Trina Solar Announces Third Quarter 2015 Results

Trina Solar Limited, a global leader in photovoltaic (“PV”) modules, solutions, and services, recently announced its unaudited financial results for the third quarter of 2015.

Third Quarter 2015 Financial and Operating Highlights

– Total module shipments from the Company’s manufacturing facilities were 1,703.2 MW, consisting of 1,353.2 MW of external shipments and 350.0 MW of shipments to the Company’s own downstream PV power projects. Total module shipments increased 38.3% sequentially and 60.1% year-over-year.
– Total PV power projects connected to the grid were 251.9 MW in the third quarter.
– Net revenues were $792.6 million, an increase of 9.6% from the second quarter of 2015 and 28.5% from the third quarter of 2014.
– Gross margin was 17.4%, compared with 20.0% in the second quarter of 2015 and 16.7% in the third quarter of 2014.
– Operating income was $5.8 million, compared with operating income of $60.7 million from the second quarter of 2015 and $35.6 million from the third quarter of 2014.
– Non-GAAP operating income, which excluded the impact of the Solyndra settlement provision, was $50.8 million.
– Net loss attributable to Trina Solar’s ordinary shareholders was $20.0 million, compared with net income attributable to its ordinary shareholders of $40.9 million in the second quarter of 2015, and net income attributable to its ordinary shareholders of $11.5 million in the third quarter of 2014.
– Loss per fully diluted American Depositary Share (“ADS”: each ADS represents 50 of the Company’s ordinary shares) was $0.24, compared with earnings per fully diluted ADS of $0.42 in the second quarter of 2015 and earnings per fully diluted ADS of $0.14 in the third quarter of 2014.
– Non-GAAP net income attributable to Trina Solar’s ordinary shareholders, excluding the impact of the Solyndra settlement, was $18.3 million, or $0.21 per diluted ADS. See “About Non-GAAP Finance Measures” for details of the reconciliation of GAAP to Non-GAAP measure.
– The Company raised its guidance for 2015 total PV module shipments to 5.5 GW to 5.6 GW from its original guidance of 4.9 GW to 5.1 GW, of which 4.6 GW to 4.7 GW will be shipped to third party customers. The revised guidance represents an increase of 50.3% to 53.0% from 2014.

Mr. Jifan Gao, Chairman and CEO of Trina Solar, commented, “We had a solid quarter of operations that came in ahead of our expectations, despite the one-off negative impact from the settlement of the Solyndra lawsuit and currency fluctuations that we experienced. We shipped a record 1.7 GW of modules, which enables us to achieve a significant milestone of over 15 GW of module shipments cumulatively since our inception. We also connected 251.9 MW of projects to the grid in the third quarter, making our total retained projects reach 610.4 MW. This further strengthened our position as a leading module manufacturer and positioned us well to become a world-class solar project player. We maintained strong growth momentum in China and the US, with record shipments to both markets and continued to execute our strategy to increase our presence in new and emerging markets, such as India and Thailand. New and emerging markets have become our third largest destination for shipments over the past two quarters.

“We remain committed to executing our long-term strategies and successfully diversifying our financing channels to meet our growth initiatives. Our cost advantage was further solidified with the help of our ongoing technological developments, and our gross profit margin was in line with our expectations given declining average selling prices.”In R&D, we achieved a number of breakthroughs, including developing the high-efficiency p-type multi-crystalline silicon solar cell of 21.3% efficiency. We also made key advances in silicon-based heterojunction (HJ) cells, where we achieved 22.0% efficiency in the laboratory. In addition, we introduced a ‘Desert Double Glass’ module for hot and dry climates that will be ready for production by the end of the year.

“On the manufacturing and operations side, we remain committed to reducing our carbon footprint throughout the lifecycle of our products, which has brought us recognition from reputable global institutions. We have also extended our vision by initiating the establishment of the Energy Management System ISO50001/GBT23331 in an effort to improve the PV industry.”Downstream, we far exceeded our 190.0 MW guidance for the quarter by connecting a total of 251.9 MW of projects to the grid, including 38.9 MW of distributed generation (“DG”). We have continued to leverage our superior project execution capabilities and diversified funding channels to position ourselves firmly ahead of the competition.

“Looking ahead, the increasing rate of solar adoption globally in both developed and emerging markets will be further augmented by the growing percentage of power generated by solar. With our leading technology, cost advantage, diversified financing channels, and flexible manufacturing model, we are confident that Trina Solar is well-positioned to capture the many opportunities that lie ahead for the foreseeable future.”

Third Quarter 2015 Results

Net Revenues

Net revenues were $792.6 million, an increase of 9.6% sequentially and 28.5% year-over-year, including electricity revenues from downstream solar power projects of $15.3 million. Total shipments were 1,703.2 MW, consisting of 1,353.2 MW of external shipments, which were recognized in revenue, and 350.0 MW of shipments to the Company’s downstream power projects. This compares with total shipments of 1,231.6 MW, consisting of 1,000.7 MW of external shipments and 230.9 MW of internal shipments in the second quarter of 2015, and total shipments of 1,063.8 MW, consisting of 936.8 MW of external shipments and 127.0 MW of internal shipments in the third quarter of 2014. The sequential and year-over-year increases in revenues and shipments were largely driven by growing demand from China, the US and emerging markets.

Gross Profit and Margin

Gross profit was $138.2 million, compared with $144.9 million in the second quarter of 2015 and $102.8 million in the third quarter of 2014. Gross margin was 17.4%, compared with 20.0% in the second quarter of 2015 and 16.7% in the third quarter of 2014. Gross profit for electricity revenues generated from build-to-own solar power projects was $10.2 million, representing a gross margin of 66.9%. The sequential decrease in gross margin was mainly due to average selling price decreasing in most of the major markets at a faster rate than the decline in the Company’s cost per watt, as well as the change in sales mix as more shipments were made to China and emerging markets such as India in the third quarter of 2015. The year-over-year increase in gross margin was primarily due to the Company’s cost per watt decreasing at a greater rate than the Company’s average selling price. This was the result of greater economies of scale and improvements in operational efficiency, which drove down both material and labor costs on a per watt basis.

Operating Expenses, Income and Margin

Operating expenses were $132.3 million, an increase of 57.2% sequentially and 97.1% year-over-year. The sequential increase was primarily due to the provision provided for the settlement of Solyndra lawsuit (“Solyndra settlement provision”) of $45.0 million, and an increase in general and administrative expenses primarily resulted from an increase of accounts receivable provision. The Company’s operating expenses represented 16.7% of its third quarter net revenues, an increase from 11.6% in the second quarter of 2015 and 10.9% in the third quarter of 2014. Operating expenses included an accounts receivable provision of $1.5 million in the third quarter of 2015, compared with a reversal of accounts receivable provisions of $3.1 million in the second quarter of 2015. If excluding the Solyndra settlement provision, the Company’s operating expenses were $87.3 million, representing 11.0% of its third quarter net revenues, a decrease from 11.6% in the second quarter of 2015 and an increase from 10.9% in the third quarter of 2014. See” Legal Proceedings” for more details of Solyndra settlement provision.

As a result, operating income was $5.8 million, compared with $60.7 million in the second quarter of 2015 and $35.6 million in the third quarter of 2014. Operating margin was 0.7%, compared with 8.4% in the second quarter of 2015 and 5.8% in the third quarter of 2014.Non-GAAP operating income, which excluded the impact of the Solyndra settlement provision, was $50.8 million. See “About Non-GAAP Financial Measures” for details of the reconciliation of GAAP to non-GAAP measures.

Net Interest Expense

Net interest expense was $13.1 million, compared with $12.4 million in the second quarter of 2015 and $7.0 million in the third quarter of 2014.

Foreign Currency Exchange Gain (Loss)

The Company recorded a foreign currency exchange loss of $13.1 million, which included a loss on change in fair value of foreign exchange derivative instruments of $1.6 million. This compares with a net foreign currency exchange gain of $5.1 million in the second quarter of 2015 and a loss of $15.1 million in the third quarter of 2014. The foreign currency exchange loss in the third quarter of 2015 primarily resulted from the depreciation of the RMB against the USD.

Income Tax Expense/ Benefit

Income tax benefit was $3.1 million, compared with income tax expense of $11.8 million in the second quarter of 2015 and income tax expense of $5.2 million in the third quarter of 2014. The tax benefit primarily resulted from the provision provided as a result of the settlement of the Solyndra lawsuit which caused the loss before income taxes to the Company in the third quarter of 2015. See” Legal Proceedings” for more details.

Net Income/ (Loss) and Earnings/ (Loss) per ADS

Net loss attributable to ordinary shareholders of Trina Solar was $20.0 million, compared with net income attributable to ordinary shareholders of Trina Solar of $40.9 million in the second quarter of 2015 and $11.5 million in the third quarter of 2014, respectively. Loss per fully diluted ADS was $0.24, compared with earnings per fully diluted ADS of $0.42 in the second quarter of 2015 and $0.14 in the third quarter of 2014 respectively.Non-GAAP net income attributable to Trina Solar’s ordinary shareholders, which excluded the impact of the Solyndra settlement provision, was $18.3 million, or $0.21 per fully diluted ADS. See “About Non-GAAP Financial Measures” for details of the reconciliation of GAAP to non-GAAP measures.

Financial Condition

As of September 30, 2015, the Company had $486.1 million in cash and cash equivalents, and restricted cash. Total bank borrowings were $1,173.7 million, of which $1,005.3 million consisted of short-term borrowings and the current portion of long-term borrowings.Total shareholders’ equity was $1,011.9 million as of September 30, 2015, a decrease from $1,031.6 million at the end of the second quarter of 2015.

Operations and Business Updates

Manufacturing Capacity

As of September 30, 2015, the Company had the following annualized in-house manufacturing capacities:

– ingot production capacity of approximately 2.3 GW;
– wafer capacity of approximately 1.8 GW;
– PV cell capacity of approximately 3.4 GW; and
– PV module capacity of approximately 4.7 GW.