- Trina Solar's Q4 revenues grow
1.5% sequentially to $302 million; operating loss
narrows to $70 million
- Shipments for the quarter up
10% sequentially to 415 MW; shipments to China and
- Systems business expanding in China and the U.S., could
help improve margins in the long term.
- Non-silicon manufacturing costs fall from $0.54 to
- Costs expected to decline through 2013 as well but unlikely
to bring about a complete turnaround
Trina Solar (
), one of China's largest solar equipment manufacturers, published
its fourth quarter earnings yesterday. Quarterly revenues rose by
around 1.5% sequentially to $302 million while operating losses
narrowed to around $70 million down from $76 million last quarter.
Although the earnings were lackluster, there were some encouraging
trends including shipment growth to the Chinese market, better cost
control and some progress in the utility scale solar business.
However, we still believe that 2013 is likely to be a
challenging year for the firm due to depressed prices and
persisting oversupply plaguing the global solar industry. Here are
some of the key takeaways from the firm's earnings release.
Growth In China And Japan Is Promising
Trina's revenues from China more than doubled in the fourth
quarter to around $100 million. The region accounted for around
one-third of quarterly revenues. China is a promising
market for Trina as the government has set a target of adding
around 10 GW of solar power this year and recently boosted
incentives to encourage installations. As of last year, China was
the world's second largest market for solar products and this year
it could overtake Germany to become the world's largest market.
Business in Japan also doubled in Q4 (although on a relatively
low base), and the country now accounts for around 7% of
Trina's revenues. Japan has among the highest feed-in-tariffs in
the world, which should help boost installations in the near term.
Systems costs in the country are typically higher than in the rest
of the world and most of the demand is for high efficiency panels.
Last year Trina added around 600 MW of capacity for manufacturing
its high efficiency 'Honey' solar panels and Japan could prove to
be a promising market to sell them.
Projects Business Plans
Trina has been gradually developing its solar systems business,
which builds large scale solar farms. The firm recently got
approval to build a 50 MW plant in China's Gansu Province and
management has indicated that another large project deal is
expected in the region. Apart from this, the firm is also
participating in some projects in the United States. This
is definitely an encouraging trend since margins for this
business are typically higher than for panels. Growing this
business would also help to partly isolate Trina from some of the
volatility in panel prices.
Trina recently signed a deal with QBotix, a firm that
develops robotic trackers for solar power plants to develop and
deploy its solar trackers in its power plants. Trina will be among
the first panel manufacturers to utilize QBotix's innovative
technology which can help reduce balance of system costs and
improve system efficiency. The firm's financial position is also a
lot better than many other Chinese solar firms, and this could
prove an advantage in bagging larger contracts in China
and abroad. As of Q4, total debt stood at $1.3 billion while cash
was around $920 million.
2013: Losses Could Narrow But A Return To Profitability
Gross margins for Q4 came in at around 1.9% due to better
control over manufacturing costs. Non-silicon costs per watt, which
excludes the prices of polysilcion raw material, fell to around
$0.51 from $0.54 in Q3. Management expects this trend to continue
into this year as well with costs expected to fall faster than
panel prices. Shipments guidance for the year stands at between 2
GW and 2.1 GW, up from around 1.6 GW in 2012, which should help
boost capacity utilization (the firm has manufacturing capacity of
around 2.4 GW) and enable better absorption of costs. Despite the
relatively positive outlook on the cost front, we still think that
a return to profitability is highly unlikely given that average
selling prices are under severe pressure both in China and
globally. However, if there is significant consolidation within the
Chinese solar industry and weaker firms file for bankruptcy, things
could look up for Trina as this would bring down supply and improve
the pricing environment.
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