May 29, 2013 - Trina Solar Limited today announced its financial results for the first quarter of 2013.
First Quarter 2013 Financial and Operating Highlights
•Solar module shipments were approximately 393MW during the first quarter of 2013, representing a sequential decrease of 5.3% from the fourth quarter of 2012
•Net revenues were $260.2 million, a decrease of 14.0% from the fourth quarter of 2012
•Gross profit was $4.4 million, a decrease of 21.5% from the fourth quarter of 2012
•Gross margin was 1.7%, compared to 1.9% in the fourth quarter of 2012
•The Company had an accounts receivables provision reversal of $11.1 million in the first quarter of 2013
•Operating loss was $40.1 million, compared to $70.4 million in the fourth quarter of 2012
•Operating margin was negative 15.4%, compared to negative 23.3% in the fourth quarter of 2012
•The Company had a foreign currency exchange loss of $19.0 million, net of changes in the fair value of derivative instruments
•Net loss was $63.7 million, compared to a net loss of $87.2 million in the fourth quarter of 2012
•Loss per fully diluted American Depositary Share ("ADS" and each ADS represents 50 of the Company's ordinary shares) was $0.90, compared to $1.23 in the fourth quarter of 2012
"While the average selling price ("ASP") of modules continued to decline in the first quarter due to the lingering supply-demand imbalance in the global PV industry, the rate of decline has slowed from previous quarters," said Mr. Jifan Gao, chairman and CEO of Trina Solar. "In this environment, we continue to focus on improving operational efficiency and exercising financial discipline. In the first quarter, the reductions in non-silicon costs we achieved outweighed the fall in ASP, and we also collected a sizeable amount of overdue accounts receivables. These efforts enable us to maintain strong liquidity and a robust balance sheet, making us better positioned to capture future growth opportunities.
"As previously announced, we completed several restructuring and streamlining initiatives in the second half of 2012 and we saw sustained improvements in our general and administrative expenses in the first quarter of 2013. We will continue to strictly control operating costs while maintaining our product quality and service capabilities. In terms of revenues, we achieved strong sequential shipment growth in Japan and India, two of the most important emerging markets for the PV industry. In Europe we worked to retain quality customers and were also able to diversify our customer base. Trina Solar remains committed to continuing to serve our customers and business partners in Europe as the EU's preliminary determination on antidumping and countervailing duty tariffs against Chinese solar products approaches.
"At the beginning of the year, we announced that the Company had been awarded the right to develop a 50 MW solar project in Gansu province, China. We began construction on the project during the end of the first quarter and expect to connect the project to the power grid and begin limited production by the end of the third quarter of 2013. For our downstream systems business, we remain committed to focusing on R&D and delivering innovative products and solutions to lower installation costs, while enhancing the efficiencies and ease-of-use of solar energy."
Recent Business Highlights
During the first quarter of 2013, the Company:
•Obtained approval from the Gansu Provincial Development and Reform Commission to develop a 50MW grid-connected solar power plant in Wuwei, Gansu Province. The project is part of a plan to stimulate the economy in a region challenged by semi-desert conditions. The Wuwei municipality is well-suited for solar energy production due to favorable irradiance and the ability to sell and transmit electricity to other regions in addition to supplying local needs.
•Announced that it will supply 30MW of photovoltaic modules to Gestamp Solar, one of the world's leading companies in the development and management of photovoltaic parks, for two projects in South Africa. Large-scale solar power systems will be installed in the towns of Prieska and De Aar in Northern Cape Province, with the capacity to generate 20MW and 10MW respectively. According to the terms of the agreement, deliveries will be made in the third quarter of 2013.
•Announced 60-cell PDG5, the first in Trina Solar's new line of dual-rated frameless modules. The PDG5 is resistant to potential induced degradation (PID) and micro-cracking, and does not require grounding. The PDG5 provides reliable performance under stressful environmental conditions.
•Announced that according to a new report from Solar Business Services, titled "Australian PV - Technology and Brands 2013", Trina Solar was the most popular solar panel brand in Australia during 2012, accounting for 100MW of installations.
•Announced that it has been recognized by Fast Company magazine in their 2013 list of The World's Top 10 Most Innovative Companies in China.
•Announced a new slimline frame design across its full range of 72-cell monocrystalline and 60-cell polycrystalline modules. Frame thickness has been reduced from 40mm to 35mm, and products are immediately available.
Subsequent to the first quarter of 2013, the Company:
•Filed its annual report on Form 20-F for the fiscal year ended December 31, 2012 with the Securities and Exchange Commission on April 2, 2013.
•Announced that Jodie Roussell, Head of Public Affairs Europe at TrinaSolar, had been elected Vice-President of the Board of the European Photovoltaic Industry Association (EPIA) at the EPIA's annual general meeting in Brussels in March 2013.
First Quarter 2013 Results
Net revenues in the first quarter of 2013 were $260.2 million, a decrease of 14.0% sequentially and 25.6% year-over-year. Total shipments were 392.6MW, compared to 414.5MW in the fourth quarter of 2012 and 380.0MW in the first quarter of 2012. The sequential decrease in shipments was caused primarily by a seasonal weakness in China, which, together with the continuous decline in ASP due to supply-demand imbalances, caused the decrease in revenues.
Gross Profit and Margin
Gross profit in the first quarter of 2013 was $4.4 million, compared to a gross profit of $5.6 million in the fourth quarter of 2012 and $20.3 million in the first quarter of 2012.
Gross margin was 1.7% in the first quarter of 2013, compared to 1.9% in the fourth quarter of 2012 and 5.8% in the first quarter of 2012. The year-on-year decrease in gross margin was due primarily to declines in the ASP of modules that exceeded decreases in costs during the past year.
Operating Expense, Loss and Margin
Operating expenses in the first quarter of 2013 were $44.5 million, a decrease of 41.5% sequentially and a decrease of 26.0% year-over-year. The Company's operating expenses represented 17.1% of its first quarter net revenues, a decrease from 25.1% in the fourth quarter of 2012 and 17.2% in the first quarter of 2012. The sequential percentage decrease was primarily due to an accounts receivables provision reversal of $11.1 million during the first quarter of 2013 and expense control measures taken by the Company since the second half of 2012. Operating expenses in the first quarter of 2013 included $1.1 million in share-based compensation expenses, compared to $0.1 million in the fourth quarter of 2012 and $2.0 million in the first quarter of 2012.
As a result of the foregoing, operating loss in the first quarter of 2013 was $40.1 million, compared to operating losses of $70.4 million in the fourth quarter of 2012 and $39.9 million in the first quarter of 2012. Operating margin was negative 15.4% in the first quarter of 2013, compared to negative 23.3% in the fourth quarter of 2012 and negative 11.4% in the first quarter of 2012.
Net Interest Expense
Net interest expense in the first quarter of 2013 was $13.2 million, compared to $11.4 million in the fourth quarter of 2012 and $8.8 million in the first quarter of 2012. The sequential increase in net interest expense was primarily due to an increase in average bank borrowings in the first quarter of 2013.
Foreign Currency Exchange Loss and Gain
The Company had a foreign currency exchange loss of $19.0 million in the first quarter of 2013, which included changes in fair value of derivative instruments, compared to a net gain of $4.7 million in the fourth quarter of 2012 and a net gain of $9.0 million in the first quarter of 2012. This net loss was primarily due to the depreciation of the Euro and Japanese Yen against the U.S. dollar during the first quarter of 2013, offset by gains from foreign currency hedging contracts involving the Euro, Renminbi, and U.S. dollar used by the Company to mitigate its foreign currency risk exposure.
Income Tax Benefit and Expense
Income tax benefit was $6.1 million in the first quarter of 2013, compared to income tax expense of $11.3 million in the fourth quarter of 2012 and income tax benefit of $8.8 million in the first quarter of 2012. The income tax benefit in the first quarter of 2013 primarily resulted from a deferred tax benefit recognized in connection with the net operating losses incurred in the quarter, net of provision for valuation allowance.
Net Loss and Loss per ADS
As a result of the foregoing, net loss was $63.7 million in the first quarter of 2013, compared to net loss of $87.2 million in the fourth quarter of 2012 and $29.8 million in the first quarter of 2012.
Net margin was negative 24.5% in the first quarter of 2013, compared to negative 28.8% in the fourth quarter of 2012 and negative 8.5% in the first quarter of 2012.
Loss per fully diluted ADS was $0.90 in the first quarter of 2013. The impact of accounts receivables provision reversal was approximately $0.16, while the effect of the foreign currency exchange net loss was approximately $0.27, per ADS.
As of March 31, 2013, the Company had $822.3 million in cash and cash equivalents and restricted cash, and a working capital balance of $238.5 million. Total bank borrowings were $1,226.4 million, of which $395.5 million were long-term borrowings. The Company decreased its short-term borrowings by $45.0 million to approximately $830.8 million as of March 31, 2013.
At the end of the first quarter of 2013, $83.6 million of the Company's convertible senior notes due July 2013 remained outstanding, which remained unchanged from the fourth quarter of 2012.
Shareholders' equity was $823.5 million as of March 31, 2013, a decrease from $881.8 million at the end of the fourth quarter of 2012.
Second Quarter and Fiscal Year 2013 Guidance
During the second quarter of 2013, the Company expects to ship between 500MW to 530MW of PV modules.
The Company believes its overall gross margin for the second quarter, taking into account wafer and cell quantities outsourced from third party suppliers to meet demand in excess of its internal capacity and other needs, will be in the middle single-digits in percentage terms. Such guidance is based on the exchange rate between the Euro and U.S. dollar as of May 29, 2013.
For the full year 2013, the Company maintains its previous guidance of 2.0GW to 2.1GW for total PV module shipments.
Operations and Business Outlook
In the first quarter of 2013, the Company continued its efforts to reduce manufacturing costs, achieving a reduction of high single digit in percentage terms from a quarter ago. The sequential decrease in non-silicon manufacturing costs were primarily due to improved supply chain cost control, increased utilization of the Company's in-house manufacturing capacities, as well as increases in the Company's module efficiencies and improvements in its manufacturing processes.
As a result of increased average poly-silicon spot prices in the first quarter of 2013 compared to the fourth quarter of 2012, the Company experienced a sequential increase in silicon costs in its module manufacturing business. Through its diversified range of short, medium and long-term supply agreements, the Company will continue to maintain competitive silicon costs relative to current market prices.
2013 Manufacturing Capacity
As of March 31, 2013, the Company's annualized in-house ingot and wafer production capacity remained approximately 1.2GW and its PV cell and module production capacity remained approximately 2.4GW.
The Company has commenced the construction of its 50MW project in Gansu Province, China. Completion of the project is expected by the end of the third quarter of 2013.
The Company continues to source project opportunities inside and outside of China. The commencement of a project is subject to a number of factors, some of which are beyond the Company's control, such as the availability of network transmission and interconnection facilities, as well as the attainment of certain project rights, including land use rights and the right to construct manufacturing facilities in the relevant locations.