Upbeat Second Quarter Earnings Report for China’s JinkoSolar

JinkoSolar
Image courtesy of JinkoSolar.

China’s JinkoSolar, a vertically integrated solar company, published second quarter 2016 financial reports this morning that reported a profit and surging growth.

Here are the highlights of the Second Quarter 2016 report:

  • Total solar module shipments were 1,716 megawatts (“MW”), which includes 204 MW used in the Company’s downstream projects. Total solar module shipments increased by 7.3% from 1,600 MW in the first quarter of 2016 and 87.9% from 913 MW in the second quarter of 2015.
  • Total revenues were RMB5.96 billion (US$896.1 million), representing an increase of 8.9% from the first quarter of 2016 and 86.1% from the second quarter of 2015.
  • Solar power projects generated 327 GWh of electricity, representing an increase of 55.8% from the first quarter of 2016 and 60.9% from the second quarter of 2015. Total revenues generated from solar power projects were RMB288.5 million(US$43.4 million), representing an increase of 55.5% from the first quarter of 2016 and 62.1% from the second quarter of 2015.
  • As of June 30, 2016, the JinkoSolar had connected 1,130 MW worth of solar power projects.
  • Gross margin was 20.4%, compared with 21.3% in the first quarter of 2016 and 20.7% in the second quarter of 2015.
  • Income from operations was RMB445.1 million (US$67.0 million), compared with RMB573.7 million in the first quarter of 2016 and RMB237.0 million in the second quarter of 2015.
  • Net income attributable to the Company’s ordinary shareholders was RMB280.1 million (US$42.1 million), compared withRMB313.3 million in the first quarter of 2016 and RMB76.4 million in the second quarter of 2015.
  • Diluted earnings per American depositary share (“ADS”) were RMB8.48 (US$1.28), compared with RMB9.32 in the first quarter of 2016 and RMB2.40 in the second quarter of 2015.
  • Non-GAAP net income attributable to the Company’s ordinary shareholders was RMB421.8 million (US$63.5 million), compared with RMB414.6 million in the first quarter of 2016 and RMB206.8 million in the second quarter of 2015.
  • Non-GAAP basic and diluted earnings per ADS were RMB13.44 (US$2.04) and RMB12.72 (US$1.92), respectively, in the second quarter of 2016.

Mr. Kangping Chen, JinkoSolar’s Chief Executive Officer, commented, “I am pleased to announce another strong quarter. Module shipments reached a record high of 1,716 MW, exceeding the high end of our guidance. Total revenues reached US$896.1 million, an increase of 86.1% over the same period last year. We expect global demand to remain robust despite recent industry headwinds and are confident that we will be able to carry this strong growth momentum throughout the second half of the year.”

“Electricity output from our domestic projects improved substantially to 327 GWh, an increase of 55.8% sequentially while generating RMB285 million in revenue. This solid increase was mainly due to a number of our projects ramping up to full capacity, increased seasonal sunlight hours, and reduced curtailment in China’s western regions. We remain on track to hit our project development guidance with the addition of 123 MW of projects this quarter, bringing our total project capacity to 1,130 MW as of June 30, 2016. We continue to work on spinning off our downstream business, which we believe has enormous potential in the long-run to maximize shareholder value and deleverage our balance sheet from this asset-heavy business.”

“Demand during the quarter was strong, especially from the US and China which accounted for the majority of our shipments. While the industry is facing a challenging period, we have already built a strong book of orders for the second half of 2016. Demand in China is expected to soften in the third quarter due to the June 30th FiT cut but is expected to pick up again in the fourth quarter of 2016. The geographic mix of our shipments is also expected to balance out during the second half of this year with other markets such as Latin America, India and Japan expected to grow rapidly.”

“In China, we are actively participating in Top Runner Program and PV Poverty Alleviation Program projects to counter the effects of the declining traditional utility- scale market. We became the first PV company to receive the China Quality Certification Center’s level-one energy efficiency certification for both mono and multi-crystalline PV products for the Top Runner Program, another demonstration of the traction our products have in the market given their high-efficiency and reliability. We continue to expand our PERC production lines and have made solid progress in developing our black-silicon technology. We are also working to combine these two technologies to further increase the efficiency and reliability of our products.”

“We update our guidance for year-end manufacturing capacity to 4.5GW, 3.7GW, and 6.5GW for wafers, cells and modules, respectively. The increase is mainly as a result of increased wafer production for usage of our PERC-line products.”

“I am confident in our ability to execute our strategy and deliver long-term sustainable growth despite a challenging global environment. We view these challenges as opportunities for us to further improve ourselves as we work to increase value for our shareholders.”

Second Quarter 2016 Financial Results

Total Revenues

Total revenues in the second quarter of 2016 were RMB5.96 billion (US$896.1 million), representing an increase of 8.9% fromRMB5.47 billion in the first quarter of 2016 and an increase of 86.1% from RMB3.2 billion in the second quarter of 2015. The sequential and year-over-year increases in total revenues were mainly attributable to the increase in solar module shipments as well as the increase in electricity revenue.

During the second quarter of 2016, revenues from downstream solar power projects were RMB288.5 million (US$43.4 million), an increase of 55.5% from RMB185.5 million in the first quarter of 2016 and an increase of 62.1% from RMB177.9 million in the second 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 and reduced curtailment of electricity in China’s western regions. Gross profit for solar power project revenues was RMB178.0 million (US$26.8 million) during the second quarter of 2016, representing a gross margin of 61.7%.

Gross Profit and Gross Margin

Gross profit in the second quarter of 2016 was RMB1.21 billion (US$182.4 million), compared with RMB1.17 billion in the first quarter of 2016 and RMB663.6 million in the second quarter of 2015.

Gross margin was 20.4% in the second quarter of 2016, compared with 21.3% in the first quarter of 2016 and 20.7% in the second quarter of 2015. The sequential decrease was mainly due to an increase in tariffs paid for solar modules produced in the Company’s Chinese production facilities and shipped to US market.

Income from Operations and Operating Margin

Income from operations in the second quarter of 2016 was RMB445.1 million (US$67.0 million), compared with RMB573.7 million in the first quarter of 2016 and RMB237.0 million in the second quarter of 2015. Operating margin in the second quarter of 2016 was 7.5%, compared with 10.5% in the first quarter of 2016 and 7.4% in the second quarter of 2015.

Total operating expenses in the second quarter of 2016 were RMB767.1 million (US$115.4 million), an increase of 29.5% fromRMB592.2 million in the first quarter of 2016 and an increase of 79.8% from RMB426.6 million in the second quarter of 2015. Total operating expenses accounted for 12.9% of total revenues, compared to 10.8% in the first quarter of 2016 and 13.3% in the second quarter of 2015. The sequential and year-over-year increases in operating expenses were mainly due to increases in shipping, warranty costs, provisions of accounts receivables and impairment of property, plant and equipment. The impairment was due to the Company’s replacement of certain production equipment in an effort to improve production automation.

Total operating expenses excluding the impact of stock-based compensation, provisions for doubtful accounts, disposal and impairment of fixed assets were RMB596.9 million (US$89.8 million), compared to RMB554.5 million in the first quarter of 2016 and RMB422.8 million in the second quarter of 2015.

Total operating expenses excluding the impact of stock-based compensation, provisions for doubtful accounts, disposal and impairment of fixed assets as a percentage of total net revenues was 10.0% in the second quarter of 2016, compared to 10.1% in the first quarter of 2016 and 13.2% in the second quarter of 2015.

Interest Expense, Net

Net interest expense in the second quarter of 2016 was RMB121.6 million (US$18.3 million), a decrease of 3.8% from RMB126.4 million in the first quarter of 2016 and an increase of 53.0% from RMB79.5 million in the second quarter of 2015. The year-over-year increase was mainly due to an increase in bank borrowings used for solar power projects.

Exchange Gain, Net

The Company recorded a net exchange gain of RMB106.6 million (US$16.0 million) including change in fair value of forward contracts in the second quarter of 2016, compared to RMB11.7 million in the first quarter of 2016 and RMB15.2 million in the second 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 option of RMB49.1 million(US$7.4 million) in the second quarter of 2016.

Income Tax Benefit / (Expense), net

The Company recorded an income tax expense of RMB90.9 million (US$13.7 million) in the second quarter of 2016, compared with an income tax expense of RMB100.4 million in the first quarter of 2016 and an income tax benefit of RMB1.8 million during the second quarter of 2015.

Net Income and Earnings per Share

Net income attributable to the Company’s ordinary shareholders in the second quarter of 2016 was RMB280.1 million (US$42.1 million), compared with RMB313.3 million in the first quarter of 2016 and RMB76.4 million in the second quarter of 2015.

Basic and diluted earnings per ordinary share were RMB2.23 (US$0.34) and RMB2.12 (US$0.34), respectively, during the second quarter of 2016. This translates into basic and diluted earnings per ADS of RMB8.92 (US$1.36) and RMB8.28 (US$1.28), respectively.

Non-GAAP net income attributable to the Company’s ordinary shareholders in the second quarter of 2016 was RMB421.8 million(US$63.5 million), compared with RMB414.6 million in the first quarter of 2016 and RMB206.8 million in the second quarter of 2015.

Non-GAAP basic and diluted earnings per ordinary share were RMB3.36 (US$0.51) and RMB3.18 (US$0.48), respectively, during the second quarter of 2016. This translates into non-GAAP basic and diluted earnings per ADS of RMB13.44 (US$2.04) andRMB12.72 (US$1.92), respectively.

Financial Position

As of June 30, 2016, the Company had RMB3.70 billion (US$556.8 million) in cash and cash equivalents and restricted cash, compared with RMB3.37 billion as of March 31, 2016.

As of June 30, 2016, the Company’s accounts receivables were RMB4.17 billion (US$627.5 million), compared with RMB3.94 billion as of March 31, 2016.

As of June 30, 2016, the Company’s inventories were RMB3.10 billion (US$466.0 million), compared with RMB3.11 billion as ofMarch 31, 2016.

As of June 30, 2016, the Company’s total interest-bearing debts were RMB12.05 billion (US$1.81 billion), compared withRMB10.41 billion as of March 31, 2016. Interest-bearing debts from downstream solar power projects were RMB6.66 billion(US$1.0 billion), compared with RMB5.58 billion as of March 31, 2016.

Second Quarter 2016 Operational Highlights

Solar Module Shipments

Total solar module shipments in the second quarter of 2016 amounted to 1,716 MW, including 204 MW used in the Company’s downstream projects.

Solar Power Project Capacity

As of June 30, 2016, the Company had connected 1,130 MW of solar power projects to the grid.

Solar Products Production Capacity

As of June 30, 2016, the Company’s in-house annual silicon wafer, solar cell and solar module production capacity was 3.5 GW, 3.5 GW and 6.5 GW, respectively.

Recent Business Developments

  • In July 2016, JinkoSolar signed three power purchase agreements with Mexico’s Federal Electricity Commission for three projects totaling 188MWac.
  • In July 2016, JinkoSolar signed amendments to the credit agreement with Wells Fargo Capital Finance to increase its credit limit to $60 million from $40 million with a three year term.
  • In July 2016, JinkoSolar made a big leap forward in the latest China Fortune 500 list, climbing from position 437 to 330.
  • In July 2016, JinkoSolar signed a one-year JPY2 billion syndicated loan agreement with a bank consortium led by Sumitomo Mitsui Banking Corporation.
  • In July 2016, JinkoSolar was awarded the 2016 BlueSky Award for Global Top Investment Scenarios to Apply New Technologies for Renewable Energy Utilization.

Operations and Business Outlook

Third Quarter and Full Year 2016 Guidance

For the third quarter of 2016, JinkoSolar estimates total solar module shipments to be in the range of 1.5 GW to 1.7GW, which includes 1.40 GW to 1.65 GW module shipments to third parties. Revenues will not be recognized for the modules shipped to the Company’s own downstream projects as required by U.S. GAAP.

For the full year 2016, JinkoSolar estimates total solar module shipments to be in the range of 6 GW and 6.5 GW, which includes 5.4 GW to 5.7 GW module shipments to third parties. Full year newly-added solar power project development scale is expected to be in the range of 600 MW to 800 MW.

 

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This post was prepared by Solar Thermal Magazine staff.

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