Trina Solar Limited today announced its unaudited financial results for the second quarter of 2015.
Second Quarter 2015 Financial and Operating Highlights
- Total module shipments from the Company's manufacturing facilities were 1,231.6MW, consisting of 1,000.7MW of external shipments and 230.9MW of shipments to the Company's own downstream PV power projects, an increase of 20.0% sequentially and 30.6% year-over-year. This compares to the Company's guidance of 1,100MW to 1,140MW of total module shipments.
- Total 121.3MW of PV power projects connected to the grid in the second quarter, compared with the Company's guidance of 65MW to 70MW.
- Net revenues were $722.9 million, an increase of 29.5% from the first quarter of 2015 and 39.2% from the second quarter of 2014.
- Gross margin was 20.0%, compared with 18.0% in the first quarter of 2015 and 15.4% in the second quarter of 2014.
- Operating income was $60.7 million, an increase of 108.1% from the first quarter of 2015 and 286.5% from the second quarter of 2014.
- Net income was $43.1 million, an increase of 174.8% from the first quarter of 2015 and 317.8% from the second quarter of 2014.
- Earnings per fully diluted American Depositary Share ("ADS" and each ADS represents 50 of the Company's ordinary shares) were $0.42, compared with $0.16 in the first quarter of 2015 and $0.14 in the second quarter of 2014.
- The Company raised its guidance for 2015 total PV module shipments to 4.9GW to 5.1GW from its original guidance of 4.4GW to 4.6GW, of which 700MW to 800MW of PV modules will be shipped to the Company's PV power projects. The total shipment volume represents an increase of 33.9% to 39.3% from 2014.
"We achieved our second straight quarter of record results and our strongest quarter ever for both upstream and downstream in almost all financial and operating metrics," said Mr. Jifan Gao, Chairman and CEO of Trina Solar. "We not only beat the high end of our guidance with record module shipments of 1.23GW and project connections of 121.3MW, we also experienced strong top-line and bottom-line growth and improved fundamentals while focusing on profitable growth. We achieved this result with a combination of cost reductions through continued improvements in supply chain management, technological development, and strategic deployment of our resources in promising and fast-growing markets."
"Demand in the global solar markets continues to trend upwards, led by China, the U.S. and India in the second quarter. Our asset-light capacity expansion, cooperation with diverse partners in China and overseas, and efficient supply chain management have enabled us to maintain flexibility on the manufacturing side and capture both upstream and downstream growth opportunities while maintaining a strong balance sheet. We believe these strategic measures, along with our industry-leading production scale and cost leadership, have positioned us well during a period of industry consolidation."
"Our dedication to technological development continues to generate exciting results, including the early trials of highly efficient cells using advanced interdigitated back contact (IBC) technology. The scientists and researchers at our State Key Laboratory of PV Science and Technology have built a pilot-line of the first low-cost industrial versions of IBC cells, which have reached a market-leading efficiency of 23.1% and have an average efficiency of greater than 22%. We will continue to develop new technology for particular climates and specific applications, as well as smarter PV products, as we work to reduce the levelized cost of electricity."
"In our downstream business, we far exceeded our goal for the quarter by connecting 121.3MW of projects to the grid, including 31.3MW of distributed generation ("DG"). We were able to do this by quickly responding to changing market trends, providing superior project execution capabilities, and leveraging diversified funding channels. With our first mover advantage among Chinese module players in the DG sector, and our prominence in the upstream business, we are well positioned to be a leading player in the DG segment, which has the potential to become the fastest-growing segment in the Chinese solar market in the coming years."
"Looking ahead, we are expecting a historically strong year in the global solar market. China is poised to generate even greater demand as the Chinese government made renewable energy a top priority and is strongly committed to achieving its 2015 grid connection target. I am confident that with our leading technology, strong brand name and superior products, we will further solidify our market leading position. We are well positioned to capitalize on strong global demand, outpace growth in the sector, and become a first class project operator and developer while remaining a leading module manufacturer. Given our solid visibility for the second half, we are confident that we will meet our revised full year module shipment guidance of 4.9GW to 5.1GW, which will be over 10% greater than our previous forecast of 4.4GW to 4.6GW."
Second Quarter 2015 Results
Net revenues were $722.9 million, an increase of 29.5% sequentially and 39.2% year-over-year. Total shipments were 1,231.6MW, consisting of 1,000.7MW of external shipments, which were recognized in revenue, and 230.9MW of shipments to the Company's downstream power projects. This compares with total shipments of 1,026.2MW, consisting of 891.7MW of external shipments and 134.5MW of internal shipments, in the first quarter of 2015 and total shipments of 943.3MW, including 794.6MW of external shipments and 148.7MW of internal shipments, in the second quarter of 2014. The sequential and year-over-year increases in revenues and shipments were largely driven by growing demand from China, the U.S. and emerging markets, which helped to offset a drop in shipments from Europe and Japan due to seasonally lower demand in the second quarter as a result of the effectiveness of new feed-in-tariffs.
Gross Profit and Margin
Gross profit was $144.9 million, compared with $100.3 million in the first quarter of 2015 and $80.2 million in the second quarter of 2014. Gross margin was 20.0%, compared with 18.0% in the first quarter of 2015 and 15.4% in the second quarter of 2014. The sequential increase in gross margin was mainly due to a reduction in cost per watt as a result of greater economies of scale and improvements in the efficiency of our operations, which drives down both material and labor costs on per watt basis. The year-over-year increase in gross margin was primarily because the annual decline in our cost per watt was greater than the decrease in the Company's ASP.
Operating Expense, Income and Margin
Operating expenses were $84.2 million, an increase of 18.3% sequentially and 30.4% year-over-year. The sequential increase was primarily due to an increase in selling expenses, particularly higher shipping expenses resulting from higher shipment volumes. The Company's operating expenses represented 11.6% of its second quarter net revenues, a decrease from 12.8% in the first quarter of 2015 and a decrease from 12.4% in the second quarter of 2014. Operating expenses included a reversal of accounts receivable provision of $3.1 million in the second quarter of 2015, compared with a reversal of accounts receivable provisions of $0.06 million in the first quarter of 2015.
As a result, operating income was $60.7 million, compared with $29.2 million in the first quarter of 2015 and $15.7 million in the second quarter of 2014. Operating margin was 8.4%, compared with 5.2% in the first quarter of 2015 and 3.0% in the second quarter of 2014.
Net Interest Expense
Net interest expense was $12.4 million, compared with $10.7 million in the first quarter of 2015 and $8.1 million in the second quarter of 2014.
Foreign Currency Exchange Gain (Loss)
The Company recorded a net foreign currency exchange gain of $5.1 million, which included a loss on change in fair value of foreign exchange derivative instruments of $0.9 million. This compares with a net loss of $1.7 million in the first quarter of 2015 and a gain of $3.3 million in the second quarter of 2014.
Income Tax Expense
Income tax expense was $11.8 million, compared with income tax expense of $3.2 million in the first quarter of 2015 and income tax expense of $2.2 million in the second quarter of 2014. The quarter-over-quarter increase is primarily a result of our subsidiary companies, both in China and overseas, generating greater profit as the industry and our business continue to grow.
Net Income and Earnings per ADS
Net income was $43.1 million, compared with $15.7 million in the first quarter of 2015 and $10.3 million in the second quarter of 2014.
Net margin was 6.0%, compared with 2.8% in the first quarter of 2015 and 2.0% in the second quarter of 2014.
Net income attributable to ordinary shareholders of Trina Solar was $40.9 million, compared with $13.9 million in the first quarter of 2015 and $10.7 million in the second quarter of 2014.
Earnings per fully diluted ADS were $0.42, compared with $0.16 in the first quarter of 2015 and $0.14 in the second quarter of 2014.
As of June 30, 2015, the Company had $616.3 million in cash and cash equivalents and restricted cash. Total bank borrowings were $1,019.1 million, of which $924.2 million consisted of short-term borrowings and the current portion of long-term borrowings.
Shareholders' equity was $1,031.6 million as of June 30, 2015, an increase from $988.4 million at the end of the first quarter of 2015.
Operations and Business Updates
As of June 30, 2015, the Company had annualized in-house manufacturing capacities: ingot production capacity of approximately 2.3GW; wafer capacity of approximately 1.8GW; PV cell capacity of approximately 3.2GW; and PV module capacity of approximately 4.4GW.
Solar Power Project Development
In the second quarter of 2015, the Company connected to the grid a total of 121.3MW PV power projects, including 31.3MW DG projects and 90MW utility projects in China, compared to the Company's guidance of 65MW to 70MW. The 90MW utility PV power projects consist of a 70MW project in Yunnan, which is a portion of a total 300MW project, and another 20MW project in Xinjiang. The 31.3MW of DG projects consist of 13.7MW in Shandong, 14.5MW in Zhejiang and 3.1MW in Shanghai.
In addition, the Company connected to the grid a total of 53.9MW utility and DG projects in the third quarter by August 18, 2015.
In the UK, the Company sold a 50.0MW solar power plant in Norfolk, UK, to Bluefield Solar Income Fund Limited. A majority of the revenue from this sale was recognized in the second quarter of 2015, and the remaining GBP 3 million will be recognized when certain conditions are met, in accordance with the relevant share purchase agreement.
As of June 30, 2015 the Company has a total of 358.5MW downstream operating assets that are generating electricity power, including 336.3MW in China, 4.2MW in the U.S., and 18.0MW in Europe. The 336.3MW projects in China consist of 300.0MW utility projects and 36.3MW DG projects.
Third Quarter and Fiscal Year 2015 Guidance
Third Quarter of 2015 Guidance
The Company expects to ship between 1,450MW and 1,500MW of PV modules, of which 170MW to 190MW will be shipped to the Company's downstream PV projects, for which revenues will not be recognized. In addition, the Company might purchase modules from third party suppliers to meet the module requirement for the downstream projects. The Company expects to connect 180MW to 200MW of PV projects to the grid in the third quarter of 2015.
Fiscal Year 2015 Guidance
2015 Manufacturing Capacity
The Company expects to achieve the following in-house annualized capacities by the end of 2015: ingot production capacity of approximately 2.5GW, from original guidance of 2.2GW; wafer capacity of approximately 1.8GW, from original guidance of 1.7GW; PV cell capacity of approximately 3.5GW; and PV module capacity of approximately 4.8GW.
The capacity increase for ingots and wafers are largely driven by upgrades of our existing equipment and technology advancements.
The Company raises its full-year guidance of total PV module shipments to between 4.9GW to 5.1GW, from original guidance of 4.4GW to 4.6GW, of which 700MW to 800MW will be shipped to the Company's downstream projects. The total shipment volume represents an increase of 33.9% to 39.3% from 2014.
The Company reiterates its full-year guidance to connect to the grid between 700MW and 750MW of downstream PV power projects across the world, including 30% to 40% of all DG projects in China.