Solar cell manufacturer
Canadian Solar Inc
) reported losses yet again in the third quarter of 2012. The
loss of $1.01 per share in the reported quarter was wider than
the Zacks Consensus Estimate of a loss of 58 cents per share.
Canadian Solar posted revenues of $326.2 million, lagging the
Zacks Consensus Estimate of $390 million. The revenue was 34.7%
lower than $499.6 million reported in the prior-year quarter.
Canadian Solar generates a major chunk of its revenue from global
operations. By geography, in the third quarter of 2012, sales to
European markets represented 47.9% of net revenue, sales to
America comprised 24.9% while sales to Asia and all other markets
came to 27.2% of net revenue.
The contribution from Europe decreased significantly from the
prior year, while American and Asian markets improved
Solar module shipments in the quarter totaled 384 megawatts
("MW"), compared with 412 MW for the second quarter 2012 and 355
MW for the third quarter of 2011. Total solar module
shipments for the third quarter of 2012 included 21.1 MW used in
the company's total solutions business.
Gross profit in the third quarter of 2012 was $7.3 million,
short of the year-ago profit level by $4.6 million. The shortfall
in gross profit was primarily due to a decline in average selling
prices, marginally offset by lower manufacturing costs and higher
Total operating expenses were $41.8 million. Operating
expenses mainly sprung from selling expenses. Higher freight and
other export-related expenses as a result of higher shipment
volume increased selling expenses. Headcount additions and
related salary expenses also spiked up selling expenses.
Overall, the company digested a net loss of $43.7 million in
the reported quarter compared with a net loss of $43.9 million in
the third quarter 2011.
As of September 30, 2012, cash, cash equivalents and restricted
cash were $690.8 million, slightly lower than $692.1 million as
of June 30, 2012. Operating cash flow was approximately $11.1
million in the third quarter of 2012, which excludes $68.6
million in cash outflows for 16 projects acquired in Ontario,
Short-term borrowings at the end of the third quarter of 2012
totaled $890.6 million, lower sequentially from $927.7
Long-term debt as of September 2012 was $224.2 million,
compared with $136.3 million at the end of the second quarter of
2012. The higher debt level was because of the acquisition
of assets in Canada.
Canadian Solar expects shipments in the range of 380 MW to 420 MW
in the fourth quarter of 2012, with gross margin expected between
1% and 3%.
The ongoing uncertainty in the global financing environment
has taken a toll on the company's shipment forecast for the full
year. The company now expects its shipment in 2012 in the range
of approximately 1,500 MW to 1,600 MW of solar products, down
from the prior expectation of 1,800 MW to 2,000 MW.
In the third quarter, the company completed the sale of a
utility-scale solar power plant to Stonepeak Infrastructure
Partners for $48.4 million. Subsequent to the quarter, the
company completed the sale of two more projects, Brockville 1 and
William Rutley, totaling 20MW (AC), to TransCanada Corporation.
We believe the increasing popularity of solar power projects may
help the company to report once again in the black.
The company continues to see attractive opportunities for
growth in China, Japan and India, as well as in other emerging
markets of Asia, Africa and Latin America. Moreover, its
specialization in the downstream total solutions business makes
it a higher margin operation.
We nonetheless remain skeptical about the future performance
of the company unless it can rein in operating expenses and
increase total revenues. Besides, the industry-wide cascading
average selling prices and European woes remain causes of concern
for solar module makers.
The company presently retains a short-term Zacks #3 Rank
(Hold). Another operator in the solar cell market,
First Solar, Inc.
) also retains a short-term Zacks #3 Rank (Hold).
CANADIAN SOLAR (CSIQ): Free Stock Analysis
FIRST SOLAR INC (FSLR): Free Stock Analysis
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Canadian Solar Inc. is one of the world's largest solar
companies. As a leading vertically integrated provider of ingots,
wafers, solar cells, solar modules and other solar applications,
the company designs, manufactures and delivers solar products and
solar system solutions for on-grid and off-grid use to customers
worldwide. With a market capitalization of $87.6 million, the
company has 9,087 full time employees.