on actual manufacturing yield.
17/5 2011 20:33 Nippon1976 0
42568 17.05.2011 14:51:40
Regnskab: Trina Solar
Den kinesiske solpanelproducent Trina Solar (TSL på NASDAQ) har i dag aflagt regnskab for 1.kvartal 2011.
Afsætningen voksede 66% til 320,4 MW, hvilket var ca. 10% lavere end udmeldt ved forrige regnskab. Omsætningen voksede 63,6% til 550,9 mUSD og bruttomarginen faldt fra 30,9% til 27,5%, bl.a. fordi selskabet i år har outsourcet en del af wafer- og celleproduktionen for at kunne tilfredsstille efterspørgslen på paneler. På in-house produktionen blev bruttomarginen 32,2% mod et lovet niveau på ca. 30%. Driftsresultatet voksede "kun" 11,2% til 84,5 mUSD fordi EBIT-overskudsgraden faldt fra 22,6% til 15,3%. Nettorenteudgifterne faldt 26% til 6,7 mUSD og resultatet før skat steg 14,7% til 60,0 mUSD. Nettoresultatet steg 7% til 47,7 mUSD, svarende til 0,68 USD pr. aktie.
Den fuldt udvandede indtjening pr. aktie blev 0,63 USD. Dette tal indeholder negative valutareguleringer på 0,30 USD. Den justerede udvandede indtjening landede dermed på 0,93 USD mod 1,55 USD i 4.kvartal, 1,19 USD i 3.kvartal, 0,89 USD i 2. kvartal og 0,87 USD i 1. kvartal 2010. Den justerede udvandede indtjening de seneste 12 måneder kan dermed opgøres til 4,56 USD pr. aktie. Markedet forventede EPS på 1,10 USD i 1.kvartal og regnskabet er på den baggrund ret skuffende.
I 2.kvartal 2011 forventer Trina Solar at afsætte 430-450 MW solpaneler, svarende til vækst på 34-40% i forhold til 1.kvartal 2011. Bruttomarginen forventes at falde til 21-24% som følge af øget outsourcing af wafer og celleproduktion.
I hele 2011 forventer Trina Solar fortsat at afsætte 1.750-1.800 MW, svarende til fornyet afsætningsvækst på 66-70%. Det er svært at vurdere prisudviklingen på solpaneler i 2011 og dermed Trinas mulighed for at øge omsætning og indtjening. Et kvalificeret gæt efter 1.kvartal kunne være EPS-indtjening i niveauet 4,0-4,5 USD. Til sammenligning forventede markedet inden dagens regnskab EPS-indtjening på 3,97 USD.
Den aktuelle kurs på 24,79 USD svarer til en prissætning på P/E2010=5,9 og P/E2011=6,2 (med EPS på 3,97 USD). Trina Solar er aktuelt vurderet til K/I=1,42.
Trina Solar indgår i min Nordnet-portefølje med en vægt på 10,7%. Jeg ejer selv aktier i Trina Solar.
T.Jackson
Regnskab: Trina Solar
Den kinesiske solpanelproducent Trina Solar (TSL på NASDAQ) har i dag aflagt regnskab for 1.kvartal 2011.
Afsætningen voksede 66% til 320,4 MW, hvilket var ca. 10% lavere end udmeldt ved forrige regnskab. Omsætningen voksede 63,6% til 550,9 mUSD og bruttomarginen faldt fra 30,9% til 27,5%, bl.a. fordi selskabet i år har outsourcet en del af wafer- og celleproduktionen for at kunne tilfredsstille efterspørgslen på paneler. På in-house produktionen blev bruttomarginen 32,2% mod et lovet niveau på ca. 30%. Driftsresultatet voksede "kun" 11,2% til 84,5 mUSD fordi EBIT-overskudsgraden faldt fra 22,6% til 15,3%. Nettorenteudgifterne faldt 26% til 6,7 mUSD og resultatet før skat steg 14,7% til 60,0 mUSD. Nettoresultatet steg 7% til 47,7 mUSD, svarende til 0,68 USD pr. aktie.
Den fuldt udvandede indtjening pr. aktie blev 0,63 USD. Dette tal indeholder negative valutareguleringer på 0,30 USD. Den justerede udvandede indtjening landede dermed på 0,93 USD mod 1,55 USD i 4.kvartal, 1,19 USD i 3.kvartal, 0,89 USD i 2. kvartal og 0,87 USD i 1. kvartal 2010. Den justerede udvandede indtjening de seneste 12 måneder kan dermed opgøres til 4,56 USD pr. aktie. Markedet forventede EPS på 1,10 USD i 1.kvartal og regnskabet er på den baggrund ret skuffende.
I 2.kvartal 2011 forventer Trina Solar at afsætte 430-450 MW solpaneler, svarende til vækst på 34-40% i forhold til 1.kvartal 2011. Bruttomarginen forventes at falde til 21-24% som følge af øget outsourcing af wafer og celleproduktion.
I hele 2011 forventer Trina Solar fortsat at afsætte 1.750-1.800 MW, svarende til fornyet afsætningsvækst på 66-70%. Det er svært at vurdere prisudviklingen på solpaneler i 2011 og dermed Trinas mulighed for at øge omsætning og indtjening. Et kvalificeret gæt efter 1.kvartal kunne være EPS-indtjening i niveauet 4,0-4,5 USD. Til sammenligning forventede markedet inden dagens regnskab EPS-indtjening på 3,97 USD.
Den aktuelle kurs på 24,79 USD svarer til en prissætning på P/E2010=5,9 og P/E2011=6,2 (med EPS på 3,97 USD). Trina Solar er aktuelt vurderet til K/I=1,42.
Trina Solar indgår i min Nordnet-portefølje med en vægt på 10,7%. Jeg ejer selv aktier i Trina Solar.
T.Jackson
17/5 2011 21:01 Kristensen 142569 Jeg har nederst vedhæftet et par highlights i visuel form. Afsætningen var lidt skuffende ligesom EPS var lidt under udmeldte.
Midt i alt det "negative" også lidt positivt:
Trina Solar GmbH (Tyskland) meddelte i dag, at man har underskrevet en salgsaftale med Møhring Energie GmbH, en veletableret tysk-baserede projektudvikler og ingeniørvirksomhed, indkøb og bygge-og anlægsarbejder selskab. Trina Solar forventes at levere 130 MW solcellepaneler i andet og tredje kvartal af 2011 til aftalte priser i dollars. Indledende forsendelser er allerede påbegyndt.
Fuld præsentation med highlights, som giver et rigtigt godt overblik.
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDI3NTg3fENoaWxkSUQ9NDQ0MDU4fFR5cGU9MQ==&t=1
Midt i alt det "negative" også lidt positivt:
Trina Solar GmbH (Tyskland) meddelte i dag, at man har underskrevet en salgsaftale med Møhring Energie GmbH, en veletableret tysk-baserede projektudvikler og ingeniørvirksomhed, indkøb og bygge-og anlægsarbejder selskab. Trina Solar forventes at levere 130 MW solcellepaneler i andet og tredje kvartal af 2011 til aftalte priser i dollars. Indledende forsendelser er allerede påbegyndt.
Fuld præsentation med highlights, som giver et rigtigt godt overblik.
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDI3NTg3fENoaWxkSUQ9NDQ0MDU4fFR5cGU9MQ==&t=1
Så det 130 Millioner Watt til 0,55 måske? 65 Musd Oveni almindelige afsætning. Synes Iøvrigt QoQ tal er misvisende. Kan bedre lide YoY stigning på 63% +
17/5 2011 21:36 Kristensen 042571 Det er en rigtig solid ordre at få i bøgerne! I hele Q2-2010 afsatte de 222,8 MW og her en ordre på 130MW. Det svarer til 58% af sidste års indgående ordrer i samme periode. De forventer i Q2-2011 430-450WM og denne ordre udgør således 29-30% af de samlede antal MW for perioden, hvis det hele bliver bogført i Q2.
18/5 2011 08:24 le 042577 trina solar er et af de bedre selskaber i sektoren, men den er alt for dyr - i går
kiggede jeg mine lister om AEN (alternative energy aktier - både sol, vind og andet) igennem og det er uhyggeligt som d eallesammen er faldet
det er også derfor vestas er faldet og ges ligeså
jeg tror det er naivt at tro at AEN er et godt sted at investere og har heller ikke investeret i sektoren selvom jeg har haft kig på nogle solaktier, men heldigvis ikke købt, jeg har kun emcore og amat, der laver semi eq og solrelaterede equipment, emcore fik jeg solgt, amat har jeg stadig
kiggede jeg mine lister om AEN (alternative energy aktier - både sol, vind og andet) igennem og det er uhyggeligt som d eallesammen er faldet
det er også derfor vestas er faldet og ges ligeså
jeg tror det er naivt at tro at AEN er et godt sted at investere og har heller ikke investeret i sektoren selvom jeg har haft kig på nogle solaktier, men heldigvis ikke købt, jeg har kun emcore og amat, der laver semi eq og solrelaterede equipment, emcore fik jeg solgt, amat har jeg stadig
P/E 6 lyder da billigt i mine øjne, Le. Hvad vurderer du prisen udfra? Peers?
det er mest ud fra chartet
kinesiske aktier har det med at have lave pe værdier og alligevel falde, så man kan ikke sammenligner pe værdier på kinesiske aktier med amerikanske aktier
det har bl.a. noget at gøre med den måde de opgør earnings på, men jeg må indrømme at jeg ikke helt ved hvad det er, men det er et faktum at deres PE værdier er lavere end for amerikanske aktier
jeg har faktisk fundet ud af det engang men har pt glmt hvad det var jeg fandt ud af, men det er ganske logisk
http://finance.yahoo.com/q/bc?s=TSL+Basic+Chart&t=5y
kinesiske aktier har det med at have lave pe værdier og alligevel falde, så man kan ikke sammenligner pe værdier på kinesiske aktier med amerikanske aktier
det har bl.a. noget at gøre med den måde de opgør earnings på, men jeg må indrømme at jeg ikke helt ved hvad det er, men det er et faktum at deres PE værdier er lavere end for amerikanske aktier
jeg har faktisk fundet ud af det engang men har pt glmt hvad det var jeg fandt ud af, men det er ganske logisk
http://finance.yahoo.com/q/bc?s=TSL+Basic+Chart&t=5y
iøvrigt hvis man tager sidste kvartals regnskabs eps og ganger med 4 så får man en pe på over 10, så der må have været ekstraordinære indtjeninger tidligere
18/5 2011 09:39 Kristensen 042584 Det aflagte Q1-regnskab i går var ikke prangende i forhold til udmeldte forventninger og heller ikke i forhold til sidste års resultater, idet EPS for Q1-2011 blev 0,63 USD, mod 1,55 USD i 4.kvartal, 1,19 USD i 3.kvartal, 0,89 USD i 2. kvartal og 0,87 USD i 1. kvartal 2010.
Selvom den i vores øjne er billig på nøgletal - i forhold til den formoede vækst, lever den ikke op til forventningerne, hvilket den straffes for. Dog kan vi formodentlig set frem til en godt Q2, da man her forventer at afsætte 430-450MW mod 320MW i Q1. Dette vil alt andet lige give et boost i indtjeningen også, ligeledes vil Q3 og Q4 hvis de skal nå udmeldte salg.
I hele 2011 forventer Trina Solar fortsat at afsætte 1.750-1.800 MW. I Q1 blev der afsat 320MW og Q2 estimeres til 450. Således giver det 770MW i første halvår. I andet halvår skal der dermed afsættes op mod 500MW pr. kvartal for at opnå forventnignerne. Kan de opretholde indtjeningen pr. MW, kan vi se frem til et godt 2. halvår.
Selvom den i vores øjne er billig på nøgletal - i forhold til den formoede vækst, lever den ikke op til forventningerne, hvilket den straffes for. Dog kan vi formodentlig set frem til en godt Q2, da man her forventer at afsætte 430-450MW mod 320MW i Q1. Dette vil alt andet lige give et boost i indtjeningen også, ligeledes vil Q3 og Q4 hvis de skal nå udmeldte salg.
I hele 2011 forventer Trina Solar fortsat at afsætte 1.750-1.800 MW. I Q1 blev der afsat 320MW og Q2 estimeres til 450. Således giver det 770MW i første halvår. I andet halvår skal der dermed afsættes op mod 500MW pr. kvartal for at opnå forventnignerne. Kan de opretholde indtjeningen pr. MW, kan vi se frem til et godt 2. halvår.
der har igennem mange år været alt for meget hype om alternativ energi selskaber bare fordi mman tror at udbygningen af alternativ energi ville gøre det til gode sektorer at investere i
men de har slået totalt fejl og det er ikke realtistisk at alternativ energi skal kunne erstatte traditionel energi
det er traditionelle sektorer som semi eq, forbrug og machine tool og minemaskiner der følger de traditionelle cykler som man kan investere efter medens alternativ energi er så meget hype at det ville være bedre ikke at bruge tid på dne sektor
men de har slået totalt fejl og det er ikke realtistisk at alternativ energi skal kunne erstatte traditionel energi
det er traditionelle sektorer som semi eq, forbrug og machine tool og minemaskiner der følger de traditionelle cykler som man kan investere efter medens alternativ energi er så meget hype at det ville være bedre ikke at bruge tid på dne sektor
20/5 2011 21:24 Nippon1976 042641 Nogen der ved hvad der skete med Trina i dag.... Den faldt til 21,15 og steg så efterfølgende til over 22
20/5 2011 23:31 Kristensen 042645 Der er ingen nyheder op den, så har intet umiddelbart svar. Men undrede mig selv, da den blev handlet godt ned i starten af dagen.
21/5 2011 09:32 Nippon1976 042647 måske det var en bund eller midlertidig bund? En hammercandle med en RSI14 værdi på 15,4. Find setup med tydeligt SL og et gab, der skal lukkes op til 24,13 så der er også et tyde kort target.
28/5 2011 06:19 le 042784 LDK Solar Revises Q1 2011 Earnings Metrics 36 comments ' by: Investing Hobo May 13, 2011 ' about: LDK Font Size: PrintEmail Recommend 1 Share this page
Share0 Before first quarter 2011 earnings season began for US-listed Chinese solar companies, LDK Solar (LDK) became the first to warn of potential shipment shortfalls. Although LDK did not cite reasons for its lower revenue forecast, it was widely believed by industry observers that policy uncertainties in Italy since March played a major role.
Earlier this week, Trina Solar (TSL) also lowered its shipment forecast, linking the shortfall to Italian uncertainties. A day later, Yingli Green Energy (YGE) joined the pre-announcement party by lowering its own shipment expectations for the first quarter due to project delays in Italy as a result of policy uncertainties.
These three cases may be more company-specific, linked to their respective Italian exposure, since not all companies among the same group experienced the same softness in their shipment order flows. Similar to peers who have recently commented on full year guidance, LDK also reaffirmed its prior 2011 guidance issued in its latest earnings report despite revisions made to its first quarter outlook.
Most notable in LDK's pre-announcement is the lower guidance for revenues and module shipments. Other quarterly metrics given by the company more or less fall in line with prior guidance. For revenues, LDK now expects Q1 2011 revenues to range between $745-755m, down from $800-850m. Module shipments were also noticeably lowered from 120-140mw to 109-114mw. Based on lower module average selling prices ("asp") indicated in the company's investor day conference call, roughly half of the $75m mean revenue shortfall was due to LDK's module business. Given the company's potentially higher Italian exposure due to the purchase of Solar Green Technology S.p.A., a system integrator based in Italy, LDK's module shortfall may simply be mirroring module producing rivals TSL and YGE.
However, LDK revised upward gross margin expectations from 27-29% to 30-31%. Since LDK is not yet a fully integrated module producer, it must rely on either external cell procurement or cell tolling agreements in order to satisfy the cell requirements in its module production. Modules produced in this manner yield much lower gross margin. As a result, module shipments based on externally produced cells are high revenue but low margin in nature. Shipment shortfalls in this product mix would thus disproportionately impact revenues but raise blended gross margin. This may be exactly the situation witnessed at LDK, based on its guidance.
In addition, because there are so many verticals within LDK's business structure, a number of factors may also lower reported revenues but not corresponding gross profit. For example, the company may opt to sell a lower percentage of its polysilicon production and instead consume it internally. Lost polysilicon sales volume would negatively impact revenues, but since it is consumed internally, higher ratios of lower cost internally produced polysilicon would lower blended silicon costs and thus raise the gross profit levels for LDK's wafer and module sales. The end result is lower revenues but the same level of gross profit, or in other words, higher gross margin.
Another example may involve LDK accounting for its module component costs differently. Instead of selling wafers and purchasing cells, the company could simply use cell tolling arrangements. Internally produced wafers would be contracted for cell conversion in this example. As a result, LDK would lose revenues due to lost wafer sales, but the gross profit potential remains constant since it is transferred into higher gross profit levels for module sales. As with the polysilicon example detailed above, cell tolling would lower reported revenues but keep gross profit levels constant and thus raise consolidated gross margin.
These are only two of many different avenues LDK could account for its revenues. Since LDK not only operates in every vertical of module production but can also potentially generate revenue in each vertical, actual reported revenues can range widely. However, gross profit should remain fairly constant, dependent on the company's capacity at each vertical and the current pricing spreads between each vertical. This was the point I tried to convey in less detail in my last LDK earnings forecast:
There may be changes in LDK's actual product mix, but the overall absolute gross profit potential should not deviate too far from this estimate since it reflects the company's earnings power potential per unit of installed capacity.
As a result, LDK's revenue shortfall may appear alarming at first glance, but in fact the company's revised guidance did not materially lower its implied gross profit potential. Using the mid-point of LDK's prior $800-850m revenue and 27-29% gross margin guidance, the implied gross profit is $231m. Using the mid-point of LDK's revised forecast of $745-755m in revenues and 30-31% gross margin, the new implied gross profit is $229m. Assuming operating and non-operating costs remained constant, the corresponding earnings per share ("EPS") should deviate by less than 1% from LDK's original guidance.
However, I have revised my prior estimate for LDK's Q1 2011 earnings. Although lower module shipment expectations do not lower my gross profit estimate significantly, I have revised my wafer shipment assumptions, which appear too aggressive now.
Assuming LDK's revised guidance on overall shipments is not conservative, it does appear the company experienced flat or even declining sequential wafer production and/or sales during the first quarter. Starting in 2011, the company changed its per-piece wafer wattage assumption from 3.8/watt to 4.1/watt. As a result, LDK's corresponding capacity should increase accordingly. Wafer capacity starting 2011 should increase by over 7% without any changes to the actual installed physical capacity. Thus, if LDK produced the same volume of wafers on a per piece basis, the actual reported megawatt volume should increase by over 7%.
However, LDK's total shipment guidance, which would involve internally produced wafers, is not much higher than Q4 2010 levels on a megawatt basis. This implies the actual per-piece wafer production level is flat or lower sequentially. Given wafer pricing was still strong in the first quarter, demand should have remained strong enough for LDK to operate at full capacity. It would appear, as already reported by some peers, that LDK may have experienced some production downtime around the Chinese New Year. I may have underestimated the potential impact of lower operating days during the first quarter of this year.
Below are my revised estimates for LDK's first quarter 2011 earnings. Although much of the rationale remains unchanged from my prior forecast, a major revision has been made to overall wafer shipment expectations. As usual, these estimates are more a reflection of the company's core operational earnings and do not include any unannounced gains or charges.
LDK Q1 2011 Revised Earnings Estimate:
Shipments:
Core Wafer: 600mw @ 0.84/watt = $504m
OEM Wafer: 35mw @ 0.48/watt = $17m
Module: 112mw @ 1.65/watt = $185m
Polysilicon: 800mt @ 65/kg = $52m
Total Revenues: $758m
Cost of Goods:
Core Wafer: 600mw @ 0.54/watt = $324m
OEM Wafer: 35mw @ 0.30/watt = $11m
Module: 64mw @ 1.58/watt = $101m + 48mw @ 1.12/watt = $54m, $155m total
Polysilicon: 800mt @ 40/kg = $32m
Total COGS: $522m
Gross Profit: $236m
Gross Margin: 31.1%
Operating Expenses: $45m
Operating Profit: $191m
Net Interest Expenses: $25m
Forex Gain: $5m
Government Subsidies/Other: $2m
Tax: $28m
Net Income: $145m
Diluted Share Count: 143m
EPS: 1.01
While the actual foreign exchange translation is always difficult to estimate, my $5m gain is based on the assumption LDK did not materially change its currency or hedging exposure relative to Q4 2010 levels. LDK historically did little hedging; thus, with the euro appreciation vs. the USD, the company should experience exchange gains as a result of its euro assets, notably accounts receivables in euros. In addition, the company should experience gains as the rmb gained vs. the USD, notably from USD-denominated debt such as its convertible debt outstanding.
Additionally, as noted in its recently released annual report, LDK last December repurchased the 15% stake in the polysilicon plant it sold in late 2009. As a result, there should not be any minority payments made during the first quarter related to this formerly divested stake. However, I did not include any potential charges which may have resulted from the repurchase transaction.
Share0 Before first quarter 2011 earnings season began for US-listed Chinese solar companies, LDK Solar (LDK) became the first to warn of potential shipment shortfalls. Although LDK did not cite reasons for its lower revenue forecast, it was widely believed by industry observers that policy uncertainties in Italy since March played a major role.
Earlier this week, Trina Solar (TSL) also lowered its shipment forecast, linking the shortfall to Italian uncertainties. A day later, Yingli Green Energy (YGE) joined the pre-announcement party by lowering its own shipment expectations for the first quarter due to project delays in Italy as a result of policy uncertainties.
These three cases may be more company-specific, linked to their respective Italian exposure, since not all companies among the same group experienced the same softness in their shipment order flows. Similar to peers who have recently commented on full year guidance, LDK also reaffirmed its prior 2011 guidance issued in its latest earnings report despite revisions made to its first quarter outlook.
Most notable in LDK's pre-announcement is the lower guidance for revenues and module shipments. Other quarterly metrics given by the company more or less fall in line with prior guidance. For revenues, LDK now expects Q1 2011 revenues to range between $745-755m, down from $800-850m. Module shipments were also noticeably lowered from 120-140mw to 109-114mw. Based on lower module average selling prices ("asp") indicated in the company's investor day conference call, roughly half of the $75m mean revenue shortfall was due to LDK's module business. Given the company's potentially higher Italian exposure due to the purchase of Solar Green Technology S.p.A., a system integrator based in Italy, LDK's module shortfall may simply be mirroring module producing rivals TSL and YGE.
However, LDK revised upward gross margin expectations from 27-29% to 30-31%. Since LDK is not yet a fully integrated module producer, it must rely on either external cell procurement or cell tolling agreements in order to satisfy the cell requirements in its module production. Modules produced in this manner yield much lower gross margin. As a result, module shipments based on externally produced cells are high revenue but low margin in nature. Shipment shortfalls in this product mix would thus disproportionately impact revenues but raise blended gross margin. This may be exactly the situation witnessed at LDK, based on its guidance.
In addition, because there are so many verticals within LDK's business structure, a number of factors may also lower reported revenues but not corresponding gross profit. For example, the company may opt to sell a lower percentage of its polysilicon production and instead consume it internally. Lost polysilicon sales volume would negatively impact revenues, but since it is consumed internally, higher ratios of lower cost internally produced polysilicon would lower blended silicon costs and thus raise the gross profit levels for LDK's wafer and module sales. The end result is lower revenues but the same level of gross profit, or in other words, higher gross margin.
Another example may involve LDK accounting for its module component costs differently. Instead of selling wafers and purchasing cells, the company could simply use cell tolling arrangements. Internally produced wafers would be contracted for cell conversion in this example. As a result, LDK would lose revenues due to lost wafer sales, but the gross profit potential remains constant since it is transferred into higher gross profit levels for module sales. As with the polysilicon example detailed above, cell tolling would lower reported revenues but keep gross profit levels constant and thus raise consolidated gross margin.
These are only two of many different avenues LDK could account for its revenues. Since LDK not only operates in every vertical of module production but can also potentially generate revenue in each vertical, actual reported revenues can range widely. However, gross profit should remain fairly constant, dependent on the company's capacity at each vertical and the current pricing spreads between each vertical. This was the point I tried to convey in less detail in my last LDK earnings forecast:
There may be changes in LDK's actual product mix, but the overall absolute gross profit potential should not deviate too far from this estimate since it reflects the company's earnings power potential per unit of installed capacity.
As a result, LDK's revenue shortfall may appear alarming at first glance, but in fact the company's revised guidance did not materially lower its implied gross profit potential. Using the mid-point of LDK's prior $800-850m revenue and 27-29% gross margin guidance, the implied gross profit is $231m. Using the mid-point of LDK's revised forecast of $745-755m in revenues and 30-31% gross margin, the new implied gross profit is $229m. Assuming operating and non-operating costs remained constant, the corresponding earnings per share ("EPS") should deviate by less than 1% from LDK's original guidance.
However, I have revised my prior estimate for LDK's Q1 2011 earnings. Although lower module shipment expectations do not lower my gross profit estimate significantly, I have revised my wafer shipment assumptions, which appear too aggressive now.
Assuming LDK's revised guidance on overall shipments is not conservative, it does appear the company experienced flat or even declining sequential wafer production and/or sales during the first quarter. Starting in 2011, the company changed its per-piece wafer wattage assumption from 3.8/watt to 4.1/watt. As a result, LDK's corresponding capacity should increase accordingly. Wafer capacity starting 2011 should increase by over 7% without any changes to the actual installed physical capacity. Thus, if LDK produced the same volume of wafers on a per piece basis, the actual reported megawatt volume should increase by over 7%.
However, LDK's total shipment guidance, which would involve internally produced wafers, is not much higher than Q4 2010 levels on a megawatt basis. This implies the actual per-piece wafer production level is flat or lower sequentially. Given wafer pricing was still strong in the first quarter, demand should have remained strong enough for LDK to operate at full capacity. It would appear, as already reported by some peers, that LDK may have experienced some production downtime around the Chinese New Year. I may have underestimated the potential impact of lower operating days during the first quarter of this year.
Below are my revised estimates for LDK's first quarter 2011 earnings. Although much of the rationale remains unchanged from my prior forecast, a major revision has been made to overall wafer shipment expectations. As usual, these estimates are more a reflection of the company's core operational earnings and do not include any unannounced gains or charges.
LDK Q1 2011 Revised Earnings Estimate:
Shipments:
Core Wafer: 600mw @ 0.84/watt = $504m
OEM Wafer: 35mw @ 0.48/watt = $17m
Module: 112mw @ 1.65/watt = $185m
Polysilicon: 800mt @ 65/kg = $52m
Total Revenues: $758m
Cost of Goods:
Core Wafer: 600mw @ 0.54/watt = $324m
OEM Wafer: 35mw @ 0.30/watt = $11m
Module: 64mw @ 1.58/watt = $101m + 48mw @ 1.12/watt = $54m, $155m total
Polysilicon: 800mt @ 40/kg = $32m
Total COGS: $522m
Gross Profit: $236m
Gross Margin: 31.1%
Operating Expenses: $45m
Operating Profit: $191m
Net Interest Expenses: $25m
Forex Gain: $5m
Government Subsidies/Other: $2m
Tax: $28m
Net Income: $145m
Diluted Share Count: 143m
EPS: 1.01
While the actual foreign exchange translation is always difficult to estimate, my $5m gain is based on the assumption LDK did not materially change its currency or hedging exposure relative to Q4 2010 levels. LDK historically did little hedging; thus, with the euro appreciation vs. the USD, the company should experience exchange gains as a result of its euro assets, notably accounts receivables in euros. In addition, the company should experience gains as the rmb gained vs. the USD, notably from USD-denominated debt such as its convertible debt outstanding.
Additionally, as noted in its recently released annual report, LDK last December repurchased the 15% stake in the polysilicon plant it sold in late 2009. As a result, there should not be any minority payments made during the first quarter related to this formerly divested stake. However, I did not include any potential charges which may have resulted from the repurchase transaction.
