CSIQ

Canadian Solar Inc. (CSIQ)

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Canadian Solar Inc. (CSIQ)

Q3 2012 Results Earnings Call

November 15, 2012 8:00 AM ET

Executives

David Pasquale - Global IR Partners

Dr. Shawn Qu - Chairman and CEO

Michael G. Potter - Senior Vice President and CFO

Ed Job - Director, Investor Relations

Analysts

Kelly Dougherty - Macquarie

Sanjay Shrestha - Lazard Capital Market

Shawn Lockman - Piper Jaffray

Mark Bachman - Avian Securities

Brandon Heiken - Credit Suisse

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Canadian Solar Third Quarter 2012 Earnings Conference Call. My name is [Dapa], and I’m your operator for today. At this time, all participants are in listen-only. We’ll conduct a question-and-answer session towards the end of the conference. (Operator Instructions)

As a reminder, this call is being recorded for replay purposes and will be ready one hour after the conclusion of this conference call. The telephone number to dial is 1-888-286-8010, and the passcode to use is 83917942.

I would now like to turn the call over to Mr. David Pasquale of Global IR Partners. Please proceed.

David Pasquale

Thank you, Operator. Welcome everyone to Canadian Solar's third quarter 2012 earnings conference call. With us today from the company are Dr. Shawn Qu, Chairman and Chief Executive Officer; Mr. Michael G. Potter, Senior Vice President and Chief Financial Officer; and Mr. Ed Job, Director of Investor Relations.

Before we begin the call, please be advised that management's prepared remarks and responses to your questions during this call may contain forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from expectations implied by these forward-looking statements. These forward-looking statements are made under Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

You should not place undue reliance on forward-looking statements and we encourage you to review a more detailed discussion of the risks and uncertainties contained in the earnings press release issued earlier today and in the company's annual report on Form 20-F with the Securities and Exchange Commission.

All information provided on this call is as of today's date, unless otherwise stated and Canadian Solar undertakes no duty to update such information except as required under applicable law.

At this time, I would like to now turn the call over to Dr. Shawn Qu. Please go ahead, sir.

Dr. Shawn Qu

Thank you, David, and thank you, all, for joining us on the call today. During the third quarter, both the solar industry, competitive environment and the micro economic background remain challenging. At 384 megawatt our shipment came in close to our expectations, while gross margins came within the range of our guidance.

Other than expected demand in Europe and strength in emerging market were offset by slow sales in North America. Despite the difficult environment we continue to execute well on all the key elements of our strategy.

Our approach differentiates us and gives us a strong platform for future growth and expansion. Our focus remains on expanding our total solutions business and enhancing our product offerings to protect and enhance our margin.

We are also focused on increasing our market share in a right market to gain scale, reduce our total cost of production and ownership, and ensure our customers have access to the high reliability, high performance product for which we are known world-wide.

In the third quarter, we continued to consolidate our position among the top three or four larger suppliers globally, making Canadian Solar the partner of choice across all major geographic.

On the manufacturing front, we further reduced our all-in module manufacturing costs to $0.64 per watt, down from $0.67 per watt in the second quarter. In addition to benefiting from lower poly and wafer costs, we were also able to reduce cell and module processing costs. We remained on track to achieve our goal of all-in module manufacturing costs in a range of $0.55 to $0.60 per watt by the end of 2012.

Clearly, our progress in this area reinforces our position as one of the lowest costs module suppliers in the world. Our achievements on cost reduction, together with our continue improvement in solar module efficiency positions us to be competitive and gain additional market share in the quarter’s ahead.

Let me now give you an update of our total solutions business, we continue to make impressive gains in expansion of this business. During the third quarter, we completed the sales of our utility-scale PV power plant to Stonepeak Infrastructure Partners for approximately US$48 million.

In past a few weeks we also completed construction on two more projects, previously sold to TransCanada and often noted to proceed for six out of the seven remaining projects which we have also agreed to sale to TransCanada after completion.

In addition, we submitted 16 projects acquired from SkyPower Ltd for renewable energy approval. Our pipeline of late stage project in the U.S. that we announced last quarter has expanded to approximately 243 megawatt DC.

Geographically, the majority of our current projects are in Canada and U.S., but we also have projects in various development stages in Japan, China, South East Asia and Europe.

In China, we have approval for over 60 megawatts of so called Golden Sun projects and we have closed to 100 megawatt of ground-mounted projects in various stages of approval process. Like all of our projects, we are seeking committed end buyers before starting construction.

Our total solution business remains a competitive advantage and is a major point of differentiation for Canadian Solar. We believe this will drive both of our long-term success and improved profitability.

Read the rest of this transcript for free on seekingalpha.com