Financial and Operational Highlights
- In Q1, total solar module shipments were 521.1 megawatts (“MW”), compared to 505.3 MW in Q4 of 2013. Total solar wafer and module shipments in Q1 were 710.1 MW, compared to 784.1 MW in Q4.
- Net revenues were US$415.0 million, compared to US$438.8 million in Q4 2013.
- Gross profit was US$44.0 million with a gross margin of 10.6%, compared to gross profit of US$49.7 million with a gross margin of 11.3% in Q4 2013.*
- Operating loss was US$8.7 million with an operating margin of negative 2.1%, compared to operating income of US$8.8 million with an operating margin of 2.0% in Q4 2013.
- Net loss attributable to holders of ordinary shares was US$14.6 million, representing basic and diluted loss per share ofUS$0.07 and basic and diluted loss per American depositary share (“ADS”) of US$0.14.
- Cash and cash equivalents plus restricted cash totaled $214.9 million as of the end of Q1 2014, compared to US$348.9 million as of the end of Q4 2013.
- Net cash outflow from operating activities was US$112.3 million compared to net cash outflow from operating activities ofUS$30.8 million in Q4 2013.
* Starting from Q1 2014, the Company has changed its accounting classification of warranty expense, which was previously classified as cost of goods sold, to better reflect its global OEM business operations and align its accounting policy to industry peers. Accordingly, beginning with this quarter, warranty expense has been recognized in the selling expense. The change in classification has been retroactively applied for all periods presented. The impact of change in classification on the consolidated financial statements are: gross profit increased by US$2.55 million, US$2.33 million and US$1.96 million; sales and marketing expense increased by US$2.55 million, US$2.33 million and US$1.96 million for Q1 2014,Q4 2013 and Q1 2013, respectively.
“Our OEM strategy continues to be the backbone of our worldwide sales and distribution efforts,” said Mr. Xianshou Li, ReneSola’s chief executive officer. “ReneSola’s overseas OEM module capacity now exceeds 1.1GW, with a total of 11 facilities in Europe,Africa, South Asia, and the Asia-Pacific region, and allows us to grow our business with minimal capital expenditure requirements. While we recognize the regulatory uncertainty regarding trade frictions across a number of major solar markets, including the United States and possibly India and Australia, we continue to be well positioned compared to our peers with our OEM facilities around the world, and will look for opportunities to gain market share from resulting market changes. Potential higher ASPs in those markets served by our OEM capacity will also help our profitability. Our OEM manufacturing network continues to play a key role in our business model in becoming a global brand and technology provider with sales channels spread across multiple continents. Additionally, we continue to grow our sales and distribution network worldwide with 22 offices and 37 warehouses. Furthermore, our ever-growing local sales teams provide us with greater adaptability in dealing with changing market conditions and meeting client needs as they emerge.
“We are gradually switching our focus from big-scale utility projects to small-scale projects, specifically commercial and residential rooftop projects. We are seeing stronger and more sustainable growth in these retail markets across different continents and are able to sell at a higher price to such smaller projects. With our brand recognition, local warehouses and on-site technical support, we are providing retail customers with integrated solar services and solutions, which not only allows us to charge a premium but also puts us on the path to becoming a stronger brand and higher-profile technology provider in the industry. We expect that by the end of this year, retail market sales will account for nearly half of our module shipments.
One of our key Q1 highlights was a tremendous sales pick-up in Japan. We expect sales volume to continue through the rest of this year, providing another example of our strong sales and marketing capabilities across international markets. Also, our polysilicon factory, after a brief period of maintenance, has been back to full production since the end of March, and we expect it will contribute positively to our overall profitability from Q2 onward.
“We have made module production cost reduction one of our priorities for 2014, and we have a detailed plan in place that we will implement gradually throughout the year. We expect the cost reduction to come primarily from our in-house polysilicon supply, increased production efficiency, and more efficient sourcing of other materials. We are aiming to be a cost-leading module supplier in the industry, while maintaining the same high level of product quality that the market has come to expect from ReneSola.”
First Quarter 2013 Results
Solar Wafer and Module Shipments
Module Shipments (MW)
Wafer Shipments (MW)
Total Solar Wafer and Module Shipments (MW)
The sequential increase in solar module shipments was mainly the result of the Company’s increased sales in Japan. The sequential decline in solar wafer shipments was consistent with the Company’s ongoing shift toward using its wafers for internal module production rather than external sales.
Net Revenues and Gross Profit
Net Revenues (US$mln)
Gross Profit (Loss) (US$mln)
* Adjusted based on the new accounting classification for warranty expense, which is now recognized as a selling expense rather than cost of goods sold, as was done previously. Before the adjustment, the gross profit for Q4 2013 was $47.4 million, and the gross loss for Q1 2013 was $5.6 million; the gross margin was 10.8% and negative 2.0% for Q4 2013 and Q1 2013, respectively.
Revenues decreased quarter-over-quarter as a result of decreased wafer shipments. The sequential decrease in the Company’s gross margin was impacted by a temporary suspension of operations for the purposes of maintenance and improvement at the Company’s Sichuan factory in Q1 2014.
Operating Income (Loss)
Operating Expenses (US$mln)
Operating Income (Loss) (US$mln)
* Adjusted based on the new accounting classification for warranty expense, which is now recognized as a selling expense rather than cost of goods sold, as was done previously. Before the adjustment, the operating expense was $38.6 million and $27.8 million for Q4 2013 and Q1 2013, respectively.
The sequential increase in operating expenses was primarily due to a reversal of accrued expenses in Q4 2013, as well as higher shipping costs due to increased overseas shipments and a provision of accounts receivable in Q1 2014.
Foreign Exchange Gain
The Company had a foreign exchange gain of US$1.48 million and recognized a US$1.38 million loss on derivatives in Q1 2014.
Change in Fair Value of Warrant Derivative Liabilities
The Company recognized a gain from a change in fair value of warrant derivative liabilities of US$1.05 million in Q1 2014, primarily due to the decrease in the Company’s stock price.
Net Income (Loss) Attributable to Holders of Ordinary Shares
Net Income (Loss) (US$mln)
Diluted Earnings (Loss) per Share
Diluted Earnings (Loss) per ADS
Liquidity and Capital Resources
Net cash outflow from operating activities was US$112.3 million in Q1 2014, mainly to pay off accounts payable, compared to net cash outflow of US$30.8 million in Q4 2013.
Net cash and cash equivalents plus restricted cash were US$214.9 million as of March 31, 2014, compared to US$348.9 million as of December 31, 2013.
Total debt was US$723.9 million as of March 31, 2014, compared to US$742.6 million as of December 31, 2013, excludingUS$111.6 million of convertible notes due March 15, 2018, unless repurchased or converted at an earlier date. Short-term borrowings were US$653.3 million as of March 31, 2014, compared to US$673.1 million as of December 31, 2013.
The total output of polysilicon in Q1 was 175 metric tons, compared to an output of 1,768 metric tons in Q4 2013 and nil in the year-ago period. Operations of the Company’s Sichuan polysilicon plant were temporarily halted in Q1 for maintenance and technical improvements, which negatively impacted the Company’s Q1 net income and gross margin. Full operations of the plant resumed in late March and are currently at 100% capacity. With the recent rise and overall stability in polysilicon prices, and further production cost reduction coming from seasonally lower electricity price, the Company expects to benefit from its in-house polysilicon production capabilities going forward.
Geographic Breakdown of Module Shipments
The Company’s module shipments to Japan grew substantially in Q1 2014, and are expected to at least maintain the current level through the rest of this year. The Japan market, along with strong sales in the UK market, made up for seasonally low shipments to other markets in Q1 2014.
Research and Development
During Q1, ReneSola continued to invest in research and development regarding the Company’s new and existing products.
Wafers and Modules
The Company expects to start manufacturing its A+++ wafer 100% in June. The A+++ wafer has a conversion efficiency rate of 17.8%.
The Company has begun optimizing the module structure, while ensuring its carrying capacity and reliability. Such structural improvement will help reduce packing and transportation costs going forward.
The Company’s glass-glass module is now in the certification process. With a differentiated design, the glass-glass module is expected to enjoy a cost advantage and a higher ready-for-sale product rate.
The Company’s second-generation micro-inverter, Micro-Replus II, has received ETL certification in the United States and is currently undergoing pilot-scale experimentation.
The Company has launched its second-generation string inverter in Australia, ranging from 3KW to 5KW in power output, featuring higher efficiency, lighter weight and longer working life. The Company’s 18KW and 20KW string inverters have achieved BDEW certification in Germany. The Company has also launched new string inverter products in India and South Africa.
Energy Storage Systems
The Company has launched its off-grid, all-in-one storage system product, which incorporates a controller, MPPT battery charger, inverter and fast power switch in one system, supporting both acid and lithium batteries. It has also introduced lithium battery packs, and will provide customized products ranging from 10AH to 500AH and 12V to 360V power requirements.
The Company has completed the research and development phase of its 30-degree tripod system and the product is now in trial production and awaiting patent approval. The Company has also completed research and development regarding AE Clamp Group products, which can hold in position solar panels with a thickness ranging from 35mm to 50mm. The program is also in trial production and awaiting patent approval.
The Company currently has 600 models of LED products and has obtained 125 UL certificates for North America, 118 CUL certificates for Canada, 150 TUV-CE certificates for the EU, 203 TUV-CB certificates for IECEE member countries, and four SAA & RCM certificates for Australia. The Company expects to obtain additional certification for its various LED products across these regions, as well as certification for other markets like Japan, Russia and Mexico. The certification process is expected to be completed by June 2014.
Recent Business Developments
- In May, ReneSola appointed Jason Wu as the Company’s vice president of marketing to oversee the Company’s global marketing, new product management, and brand enhancement.
- In May, the Company announced a deal to provide 1.6MW in solar modules and 1MW in mounting systems to Consolidated Energy & Economic Engineering Co. to power a series of residential and commercial rooftop projects in the country ofJordan.
- In April, ReneSola announced the appointment of Mr. Daniel Lee as the Company’s new chief financial officer.
- In April, the Company announced it had completed the sale of three utility-scale projects in Western China, with a total capacity of 60MW, to Jiangsu Akcome Solar Science & Technology Co., Ltd.
- In April, the Company announced it had been awarded a “TOP BRAND PV” seal in the union of states of Belgium, the Netherlands, and Luxembourg (“Benelux”) by EuPD Research, the leading market intelligence company in the sustainable business sector and an independent brand management appraiser of module manufacturers in Germany, Italy, the United Kingdom, Benelux, and France.
- In March, the Company announced it had been included as a respondent in the United States Department of Commerce’s anti-dumping investigation regarding certain crystalline silicon photovoltaic products from China (DOC Case No. A-570-010). A preliminary ruling is expected in June of this year.
- In March, ReneSola announced it will deliver 66 Replus string inverters, 100 Micro Replus micro inverters, and 2,000 ReneSola 240W and 260W Virtus II modules to Enlightened Solar to be installed at residential housing developments in southeastern England.
- In March, ReneSola announced it had delivered approximately 45,900 of its high-efficiency modules to the Photovoltaic Plant of Ferrara Aranova project, a 11.7MW ground-mounted solar project in Italy developed by Tozzi Sud S.p.A., an Italian designer, manufacturer, and installer of power plants.
- In March, ReneSola announced it will begin manufacturing its Virtus II modules in Japan through a joint venture, Vitec Global Solar, in partnership with Vitec Co., Ltd., a Japanese trading company that specializes in the sale of semiconductor and electrical products.
- In February, ReneSola announced it had opened a new office in Lyon, France. The office will provide regional sales and customer support services.
- In February, ReneSola announced it is supplying 13MW of its high-efficiency Virtus and Virtus II polycrystalline solar modules to Low Carbon, a UK-based investor in renewable energy developers and projects. The modules will power a ground-mounted project on 63.5 acres of land in Wiltshire, England.
- In February, ReneSola announced that it had provided 10,000 of its high efficiency solar PV modules to Chevron Energy Solutions, one of the largest installers of solar power in the United States, for a 3.1MW multi-site project in Lemoore, California. The multi-array project will consist of 2.85MW of ReneSola’s 72-cell 300W polycrystalline modules and 260KW of 260W monocrystalline modules.
- In February, ReneSola announced the formal launch of ReneSola Panama Inc., the Company’s first branch office in Latin America. The office will be responsible for sales and marketing efforts across Latin America and the Caribbean region.
- In January, ReneSola announced an agreement to provide Isolux Corsan, a global benchmark in the areas of concessions, energy, construction and industrial services and a leader in engineering, procurement and construction projects for solar PV plants, with 57 megawatts of Virtus PV modules for installation in three commercial PV projects in the United Kingdom.
- In January, ReneSola announced the formal launch of ReneSola South Africa (Pty) Ltd. in Cape Town. The office will be responsible for sales and marketing efforts across Africa and South Africa.
- In January, ReneSola announced it provided Isolux Corsan Servicios, S.A., a global benchmark in the areas of concessions, energy, construction and industrial services and a leader in engineering, procurement and construction projects for solar PV plants, with 31.7 MW of Virtus PV modules for a commercial PV project in the United Kingdom.
- In January, ReneSola marked a year of projects that cumulatively utilize over 50MW of solar power across several sites inNorth Carolina and that are powered by ReneSola’s high-efficiency 300W 72-cell polycrystalline solar modules.
- In January, ReneSola announced it had been awarded a contract to supply 420MW of solar panels to a leading solar project developer based in Japan. ReneSola’s Virtus II 300W 72-cell high-efficiency polycrystalline PV panels will be installed in over ten ground-mounted power plants in the mountain regions of Japan, and will provide power to the surrounding residential homes.
For Q2 2014, the Company expects its total solar module shipments to be in the range of 480 MW to 500 MW, and its gross margin to be in the range of 12% to 14%.
The Company reiterates its total solar module shipments for full year 2014 to be in the range of 2.3 GW to 2.5 GW.