JinkoSolar Announces Third Quarter 2015 Financial Results

JinkoSolar Montage

JinkoSolar Holding Co., Ltd.  (NYSE: JKS), a global Chinese solar PV company,  announced its unaudited financial results for the third quarter ended September 30, 2015.   You may recall, the company also agreed at the end of September to settle the class action lawsuit broughtagainst it in 2011 on behalf of all purchasers of JinkoSolar’s American Depositary Shares between May 13, 2010 andSeptember 20, 2011.

Third Quarter 2015 Highlights

  • Total solar module shipments were 1,134.5 MW, which includes 70.6 MW earmarked for use in the Company’s downstream projects. Total solar product shipments to the third parties were 1,107.7 megawatts (“MW”), consisting of 1,063.9 MW of solar modules, 10.4 MW of silicon wafers and 33.4 MW of solar cells. This represents an increase of 21.1% from 915.0 MW in the second quarter of 2015 and an increase of 56.4% from 708.2 MW in the third quarter of 2014.
  • As of September 30, 2015, the Company had connected 846 MW worth of solar projects.
  • Total revenues were RMB4.1 billion (US$637.6 million), representing an increase of 26.6% from the second quarter of 2015 and an increase of 58.2% from the third quarter of 2014.
  • Solar power projects generated electricity of 233.7 GWh, a 15.1% increase from the second quarter of 2015 and an increase of 207.6% from the third quarter of 2014. Revenues generated from solar power projects were RMB205.8 million (US$32.4 million), representing an increase of 15.7% from the second quarter of 2015 and an increase of 205.8% from the third quarter of 2014.
  • Gross margin was 21.3%, compared with 20.7% in the second quarter of 2015 and 20.6% in the third quarter of 2014.
  • Income from operations was RMB384.0 million (US$60.4 million), compared with RMB237.0 million in the second quarter of 2015 and RMB239.9 million in the third quarter of 2014.
  • Net income attributable to JinkoSolar Holding Co., Ltd.’s ordinary shareholders was RMB195.1 million (US$30.7 million), compared with RMB76.4 million in the second quarter of 2015 and RMB280.6 million in the third quarter of 2014.
  • Diluted earnings per American depositary share (“ADS”) was RMB3.12 (US$0.48), compared with RMB2.40 in the second quarter of 2015 and RMB8.00 in the third quarter of 2014.
  • Non-GAAP net income attributable to JinkoSolar Holding Co., Ltd.’s ordinary shareholders in the third quarter of 2015 wasRMB253.3 million (US$39.8 million), compared with RMB206.8 million in the second quarter of 2015 and RMB342.0 million in the third quarter of 2014.
  • Non-GAAP basic and diluted earnings per ADS were RMB8.12 (US$1.28) and RMB6.52 (US$1.04), respectively, in the third quarter of 2015.

Mr. Kangping Chen, JinkoSolar’s Chief Executive Officer commented, “I am excited to report another strong quarter as our business gained considerable growth momentum. Total revenues during the third quarter reached US$637.6 million, representing an increase of 58.2% over the same period in 2014 and 26.6% sequentially. Module shipments to the third parties reached a record high of 1064 MW, which once again exceeds the high end of our third-party shipment guidance. With increasing demand for our high-quality solar products, we are raising our full year 2015 third party module shipment guidance from the current 3.4 GW to 3.7 GW, to 3.8 GW to 4.0 GW.”

“During the third quarter, electricity output reached 2.4 GWh, up 15.1% sequentially. Electricity revenues generated RMB205.8 million. 121 MW of JinkoSolar projects were connected to the grid during the quarter which brings our total capacity of connected projects to 846 MW. This leaves us right on track to meet our 600-800 MW target for the year. This higher-margin downstream business increasingly generates a larger share of our revenues and profits as it develops in size and scale. The rapid growth of our downstream business is supported by diversified financing channels including the RMB10 billion strategic line of credit agreement JinkoPower recently signed with the Industrial and Commercial Bank of China, China’s largest commercial bank. This new line of credit will be used to provide us with working capital as well as bridge and project loans for future project development.”

“Earlier this year, we made strategic plans for a surge in global demand during the second half year by pre-emptively increasing inventory levels. This strategy is now paying off as it provides us with flexibility to balance between shipments to third-party customers and our downstream business as well as good visibility on next year’s orders.”

“This quarter’s performance along with what we expect will be a strong fourth quarter, leave me very confident in our ability to deliver strong full-year results and further grow our sustainable business. With a large and geographically diverse customer base, industry-leading technology, long-lasting relationships with financial institutions and new growth drivers, we are building a foundation for sustainable growth in the years to come and will deliver long-term return to our shareholders”

Third Quarter 2015 Financial Results

Total Revenues

Total revenues in the third quarter of 2015 were RMB4.1 billion (US$637.6 million), representing an increase of 26.6% from RMB3.2 billion in the second quarter of 2015 and an increase of 58.2% from RMB2.6 billion in the third quarter of 2014. The sequential and year-over-year increase in total revenues was mainly attributable to the increase in shipments of solar modules and electricity revenues from solar projects.

During the third quarter of 2015, revenues from downstream solar power projects were RMB205.8 million (US$32.4 million), representing an increase of 15.7% from RMB177.9 million in the second quarter of 2015 and an increase of 205.8% from RMB67.3 million in the third quarter of 2014. The increase in solar power project revenues was primarily due to the increase in number and capacity of the Company’s solar projects. Gross profit for solar power project revenues was RMB126.1 million (US$19.8 million) during the third quarter of 2015, representing a gross margin of 61.3%.

The Company has entered into certain sales contracts with retainage terms (the “Retainage Contracts”) since the second half of 2012, under which customers were allowed to withhold payment of 5% to 10% of the full contract price as retainage for the specified period which generally ranges from one year to two years (the “Retainage Period”). The Company does not recognize such retainage until the customers pay it after the Retainage Period expires. The total amounts of retainage under the Retainage Contracts that were not recognized as revenue were nil and RMB17.3 million for the third and the second quarter of 2015, respectively. During the third quarter of 2015, the Company received retainage payment of RMB23.8 million (US$3.7 million) and recognized it as revenue. As of September 30, 2015, the cumulative amount of retainage that had not yet been recognized as revenue was RMB180.7 million (US$28.4 million).

Gross Profit and Gross Margin

Gross profit in the third quarter of 2015 was RMB864.6 million (US$136.0 million), compared with RMB663.6 million in the second quarter of 2015 and RMB528.5 million in the third quarter of 2014.

Gross margin was 21.3% in the third quarter of 2015 compared with 20.7% in the second quarter of 2015 and 20.6% in the third quarter of 2014. The sequential and year-over-year increases were mainly due to the continued reduction in cost of solar modules and the increase of electricity revenues.

Income from Operations and Operating Margin

Income from operations in the third quarter of 2015 was RMB384.0 million (US$60.4 million), compared with RMB237.0 million in the second quarter of 2015 and RMB239.9 million in the third quarter of 2014. Operating margin in the third quarter of 2015 was 9.5%, compared with 7.4% in the second quarter of 2015 and 9.4% in the third quarter of 2014.

Total operating expenses in the third quarter of 2015 were RMB480.6 million (US$75.6 million), an increase of 12.7% from RMB426.6 million in the second quarter of 2015 and an increase of 66.5% from RMB288.6 million in the third quarter of 2014. The sequential increase in operating expenses was mainly due to increases in shipping and warranty costs and stock-based compensation expenses. The year-over-year increase in operating expenses was mainly due to increases in shipping and warranty costs and stock-based compensation expenses.

Total operating expenses excluding non-cash charges, including stock-based compensation and changes in allowance for doubtful accounts were RMB495.3 million (US$77.9 million) in the third quarter of 2015, compared to RMB422.8 million in the second quarter of 2015 and RMB295.2 million in the third quarter of 2014.

Total operating expenses excluding non-cash charges as a percentage of total net revenues was 12.2% in the third quarter of 2015, compared to 13.2% in the second quarter of 2015 and 11.5% in the third quarter of 2014.

Interest Expense, Net

Net interest expense in the third quarter of 2015 was RMB146.2 million (US$23.0 million), an increase of 83.9% from RMB79.5 million in the second quarter of 2015 and an increase of 100.2% from RMB73.1 million in the third quarter of 2014, mainly due to an increase of loans for solar power projects.

Exchange gain/loss, Net

The Company recorded an exchange loss of RMB121.6 million (US$19.1 million) including change in fair value of forward contracts in the third quarter of 2015. The Company had a net exchange gain of RMB15.2 million in the second quarter of 2015 and RMB1.3 millionin the third quarter of 2014. The sequential and year-over-year changes were mainly due to unexpected depreciation of RMB against US$ in the third quarter of 2015.

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

The Company recognized a gain from a change in fair value of convertible senior notes of RMB158.1 million (US$24.9 million) which was offset by a loss from a change in fair value of capped call options of RMB47.1 million (US$7.4 million). Gain from change in fair value of convertible senior notes was primarily due to the decline in price of the Company’s stock during the third quarter of 2015.

Equity in income of affiliated companies

The Company recognized equity income from affiliated companies of RMB7.0 million (US$1.1 million) in the third quarter of 2015 as a result of its share of profits for solar projects held by affiliated companies.

Income Tax Expense / (Benefit), net

The Company recorded an income tax expense of RMB34.2 million (US$5.4 million) in the third quarter of 2015, compared with income tax benefit of RMB1.8 million in the second quarter of 2015 and RMB153.8 million during the third quarter of 2014. The sequential changes were mainly due to additional deduction in R&D costs approved by the local tax bureau in the second quarter of 2015.

Net Income and Earnings per Share

Net income attributable to JinkoSolar Holding Co., Ltd.’s ordinary shareholders in the third quarter of 2015 was RMB195.1 million(US$30.7 million), compared with RMB76.4 million in the second quarter of 2015 and RMB280.6 million in the third quarter of 2014.

Basic earnings per share was RMB1.56 (US$0.25) and diluted earnings per share was RMB0.78 (US$0.12) in the third quarter of 2015, equivalent to basic and diluted earnings per ADS of RMB6.24 (US$1.00) and RMB3.12 (US$0.48), respectively.

Non-GAAP net income attributable to JinkoSolar Holding Co., Ltd.’s ordinary shareholders in the third quarter of 2015 was RMB253.3 million (US$39.8 million), compared with RMB206.8 million in the second quarter of 2015 and RMB342.0 million in the third quarter of 2014.

Non-GAAP basic and diluted earnings per share in the third quarter of 2015 were RMB2.03 (US$0.32) and RMB1.63 (US$0.26), respectively, equivalent to non-GAAP basic and diluted earnings per ADS of RM8.12 (US$1.28) and RMB6.52 (US$1.04), respectively.

Financial Position

As of September 30, 2015, the Company had RMB3.7 billion (US$584.2 million) in cash and cash equivalents and restricted cash, compared with RMB2.3 billion of cash and cash equivalents and restricted cash as of June 30, 2015.

As of September 30, 2015, total short-term bank borrowings, including the current portion of long-term bank borrowings, was RMB4.7 billion (US$744.0 million), compared with RMB4.1 billion as of June 30, 2015, and total long-term borrowings was RMB3.5 billion(US$544.6 million), compared with RMB2.1 billion as of June 30, 2015.

As of September 30, 2015, the Company’s working capital was negative RMB734.3 million (US$115.5 million), compared with negativeRMB1.8 billion as of June 30, 2015.

Third quarter 2015 Operational Highlights

Solar Product Shipments

Total solar product shipments to the third parties in the third quarter of 2015 were 1,107.7 MW, consisting of 1,063.9 MW of solar modules, 10.4 MW of silicon wafers and 33.4 MW of solar cells. In comparison, total shipments for the second quarter of 2015 were 915.0 MW, consisting of 823.0 MW of solar modules, 59.5 MW of silicon wafers and 32.5 MW of solar cells, and total solar product shipments in the third quarter of 2014 were 708.2 MW, consisting of 658.1 MW of solar modules, 30.3 MW of silicon wafers and 19.8 MW of solar cells.

Solar Project Capacity

As of September 30, 2015, the Company had connected 846 MW of solar projects to the grid, compared with 725 MW of solar projects to the grid as of June 30, 2015.

Solar Products Production Capacity

As of September 30, 2015, the Company’s in-house annual silicon wafer, solar cell and solar module production capacity was 3 GW, 2.5 GW and 4 GW, respectively.

Recent Business Developments

  • In September 2015, JinkoSolar entered into an agreement with Ygrene Energy Fund, Inc. to integrate JinkoSolar’s high quality solar modules into Ygrene’s PACE (property assessed clean energy) financing program, YgreneWorksTM, for residential and commercial PV systems in the United States. The Jinko-Ygrene partnership offers zero-down, 100% project financing to homeowners and business owners who want to own solar systems.
  • In September 2015, JinkoSolar announced the official launch of the JinkoMX module series, incorporating a single chip optimizer from Maxim Integrated Products, Inc. JinkoSolar has completed UL certification for this module series, which will generate more electricity than standard modules under most non-ideal real world conditions.  JinkoSolar is the first PV module manufacturer offering mass production of this technology for the US solar market.
  • In September 2015, JinkoSolar signed a line of credit of up to RMB10 billion strategic agreement with the Industrial and Commercial Bank of China (“ICBC”) Jiangxi Provincial branch.
  • In September 2015, JinkoSolar announced that it will supply TSK Electrónica y Electricidad, S.A. with 49.8MW of PV solar modules for the largest solar PV plant in Mexico.

Operations and Business Outlook

Fourth Quarter and Full Year 2015 Guidance

For the fourth quarter of 2015, the Company estimates total solar module shipments to be in the range of 1.4 GW to 1.7 GW, which includes 1.2 GW to 1.4 GW module shipments to third parties. Revenues will not be recognized for the modules shipped to its own downstream projects as required by U.S. GAAP.

For the full year 2015, the Company updates the guidance of total solar module shipments to 4.2 GW to 4.5 GW which includes 3.8 GW to 4.0 GW module shipments to third parties. The Company expects to grid-connect solar power projects with a total capacity of 600 MW — 800 MW in 2015.

 

 

 

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