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JinkoSolar Announces Third Quarter 2016 Financial Results

JinkoSolar Announces Third Quarter 2016 Financial Results

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JinkoSolar Holding Co., Ltd., a global leader in the solar PV industry, recently announced its unaudited financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

Total solar module shipments were 1,606 megawatts (“MW”), which includes 50 MW used in the Company’s downstream projects. Total solar module shipments decreased by 6.4% from 1,716 MW in the second quarter of 2016 and increased by 41.6% from 1,134.5 MW in the third quarter of 2015.
Total revenues were RMB5.70 billion (US$855.3 million), a decrease of 4.4% from the second quarter of 2016 and an increase of 39.0% from the third quarter of 2015.
Gross margin was 22.1%, compared with 20.4% in the second quarter of 2016 and 21.3% in the third quarter of 2015.
Solar power projects generated 395 GWh of electricity, an increase of 20.8% from the second quarter of 2016 and an increase of 69.0% from the third quarter of 2015. Total revenues generated from solar power projects were RMB372.4 million (US$55.8 million), an increase of 29.1% from the second quarter of 2016 and an increase of 81.0% from the third quarter of 2015.
As of September 30, 2016, the Company had connected 1,314 MW worth of solar power projects.
In October 2016, the Company entered into definitive agreement to sell Jinko Power’s downstream business to Shangrao Kangsheng Technology Co., Ltd. (“Shangrao Kangsheng”), a company incorporated with limited liability under the laws of the People’s Republic of China, formed by a buyer consortium led by Mr. Xiande Li, chairman of the board of directors of the Company (the “Board”). The transaction was closed in November 2016. The Company expects to report a gain on the sale in the fourth quarter of 2016.
Income from operations was RMB600.9 million (US$90.1 million), compared with RMB445.1 million in the second quarter of 2016 and RMB384.0 million in the third quarter of 2015.
Net income attributable to the Company’s ordinary shareholders was RMB233.7 million (US$35.0 million), compared with RMB280.1 million in the second quarter of 2016 and RMB195.1 million in the third quarter of 2015.
Diluted earnings per American depositary share (“ADS”) was RMB6.04 (US$0.92), compared with RMB8.48 in the second quarter of 2016 and RMB3.12 in the third quarter of 2015.
Non-GAAP net income attributable to the Company’s ordinary shareholders in the third quarter of 2016 was RMB305.8 million (US$45.8 million), compared with RMB421.8 million in the second quarter of 2016 and RMB253.3 million in the third quarter of 2015.
Non-GAAP basic and diluted earnings per ADS were RMB9.72 (US$1.44) and RMB9.36 (US$1.40), respectively, in the third quarter of 2016.
Mr. Kangping Chen, JinkoSolar’s Chief Executive Officer commented, “Our business continued to gain growth momentum despite a challenging environment. Module shipments reached 1,606 MW, an increase of 41.6% year-over-year while total revenues reached US$855.3 million, an increase of 39.0% over the same period last year. Based on our visibility into the fourth quarter of 2016, we are once again raising our full year 2016 shipment guidance to 6.6GW to 6.7GW from our previous guidance of 6.0GW to 6.5GW. We are well positioned to continue benefitting from the global adoption of solar energy, which is playing a more important role in the global energy landscape.”

“Jinko Power’s electricity output increased 20.8% sequentially to 395GWh while generating RMB372.4 million in revenue. Jinko Power connected an additional 184MW worth of solar projects during the quarter, bringing our total to 1,314 MW as of September 30, 2016. We closed the sale of Jinko Power’s business in November 2016 to Shangrao Kangsheng for US$250 million in cash, which will significantly improve our balance sheet by reducing our debt and net gearing ratio. We expect to report a gain on the sale in the fourth quarter of 2016. This injection into our already substantial cash position will also provide us with the extra flexibility for our future operations.”

“We consolidated our leading position across a number of key and emerging markets during the quarter. Demand in China remains robust as module prices stabilized. Demand is expected to pick up again in the first half of 2017 with the announcement of the next round of FiT cut, which we expect will act as a strong catalyst. Demand in the US is stable despite recent market panic which we believe is only temporary. We expect the US market will heat up again during the second half of 2017. We have always advocated a fair, transparent and market-driven environment, and the withdrawal of major solar manufacturers from the EU’s MIP agreement is boosting our outlook for the European markets. We also reinforced our presence on the ground in India by opening a new office to offer local technical and logistical support to our customers there. We expanded our emerging market presence to over 40 countries and regions, and strengthened our leading position in key markets such as Chile, Mexico and the UAE.”

“We continued to focus on developing high-efficiency products. Our mono wafer capacity using diamond-wire cutting is now operational and is scaling up rapidly to support our high-efficiency PERC lines. As leader in the industry, our team is constantly focusing on providing our customers the highest-quality, most reliable and high-efficiency products.”

“We have experienced the ups and downs of the solar industry but we have never had any doubt about its great potential. We will continue to grow our business sustainably as we fulfill our commitment to green energy.”

Third Quarter 2016 Financial Results

Total Revenues

Total revenues in the third quarter of 2016 were RMB5.70 billion (US$855.3 million), a decrease of 4.4% from RMB5.96 billion in the second quarter of 2016 and an increase of 39.0% from RMB4.1 billion in the third quarter of 2015. The sequential decrease was mainly attributable to a decline in module selling prices in the third quarter of 2016 as a result of a decrease in market demand and intense competition in the solar industry. The year-over-year increase was mainly due to the increase in revenues from electricity generation and solar module shipments growing at a faster pace than the decrease in average selling prices.

During the third quarter of 2016, revenues from downstream solar power projects were RMB372.4 million (US$55.8 million), an increase of 29.1% from RMB288.5 million in the second quarter of 2016 and an increase of 81.0% from RMB205.8 million in the third quarter of 2015. The sequential and year-over-year increases were primarily due to the increase in number and capacity of the Company’s solar projects.

Gross Profit and Gross Margin

Gross profit in the third quarter of 2016 was RMB1.26 billion (US$188.6 million), compared with RMB1.21 billion in the second quarter of 2016 and RMB864.6 million in the third quarter of 2015.

Gross margin was 22.1% in the third quarter of 2016 compared with 20.4% in the second quarter of 2016 and 21.3% in the third quarter of 2015.

Income from Operations and Operating Margin

Income from operations in the third quarter of 2016 was RMB600.9 million (US$90.1 million), compared with RMB445.1 million in the second quarter of 2016 and RMB384.0 million in the third quarter of 2015. Operating margin in the third quarter of 2016 was 10.5%, compared with 7.5% in the second quarter of 2016 and 9.5% in the third quarter of 2015.

Total operating expenses in the third quarter of 2016 were RMB657.0 million (US$98.5 million), a decrease of 14.4% from RMB767.1 million in the second quarter of 2016 and an increase of 36.7% from RMB480.6 million in the third quarter of 2015. The sequential decrease was mainly due to an RMB99.3 million provision for impairment of property, plant and equipment during the second quarter of 2016. The year-over-year increase in operating expenses was mainly due to the increases in shipping and warranty costs and change in provision of accounts receivables.

Total operating expenses accounted for 11.5% of total revenues, compared to 12.9% in the second quarter of 2016 and 11.9% in the third quarter of 2015.

Interest Expense, Net

Net interest expense in the third quarter of 2016 was RMB219.7 million (US$32.9 million), an increase of 80.6% from RMB121.6 million in the second quarter of 2016 and an increase of 50.3% from RMB146.2 million in the third quarter of 2015. The sequential and year-over-year increases were mainly due to an increase in loans for solar power projects and fees charged by financial institutions associated with discounted notes receivables.

Exchange Gain / (Loss), Net

The Company recorded a net exchange loss of RMB14.1 million (US$2.1 million) including change in fair value of forward contracts in the third quarter of 2016, compared to a net exchange gain of RMB106.6 million in the second quarter of 2016 and a net exchange loss of RMB121.6 million in the third quarter of 2015.

Change in Fair Value of Convertible Senior Notes and Capped Call Options

The Company recognized a loss from a change in fair value of convertible senior notes and capped call options of RMB15.7 million (US$2.4 million) in the third quarter of 2016 primarily due to the change of volatility of the stock price of the Company.

Change in fair value of derivative liability

In July 2015, Jinko Power, the parent company of the solar projects, entered into a US$150 million loan agreement. In conjunction with the loan, Jinko Power issued certain warrants which granted the holders a right to purchase its ordinary shares. The warrants are liability derivatives which need to be fair valued on day one and marked to market subsequently at each reporting period. In September 2016, Jinko Power refinanced and repaid the loan in advance and the warrants were settled.

The Company recognized a gain from change in fair value of derivative liability of RMB36.0 million (US$5.4 million) in the third quarter of 2016 mainly due to the early repurchase of warrants.

Income Tax Expense, net

The Company recorded an income tax expense of RMB116.8 million (US$17.5 million) in the third quarter of 2016, compared with an income tax expense of RMB90.9 million in the second quarter of 2016 and an income tax expense of RMB34.2 million during the third quarter of 2015. The sequential change was mainly due to additional tax deductions in R&D costs approved by the local tax bureau in the second quarter of 2016.

Net Income and Earnings per Share

Net income attributable to the Company’s ordinary shareholders in the third quarter of 2016 was RMB233.7 million (US$35.0 million), compared with RMB280.1 million in the second quarter of 2016 and RMB195.1 million in the third quarter of 2015.

Basic and diluted earnings per ordinary share were RMB1.85 (US$0.28) and RMB1.51 (US$0.23), respectively, during the third quarter of 2016. This translates into basic and diluted earnings per ADS of RMB7.40 (US$1.12) and RMB6.04 (US$0.92), respectively.

Non-GAAP net income attributable to the Company’s ordinary shareholders in the third quarter of 2016 was RMB305.8 million (US$45.8 million), compared with RMB421.8 million in the second quarter of 2016 and RMB253.3 million in the third quarter of 2015.

Non-GAAP basic and diluted earnings per ordinary share were RMB2.43 (US$0.36) and RMB2.34 (US$0.35), respectively during the third quarter of 2016. This translates into non-GAAP basic and diluted earnings per ADS of RMB9.72 (US$1.44) and RMB9.36 (US$1.40), respectively.

Financial Position

As of September 30, 2016, the Company had RMB3.6 billion (US$547.3 million) in cash and cash equivalents and restricted cash, compared with RMB3.70 billion as of June 30, 2016.

As of September 30, 2016, the Company’s accounts receivables were RMB5.87 billion (US$880.5 million), compared with RMB4.17 billion as of June 30, 2016. Accounts receivables from downstream solar power projects were RMB1.25 billion (US$186.8 million), compared with RMB1.00 billion as of June 30, 2016.

As of September 30, 2016, the Company’s inventories were RMB3.26 billion (US$488.7 million), compared with RMB3.10 billion as of June 30, 2016.

As of September 30, 2016, the Company’s total interest-bearing debts were RMB14.47 billion (US$2.17 billion), compared with RMB12.05 billion as of June 30, 2016. Interest-bearing debts from downstream solar power projects were RMB8.35 billion (US$1.25 billion), compared with RMB6.66 billion as of June 30, 2016.

Third Quarter 2016 Operational Highlights

Solar Module Shipments

Total solar module shipments in the third quarter of 2016 amounted to 1,606 MW, including 50 MW used in the Company’s downstream projects.

Solar Power Project Capacity

As of September 30, 2016, the Company had connected 1,314 MW of solar power projects to the grid.

Solar Products Production Capacity

As of September 30, 2016, the Company’s in-house annual silicon wafer, solar cell and solar module production capacity was 4.5 GW, 3.7 GW and 6.5 GW, respectively.

Recent Business Developments

In October 2016, JinkoSolar ranked 16th among Fortune magazine’s 100 Fastest-Growing Companies in 2016.
In October 2016, JinkoSolar entered into a definitive agreement for the sale of Jinko Power’s downstream business in China to Shangrao Kangsheng, a company incorporated with limited liability under the laws of the People’s Republic of China, formed by a buyer consortium led by Mr. Xiande Li, chairman of the Board. The transaction was closed in November 2016. JinkoSolar expects to report a gain on the sale in the fourth quarter of 2016.
In October 2016, JinkoSolar signed a 300MW master module supply agreement with Henan Senyuan Electric.
In September 2016, JinkoSolar helped create the first PV recycling network in the US
In September 2016, JinkoSolar signed a master module supply agreement with Con Edison Development in the U.S.
In September 2016, JinkoSolar supplied modules to power several mosques in Jordan.
In September 2016, JinkoSolar announced its withdrawal from the European Union Price Undertaking agreement.
Operations and Business Outlook

Fourth Quarter and Full Year 2016 Guidance

For the fourth quarter of 2016, the Company estimates total solar module shipments to be in the range of 1.7 GW to 1.8 GW.

For the full year 2016, the Company raises the estimation of total solar module shipments to be in the range of 6.6 GW and 6.7 GW.

Conference Call Information

JinkoSolar’s management will host an earnings conference call on Wednesday, November 16, 2016 at 7:30 a.m. U.S. Eastern Time (8:30 p.m. Beijing / Hong Kong the same day).

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

Hong Kong / International:
+852-5808-3202

U.S. Toll Free:
+1-855-298-3404

Passcode:
JinkoSolar

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

A telephone replay of the call will be available 2 hours after the conclusion of the conference call through 23:59 U.S. Eastern Time, November 22, 2016. The dial-in details for the replay are as follows:

International:
+61-2-9641-7900

U.S. Toll Free:
+1-866-846-0868

Passcode:
1681350

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Anand Gupta Editor - EQ Int'l Media Network

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