Exceeds guidance with record solar wafer and module shipments of 533 MW
Achieves guidance with revenues of US$218.2 million
Expects solar module shipments to increase over 75% quarter over quarter in Q4 2012
ReneSola Ltd ("ReneSola" or the "Company") (NYSE: SOL), a leading global manufacturer of solar photovoltaic ("PV") modules and wafers, announced its unaudited financial results for the third quarter ended September 30, 2012.
Third Quarter 2012 Financial and Operating Highlights
•Total solar wafer and module shipments in Q3 2012 were 532.8 megawatts ("MW"), exceeding Company guidance and representing an increase of 5.8% from 503.7 MW in Q2 2012.
•Q3 2012 net revenues were US$218.2 million, meeting Company guidance and representing a decrease of 6.4% from US$233.0 million in Q2 2012.
•Q3 2012 gross loss was US$39.2 million with a gross margin of negative 18.0%, which included a US$31.6 million write-down for inventory, compared to a gross profit of US$1.3 million with a gross margin of 0.6% in Q2 2012.
•Q3 2012 operating loss was US$82.8 million with an operating margin of negative 38.0%, compared to an operating loss of US$34.6 million with an operating margin of negative 14.9% in Q2 2012.
• Q3 2012 net loss was US$78.6 million, representing basic and diluted loss per share of US$0.46 and basic and diluted loss per American depositary share ("ADS") of US$0.91.
• Cash and cash equivalents plus restricted cash were US$335.2 million as of the end of Q3 2012, compared to US$394.2 million as of the end of Q2 2012.
"While we delivered record shipments in the third quarter, declining selling prices and the substantial supply-demand imbalance continued to have a large impact on our margins," said Mr. Xianshou Li, ReneSola's chief executive officer. "Nevertheless, we continued to drive down costs and improve efficiency through strong management and a dedicated R&D team. Over the year, we've leveraged our core competitive strength in wafer manufacturing and technology to develop highly efficient solar modules that have attracted customers in a number of markets, most notably Europe and Australia, and also the United States and China. Despite the difficult market conditions impacting the industry, we are confident in our ability to lower costs and develop superior technology that will grow our solar module business in both the near and long term."
Third Quarter 2012 Results
Solar Wafer and Module Shipments
|
3Q12 |
2Q12 |
3Q11 |
Q-o-Q% |
Y-o-Y% |
|
|
Total Solar Wafer and Module Shipments (MW) |
532.8 |
503.7 |
328.5 |
5.8% |
62.2% |
|
Solar Wafer Shipments (MW) |
387.5 |
344.0 |
294.8 |
12.6% |
31.4% |
|
Solar Module Shipments (MW) |
145.3 |
159.7 |
33.7 |
(9.0%) |
331.2% |
The sequential increase in solar product shipments was mainly the result of an increase in the demand of the Company's high-efficiency solar wafers from Asia-Pacific customers.
Net Revenues
|
3Q12 |
2Q12 |
3Q11 |
Q-o-Q% |
Y-o-Y% |
|
|
Net Revenues (US$mln) |
$218.2 |
$233.0 |
$189.1 |
(6.4%) |
15.4% |
Revenues in Q3 2012 decreased quarter over quarter due to a decrease in the average selling prices ("ASPs") of solar wafers and modules to US$0.28 per watt ("W") and US$0.67/W, respectively.
Gross Profit (Loss)
|
3Q12 |
2Q12 |
3Q11 |
Q-o-Q% |
Y-o-Y% |
|
|
Gross Profit (Loss) (US$mln) |
($39.2) |
$1.3 |
($7.7) |
- |
- |
|
Gross Margin |
(18.0%) |
0.6% |
(4.0%) |
- |
- |
The sequential decrease in gross profit was primarily due to an inventory write-down of US$31.6 million to reflect the decline in the price of solar wafers and polysilicon.
Operating Income (Loss)
|
3Q12 |
2Q12 |
3Q11 |
Q-o-Q% |
Y-o-Y% |
|
|
Operating Expenses (US$mln) |
$43.6 |
$35.9 |
$26.8 |
21.2% |
62.3% |
|
Operating Income (Loss) (US$mln) |
($82.8) |
($34.6) |
($34.5) |
- |
- |
|
Operating Margin |
(38.0%) |
(14.9%) |
(18.2%) |
- |
- |
The sequential increase in operating expenses was primarily due to (1) an increase in sales and marketing expenses in conjunction with the Company's expansion of its business outside of China, (2) an increase in general and administrative expenses as a result of a US$1.8 million bad debt provision for difficulty collecting receivables, (3) an impairment loss on long-lived assets of US$6.1 million related to the discontinuation of 200 MW of monocrystalline wafer furnace production capacity and (4) a goodwill impairment charge of US$5.8 million related to the Company's solar cell and module business acquired in 2009, offset by a decrease of US$5.6 million in research and development ("R&D") expenses in order to save costs. Operating expenses represented 20.0% of total revenues in Q3 2012, compared to 15.4% in Q2 2012.
Foreign Exchange Gain (Loss)
The Company had a foreign exchange net gain of US$2.1 million in Q3 2012, primarily due to the appreciation of the euro against the U.S. dollar and the depreciation of the U.S. dollar against the renminbi ("RMB"). The Company also recognized a US$0.3 million loss on derivatives in Q3 2012, compared to a loss of US$0.7 million in Q2 2012.
Net Income (Loss) Attributable to Holders of Ordinary Shares
|
3Q12 |
2Q12 |
3Q11 |
|
|
Net Income (Loss) (US$mln) |
($78.6) |
($34.8) |
($8.2) |
|
Diluted Earnings (Loss) per Share |
($0.46) |
($0.20) |
($0.05) |
|
Diluted Earnings (Loss) per ADS |
($0.91) |
($0.40) |
($0.09) |
Business Highlights
Research and Development
ReneSola continued to invest in R&D to enhance the technology behind its products and manufacturing with the primary goals of lowering cost and improving efficiency. The Company's Virtus II products are currently in full production, with average efficiencies of 15.7%. A 60-cell Virtus II module produces an average of 255 W. Additionally, the Company's microinverter, Micro Replus, successfully completed its initial testing phase in the United States, Australia and Europe. ReneSola has also began research on small-scale storage systems, with the aim of providing these products to the market by the middle of next year, as well as began R&D on developing its own AC-OC optimizer, with the aim of providing this product to the market by the end of next year.
Solar Module Business
ReneSola delivered 145.3 MW of solar modules, of which 101.7 MW were Virtus modules, in Q3 2012, down slightly quarter over quarter due to seasonality. For Q3 2012, the Company's total solar module selling cost was approximately US$0.65/W, slightly lower compared to Q2 2012. Gross margin for the Company's solar module business was approximately 1.0% in Q3 2012. The Company expects to continue to reduce its solar module manufacturing costs through improvements in its manufacturing methods as well as a reduction in material costs and capitalize on the module business's higher margins relative to solar wafer production. In Q4 2012, the Company expects its total solar module production cost to decrease to approximately US$0.57/W and its shipments to increase to a range of 250 MW to 270 MW.
Solar Wafer Business
ReneSola reached its year-end blended non-silicon solar wafer processing cost target of US$0.15/W in Q3 2012, a decrease from US$0.17/W in Q2 2012 as a result of the Company's continued cost-reduction efforts. As announced last quarter, the Company has began manufacturing Virtus A++ wafers, which use new proprietary manufacturing technology that allows the Company to produce a larger number of high-efficiency solar wafers per ingot, in its newest facilities. The Company expects non-silicon solar wafer processing cost in these new facilities to reach US$0.11/W by the end of 2012. Overall, the Company expects to further drive down its blended non-silicon solar wafer processing cost to US$0.12/W by the end of 2012.
Polysilicon Production
In Q3 2012, ReneSola produced approximately 1,175.7 metric tons ("MT") of polysilicon, an increase from approximately 1,119.4 MT in Q2 2012. At the end of Q3 2012, the Company had a polysilicon production capacity of 4,000 MT. The Company expects polysilicon production capacity to reach 10,000 MT by the end of Q1 2013 through the completion of Phase II of its polysilicon production plant. On November 1, 2012, the Company temporarily halted polysilicon production to upgrade its facilities and equipment, as well as integrate Phase II with Phase I. Trial production for Phase II is expected to begin in January 2013.
ReneSola's internal polysilicon production cost decreased to approximately US$23.57 per kilogram ("kg") at the end of Q3 2012, compared to approximately US$25.80/kg at the end of Q2 2012, as a result of improvements in the Company's manufacturing techniques. The Company expects its polysilicon production facilities to have a polysilicon production cost below US$18/kg by the end of Q1 2013.
Projects and Systems Business
To date, ReneSola has 40 MW of projects under construction in China and 6 MW of projects under construction in Romania. The Company will selectively evaluate and engage in solar project opportunities as they arise. China Development Bank has, in the past, indicated its support for the Company's additional solar power projects.
Recent Business Developments
• In November 2012, ReneSola announced that its high-wattage 300 W poly module passed the potential-induced degradation ("PID") test performed by TUV SUD, a leading provider of testing, inspection and certification solutions.
• In November 2012, ReneSola announced that its solar PV modules sold in the United States are not subject to tariffs on PV modules made with Chinese-manufactured solar cells, as the Company sources its cells from countries other than China.
• In November 2012, ReneSola introduced its new Virtus II multicrystalline modules to the Indian market at the 6th Renewable Energy India 2012 Expo and announced the Company had started providing locally produced PV modules to the Indian market with the expectation of providing 250 MW of India-made PV modules over a two-year period.
• In November 2012, ReneSola announced that its customer Solar Planet Power Inc. ("Solar Planet"), a U.S. company specializing in PV system solutions for commercial properties including system due diligence, financing, design and installation, commissioned several ground and rooftop projects composed entirely of ReneSola modules at elementary and high schools in West Jefferson and Blacklick, Ohio.
• In October 2012, ReneSola invited several of its U.S. customers to tour its Yixing manufacturing facilities, which include solar cell and module production lines, in China's Jiangsu province.
• In October 2012, ReneSola established its Asia-Pacific, Middle East and Africa regional sales headquarters in Singapore.
• In October 2012, ReneSola announced that, as a result of the Company's diversified supply chain, its products will not be subject to anti-dumping and countervailing duties imposed by the U.S. Department of Commerce on a range of solar imports originating in China.
• In October 2012, ReneSola shipped 10 MW of its high-quality solar modules to saferay GmbH, a leading large-scale PV power plant installer in Germany.
• In October 2012, ReneSola launched its new solar module series products, the Virtus II solar module, the optimized Virtus II Plus 250 solar module and the Micro Replus microinverter, to the Australian market at All Energy Australia 2012.
• In September 2012, ReneSola announced Segen Ltd, the UK's leading value-added distributor of solar PV products, would be adding a new range of quality PV panels from ReneSola to its comprehensive portfolio.
• In September 2012, ReneSola contracted to sell 512 kilowatts ("kW") of its high-quality, high-efficiency solar modules to Cummings Properties, one of the most prominent full-service commercial real estate development and property management organizations in Massachusetts, for use on the rooftop solar system of Cummings Center, a two-million square foot corporate campus and retail center in Beverly, Massachusetts.
• In September 2012, ReneSola announced its high-wattage 300 W and 305 W 72-cell poly line was ready for shipment from its east and west coast warehouses in the United States.
• In September 2012, ReneSola released its microinvertor, Micro Replus, which is available as a standalone microinverter or integrated with a ReneSola panel as a turnkey AC module.
• In August 2012, ReneSola agreed to sell 4.6 MW of its 255 W poly modules to Solar Planet.
Liquidity and Capital Resources
Net cash outflow from operating activities was US$46.0 million for Q3 2012, compared to net cash inflow of US$14.2 million in Q2 2012. Net cash and cash equivalents plus restricted cash were US$335.2 million at the end of Q3 2012, compared to US$394.2 million at the end of Q2 2012.
Total debt was US$850.3 million at the end of Q3 2012, compared to US$821.3 million at the end of Q2 2012, excluding US$111.6 million of convertible notes due March 15, 2018, unless repurchased or converted at an earlier date. Short-term borrowings were US$715.8 million in Q3 2012, an increase from US$691.1 million in Q2 2012.
Capital expenditures were US$30.6 million for Q3 2012, primarily for the Company's PV project business, as well as expanding its polysilicon production capacity and improving its manufacturing processes.
2012 Capacity Expansion Plans and Related CAPEX
The Company expects to spend approximately US$14.8 million in Q4 2012 to expand its polysilicon production capacity and integrate Phase II of its Sichuan polysilicon production plant, as well as build up its horizontal and project businesses.
Amendment of 2007 Employee Stock Option Plan to Establish New Exercise Price
In Q3 2012, ReneSola's board of directors approved the amendment of 7,835,600 stock options previously granted under the 2007 employee stock option plan to establish a new exercise price for such stock options held by current employees equal to $1.47 per ADS, which was the closing price of the Company's ADSs on August 8, 2012.
Outlook
For Q4 2012, the Company expects total solar wafer and module shipments to be in the range of 635 MW to 675 MW, with solar module shipments expected to be in the range of 250 MW to 270 MW. Revenues are expected to be in the range of US$240 million to US$260 million and gross margin is expected to be positive in Q4 2012.
For the full year of 2012, the Company expects total solar wafer and module shipments to be close to 2.2 GW.
