ReneSola Ltd Announces Second Quarter 2011 Results

Company records revenues of US$249.3 million;

Achieves gross margin of 18.4% despite lower ASPs;

Virtus wafer capacity reaches 900 MW

Aug 09, 2011, 05:45 ET from ReneSola Ltd.

JIASHAN, China, Aug. 9, 2011 /PRNewswire-Asia-FirstCall/ -- ReneSola Ltd ("ReneSola" or the "Company") (NYSE: SOL), a leading global manufacturer of solar products, today announced its unaudited financial results for the quarter ended June 30, 2011.

Second Quarter 2011 Financial and Operating Highlights

  • Total solar product shipments in Q2 2011 were 295.5 megawatts ("MW"), compared to 330.4 MW in Q1 2011.
  • Q2 2011 net revenues were US$249.3 million, a decrease of 30.6% from US$359.2 million in Q1 2011.
  • Q2 2011 gross profit was US$45.9 million and gross margin was 18.4%, compared to US$101.2 million and 28.2% in Q1 2011.
  • Q2 2011 operating income was US$23.0 million and operating margin was 9.2%, compared to US$75.6 million and 21.0% in Q1 2011.
  • Q2 2011 net income was US$1.8 million, representing basic and diluted earnings per share of US$0.01, and basic and diluted earnings per American depositary share ("ADS") of US$0.02.
  • Cash and cash equivalents plus restricted cash reached US$480.8 million as of June 30, 2011, compared to US$435.9 million as of March 31, 2011.

"Both wafer and module prices fell faster than expected in the second quarter as European subsidy cuts weakened demand and led to oversupply in the industry," said Mr. Xianshou Li, ReneSola's chief executive officer. "Although this affected both our top and bottom lines, we were able to maintain a gross margin of 18.4% with our industry-low wafer processing costs and growing in-house polysilicon production. Our new Virtus wafer, a multicrystalline wafer that can achieve cell efficiency rates of up to 18.2%, has an even higher profit margin than our existing wafers and has been well-received by clients with its high efficiency-to-price ratio. We expect Virtus wafers to replace all of ReneSola's existing multicrystalline wafers by the end of 2011. As the solar market matures, we will continue to focus on wafer production to capitalize on our brand name, scale of operations and innovative technologies to lead the industry in cost-competitive solar manufacturing."

Henry Wang, ReneSola's chief financial officer, commented, "We continued to execute our cost reduction strategy in the second quarter. Although wafer processing cost rose $0.02 per watt in the second quarter, the increase was primarily due to our transition to Virtus wafer production, which has not yet reached full efficiency. As we continue to improve Virtus wafer production, we expect our wafer processing cost to decrease to US$0.19 per watt by the end of 2011. Our cost control can also be accredited to our prudent polysilicon purchasing and the decrease in our internal polysilicon cost to approximately $40 per kilogram at the end of the second quarter. Our cost-competitive solar manufacturing platform is further bolstered by our efficient operational management and strong balance sheet. Our inventories remain stable, with only modules increasing slightly, illustrating sound market judgment and inventory control. We also hold one of the largest cash positions in the industry, allowing us to make strategic investments to increase efficiency or make debt repurchases, such as buying back our convertible bonds, which we have done and may continue to do from time to time. Despite relatively tough market conditions, we are confident we are well positioned for long-term growth."

Second Quarter 2011 Results

Total Solar Product Shipments

2Q11

1Q11

2Q10

Q-o-Q%

Y-o-Y%

Total Solar Product Shipments (MW)

295.5

330.4

258.3

(10.6%)

14.4%

Wafer Shipments (MW)

230.5

243.5

206.7

(5.3%)

11.5%

Module Shipments (MW)

65.0

86.9

50.6

(25.2%)

28.5%

The sequential decrease in wafer shipments was affected by the transition toward Virtus wafer production, which resulted in a temporary loss of 25 MW of capacity for Q2 2011. The Company operates its wafer production near its operational capacity to meet customer demand.

Net Revenues

2Q11

1Q11

2Q10

Q-o-Q%

Y-o-Y%

Net Revenues (US$mln)

$249.3

$359.2(1)

$253.9

(30.6%)

(1.8%)

The sequential decrease in revenues was driven by a decline in the average selling price ("ASP") of solar wafers and modules to US$0.69 per watt ("W") and US$1.53/W, respectively, as well as a relatively large decrease in module shipments and a slight decrease in wafer shipments.

Gross Profit

2Q11

1Q11

2Q10

Q-o-Q%

Y-o-Y%

Gross Profit (US$mln)

$45.9

$101.2(1)

$76.6

(54.6%)

(40.1%)

Gross Margin

18.4%

28.2%

30.2%

-

-

The sequential decrease in gross margin was primarily due to the decline in solar wafer and module ASPs as well as the transition toward Virtus wafer production, offset by a decline in polysilicon prices.

Operating Income

2Q11

1Q11

2Q10

Q-o-Q%

Y-o-Y%

Operating Expenses (US$mln)

$22.9

$25.6

$24.2

(10.5%)

(5.2%)

Operating Income (US$mln)

$23.0

$75.6

$52.5

(69.6%)

(56.2%)

Operating Margin  

9.2%

21.0%

20.7%

-

-

The decrease in operating expenses was primarily due to the mixed impact from lower general and administrative expenses as a result of overall expense control and decreased R&D spending in line with reduced revenues. Operating margins represented 9.2% of total revenues in Q2 2011, a decrease from 21.0% in Q1 2011.

Foreign Exchange Gain (Loss)

The Company had a foreign exchange gain of US$0.9 million in Q2 2011, primarily due to the appreciation of the Euro against USD. The Company also recognized a US$1.4 million loss in the fair value of foreign exchange forward contracts, compared to a loss of US$19.8 million in Q1 2011, as the Euro appreciated more than the forward rate hedged. The Company also recognized an investment loss of US$7.8 million, relating to the Company's foreign exchange forward contracts.

Net Income Attributable to Holders of Ordinary Shares

2Q11

1Q11

2Q10

Net Income (US$mln)

$1.8

$43.3

$36.1

Diluted Earnings Per Share

0.01

0.24

$0.21

Diluted Earnings Per ADS

0.02

0.49

$0.42

(1) In Q2 2011, the Company presented the sale of some of its raw materials, comprised primarily of extra tips and edges produced in the wafer slicing process, as sales of raw materials, and as such are included in revenue and gross profit. This change in presentation was retrospectively applied for Q1 2011.

Business Highlights

Wafer Business

The Company's solar wafer business achieved a gross margin of 14.3% in Q2 2011, impacted by the decline in solar wafer ASPs. In Q2 2011, the Company's non-silicon wafer processing cost was US$0.26/W, a slight increase from US$0.24/W in Q1 2011 primarily due to the transition toward Virtus wafer production, which is expected to replace production of the Company's existing multicrystalline wafers by the end of the year. Virtus wafer production is currently operating at an annual production capacity of 900 MW. The Company also reduced its polysilicon raw material cost to approximately US$54.10 per kilogram ("kg"), well below the market spot price. The Company will continue its cost reduction efforts through advancements in technology and manufacturing, and expects its processing cost to reach US$0.19/W by the end of 2011 as the Company begins steel wire production and undertakes slurry recycling.  

Module Business

The Company delivered solar module shipments of 65.0 MW with an ASP of US$1.53/W in Q2 2011. Module shipments declined 25.2% quarter-over-quarter. The Company expects to continue to reduce its module processing cost and expand its module sales force internationally.

Polysilicon Update

The Company's Sichuan polysilicon plant continued to make increasing contributions to profitability in Q2 2011. In Q2 2011, the Company produced approximately 787 metric tons ("MT") of polysilicon, an increase from approximately 750 MT in Q1 2011. The Company's polysilicon production cost was reduced to approximately US$40/kg by the end of Q2 2011, compared to approximately US$45/kg at the end of Q1 2011.

The Company now expects to expand its polysilicon production capacity to 8,500 MT by Q2 2012, due to a deferment of ongoing capital expenditures. In Q3 2011, the Company expects polysilicon production to decrease to between 600 MT and 700 MT as a result of temporary electricity shortages from government-sponsored infrastructure upgrades and facility improvements. The Company is still targeting to reduce production cost to US$35/kg by the end of 2011.

Strong Cash Position

Net cash and cash equivalents plus restricted cash were US$480.8 million at the end of Q2 2011, compared to US$435.9 million at the end of Q1 2011. Total debt was US$560.7 million in Q2 2011, compared to US$522.8 million in Q1 2011, excluding the US$200 million of convertible notes offered in the first and second quarters.

Capital expenditures were US$22.8 million for Q2 2011. Short-term borrowings were US$428.0 million in Q2 2011, an increase from US$404.0 million in Q1 2011. Short-term borrowings consisted of US$174.5 million in trade finance, US$181.9 million in short-term facilities and US$71.6 million as the short-term portion of the long-term debt.

The Company repurchased a portion of its convertible bonds in Q3 2011. As in previous quarters, the Company may repurchase its convertible bonds from time to time.

2011 Capacity Expansion Plans and Related CAPEX

The Company expects to reduce its capital expenditures for the full year 2011 from $350 million to $270 million as a result of the deferment of a portion of the Company's polysilicon production capacity expansion into the first half of 2012. The Company expects to spend the $270 million in 2011 to expand wafer production capacity from the current 1.3 gigawatts ("GW") to 2.0 GW, consisting of 1.8 GW of Virtus wafers and 200 MW of monocrystalline wafers, expand module production capacity from the current 400 MW to 600 MW and launch steel wire production with an annualized capacity of 8,400 MT. The Company also expects to spend a significant portion of its 2011 capital expenditure to increase polysilicon production from the current 3,000 MT to 8,500 MT by the end of Q2 2012.

Outlook

In Q3 2011, the Company expects total solar wafer and module shipments to be in the range of 330 MW to 350 MW, revenues to be in the range of US$220 million to US$240 million and gross profit margin to be in the range of 6% to 8%, as market conditions continue to be challenging. The Company is also withdrawing its guidance for the full year.

Conference Call Information

ReneSola's management will host an earnings conference call on Tuesday, August 9, 2011 at 8 am U.S. Eastern Time (8 pm Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

U.S. / International:                                  

+1-617-614-3453

Hong Kong:          

+852-3002-1672

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "ReneSola Call".

A replay of the conference call may be accessed by phone at the following number until August 16, 2011:

International:                                                

+1-617-801-6888

Passcode:

83559070

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of ReneSola's website at http://www.renesola.com.

About ReneSola

ReneSola is a leading global manufacturer of solar wafers and producer of solar power products based in China. Capitalizing on proprietary technologies, economies of scale, low-cost production capabilities and technological innovations and know-how, ReneSola leverages its in-house virgin polysilicon and solar cell and module production capabilities to provide its customers with high-quality, cost-competitive solar wafer products and processing services. The Company possesses a global network of suppliers and customers that includes some of the leading global manufacturers of solar cells and modules. ReneSola's ADSs are traded on The New York Stock Exchange (NYSE: SOL). For more information about ReneSola, please visit http://www.renesola.com.

Safe Harbor Statement

This press release contains statements that constitute ''forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Whenever you read a statement that is not simply a statement of historical fact (such as when the Company describes what it "believes," "expects" or "anticipates" will occur, what "will" or "could" happen, and other similar statements), you must remember that the Company's expectations may not be correct, even though it believes that they are reasonable. The Company does not guarantee that the forward-looking statements will happen as described or that they will happen at all. Further information regarding risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements is included in the Company's filings with the U.S. Securities and Exchange Commission, including the Company's annual report on Form 20-F. The Company undertakes no obligation, beyond that required by law, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, even though the Company's situation may change in the future.

For investor and media inquiries, please contact:

In China:

Mr. Tony Hung

ReneSola Investor Relations

Tel:    +86-573-8473-9011

Email: ir@renesola.com

Mr. Derek Mitchell

Ogilvy Financial, Beijing

Tel:   +86-10-8520-6284

Email: sol@ogilvy.com

In the United States:

Ms. Jessica Barist Cohen

Ogilvy Financial, New York

Tel:   +1-646-460-9989

Email: sol@ogilvy.com

RENESOLA LTD

Unaudited Consolidated Balance Sheet

(US dollars in thousands)

June 30,

Mar 31,

Dec 31,

June 30,

2011

2011

2010

2010

ASSETS

Current assets:

Cash and cash equivalents  

438,124

388,648

290,702

171,208

Restricted cash  

42,690

47,234

33,640

75,384

Available-for-sale investment

3,541

4,754

3,332

4,975

Accounts receivable, net of allowances for doubtful accounts

104,651

124,659

81,540

102,629

Inventories, net of inventory provision

162,571

152,409

170,599

164,770

Advances to suppliers-current

34,160

31,344

26,315

18,917

Amounts due from related parties

364

376

389

412

Value added tax recoverable

51,058

56,279

44,102

44,341

Income tax recoverable

4,939

2,976

4,021

811

Prepaid expenses and other current assets  

16,795

10,142

16,946

10,783

Deferred convertible bond issue costs-current

1,431

909

-

-

Derivative assets

3,252

3,285

11,660

-

Deferred tax assets-current

16,923

13,901

14,763

25,124

Total current assets  

880,499

836,916

698,009

619,354

Property, plant and equipment, net

879,935

842,616

801,472

743,079

Prepaid land use right

48,643

41,039

37,189

25,351

Intangible assets

3,629

-

-

425

Deferred tax assets-non-current

9,995

8,192

8,526

27,723

Deferred convertible bond issue costs-non-current

5,313

5,417

-

-

Advances to suppliers-non-current

24,697

25,249

13,743

7,204

Advances for purchases of property, plant and equipment  

12,396

26,845

26,930

13,402

Other long-lived assets

2,763

3,274

2,753

2,669

Goodwill

5,638

5,323

5,323

5,323

Total assets  

1,873,508

1,794,871

1,593,945

1,444,530

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term borrowings  

427,961

404,002

400,798

388,028

Accounts payable  

162,439

177,706

220,798

190,779

Advances from customers-current

64,631

60,070

57,396

51,276

Amounts due to related parties  

-

25

25

24

Other current liabilities  

111,316

94,342

79,633

69,695

Income tax payable

7,347

18,754

16,438

4,463

Deferred tax liabilities

3,350

1,908

1,778

70

Derivative liabilities

13,998

12,651

1,381

431

Total current liabilities  

791,042

769,458

778,247

704,766

Convertible bond payable-non-current

200,000

175,000

-

-

Long-term borrowings  

132,745

118,809

121,515

189,073

Advances from customers-non-current

70,641

76,734

76,080

90,198

Warranty  

11,087

9,980

8,701

4,365

Other long-term liabilities  

38,361

26,789

22,937

8,546

Total liabilities  

1,243,876

1,176,770

1,007,480

996,948

Shareholders' equity

  Common shares  

422,314

422,254

422,039

414,585

  Additional paid-in capital  

2,133

2,133

19,858

21,896

  Retained earnings (accumulated deficit)

148,841

149,052

108,387

(12,772)

  Accumulated other comprehensive income  

56,344

44,662

36,181

23,873

Total shareholders' equity  

629,632

618,101

586,465

447,582

Total liabilities and shareholders' equity  

1,873,508

1,794,871

1,593,945

1,444,530

RENESOLA LTD

Unaudited Consolidated Statements of  Income Data

(US dollar in thousands, except ADS and share data)

Three Months Ended

Six Months Ended

Jun. 30 2011

Mar. 31 2011

Jun. 30 2010

Jun. 30 2011

Jun. 30 2010

US$000

US$000

US$000

US$000

US$000

Net revenues

249,313

359,213

253,879

608,526

460,430

Cost of revenues

(203,409)

(258,040)

(177,255)

(461,449)

(348,483)

Gross profit

45,904

101,173

76,624

147,077

111,947

GP%

18.4%

28.2%

30.2%

24.2%

24.3%

Operating expenses:

Sales and marketing

(3,200)

(3,482)

(1,815)

(6,682)

(3,241)

General and administrative

(8,321)

(9,995)

(13,371)

(18,316)

(18,098)

Research and development

(11,189)

(12,168)

(7,459)

(23,357)

(13,627)

Other general (expense) income

(207)

25

(1,529)

(182)

(3,327)

Total operating expenses

(22,917)

(25,620)

(24,174)

(48,537)

(38,293)

Income from operations

22,987

75,553

52,450

98,540

73,654

Non-operating (expenses) income:

Interest income

1,603

485

378

2,088

479

Interest expenses

(9,097)

(7,033)

(5,299)

(16,130)

(10,267)

Foreign exchange gain (loss)

906

4,755

(7)

5,661

(918)

Fair value change on derivatives

(1,355)

(19,824)

(147)

(21,179)

(147)

Other-than-temporary impairment loss on available-for-sale investment

(2,666)

-

-

(2,666)

-

Investment (loss) income

(7,796)

20

293

(7,776)

293

Total non-operating (expenses) income

(18,405)

(21,597)

(4,782)

(40,002)

(10,560)

Income before income tax  

4,582

53,956

47,668

58,538

63,094

Income tax (expense)

(2,743)

(10,620)

(11,607)

(13,363)

(15,256)

Net income attributed to holders of ordinary shares

1,839

43,336

36,061

45,175

47,838

Earnings per share

 Basic

0.01

0.25

0.21

0.26

0.28

 Diluted

0.01

0.24

0.21

0.24

0.28

Earnings per ADS

 Basic

0.02

0.50

0.42

0.52

0.55

 Diluted

0.02

0.49

0.42

0.49

0.55

Weighted average number of shares used in computing earnings per share

 Basic

173,897,369

173,856,442

172,706,512

173,877,019

172,687,379

 Diluted

173,971,905

179,895,439

172,706,512

195,676,823

172,687,379

RENESOLA LTD

Consolidated Cash Flow Statement

Six Months Ended

June 302011

June 302010

US$000

US$000

Operating activities:

Net income

45,175

47,837

Adjustment to reconcile net income to net cash used in operating activities:

  Investment income

7,776

-

  Inventory write-down

3,366

-

  Depreciation and amortization

39,656

24,346

  Amortization of deferred convertible bond issuance costs and premium

407

327

  Allowance for doubtful receivables and advance to suppliers and prepayment for   purchases of property, plant and equipment

(1,604)

1,961

  Change in fair value of derivatives

21,179

147

  Share-based compensation

2,382

1,360

  Loss on impairment of long-lived assets  

192

-

  Loss on disposal of long-lived assets

224

133

  Other-than-temporary impairment loss on available-for-sale investment

2,666

-

Changes in operating assets and liabilities:

  Accounts receivable

(25,818)

5,114

  Inventories

7,962

(25,861)

  Advances to suppliers

(17,480)

(7,859)

  Amounts due from related parties

8

31

  Value added tax recoverable

(5,847)

7,791

  Prepaid expenses and other current assets

415

(4,463)

  Derivative assets and liabilities

(503)

-

  Prepaid land use right

1,395

404

  Accounts payable

(61,963)

96,277

  Advances from customers

373

8,496

  Income tax payables

(10,220)

987

  Other current liabilities

(6,483)

(2,085)

  Other long-term liabilities

6,613

-

  Other long-term assets

(197)

-

  Deferred taxes  

250

12,291

  Accrued warranty cost

2,176

1,141

Net cash provided by operating activities

12,100

168,375

Investing activities:

  Purchases of property, plant and equipment

(52,501)

(53,562)

  Advances for purchases of property, plant and equipment

(2,171)

6,083

  Purchases of other long-lived assets

(121)

67

  Proceeds from disposal of property, plant and equipment  

-

51

  Changes in restricted cash

(8,131)

(49,631)

  Cash consideration for acquisition, net of cash received

(1,102)

-

  Net proceeds from settlement of financial assets

(2,972)

79

Net cash used in investing activities

(66,998)

(96,913)

Financing activities:

  Proceeds from bank borrowings

389,063

447,676

  Repayment of bank borrowings

(361,691)

(422,239)

  Cash paid for issuance cost

-

(252)

  Proceeds from exercise of stock options

148

304

  Cash paid for repurchase of convertible bonds

-

(32,715)

  Proceeds from issuance of convertible bonds

200,000

-

  Payment of convertible notes issuance expenses

(7,150)

-

  Purchase of conversion spread hedges

(24,703)

-

Net cash provided by (used in) financing activities  

195,667

(7,226)

Effect of exchange rate changes

6,653

164

Net increase in cash and cash equivalent

147,422

64,400

Cash and cash equivalents, beginning of period

290,702

106,808

Cash and cash equivalents, end of period

438,124

171,208

SOURCE ReneSola Ltd.



RELATED LINKS

http://www.renesola.com