Trina Solar Limited (TSL)

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Trina Solar Limited (TSL)

Q3 2012 Earnings Call

November 20, 2012 6:30 AM ET

Executives

Thomas Young – VP, IR

Jifan Gao – Chairman and CEO

Terry Wang – CFO

Zhiguo Zhu – SVP and President, Module Business Unit

Analysts

Kelly Dougherty – Macquarie

Mark Bachman – Avian Securities

Vishal Shah – Deutsche Bank

Shar Pourreza – Citigroup

Aaron Chew – Maxim Group

Satya Kumar – Credit Suisse

Pranab Sarmah – Daiwa Capital Markets

Jim Medvedeff – Cowen & Company

Presentation

Operator

Good morning. My name is Felicia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trina Solar Third Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to hand the conference over to your host today, Mr. Thomas Young, Vice President of Investor Relations. Sir, you may begin.

Thomas Young

Thank you. Good day to all, and welcome to Trina Solar’s third quarter 2012 earnings conference call. This is Thomas Young, Trina Solar’s VP of Investor Relations. With us today are Trina Solar’s Chairman and CEO, Jifan Gao; Chief Financial Officer, Terry Wang; and SVP and President of Trina Solar’s Module Business Unit, Zhiguo Zhu.

Before I turn the call over to Mr. Gao, may I remind listeners that in this call, management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and therefore, we refer you to more detailed discussions of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission.

In addition, any projections as to the company’s future performance represent management’s estimates as of today, November 20, 2012. Trina Solar assumes no obligation to update these projections in the future as market conditions change. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days at the Investor Relations section of Trina Solar’s website at trinasolar.com.

And with that, it’s my pleasure to turn the call over to Trina Solar’s Chairman and CEO, Mr. Jifan Gao, for our third quarter opening remarks.

Jifan Gao

Thank you, Thomas, and thank you, everyone joining us today. During the third quarter, the solar TV industry continued to present challenges as supply-demand imbalance, high inventories and irrational pricing practices by our larger and smaller competitors. As a result, greater than expected ASP declines adversely impacted our gross margin, overall shipments and bottom line.

To address this and market conditions, operating instances for the third quarter included retaining all the customers, managing working capital, streamlining our organization to reduce OpEx per account and operating costs. As part of this streamlining, in the third quarter, we instructed our global operating into distinct module and system business units. We did this to better manage our modules business, the foundation of technology, driving innovation and cost leadership.

We have seen some efficiency businesses around the world. Over less than six months, we have made progress on our growing system business in the domestic market.

Most recently, we have obtained the land use rights for a large scale, multi-phase solar power project in Eastern China, where we’ll continue to expand our downstream operations to enhance our profitability from added customer service and product implementations.

Our assumption then is we’ll cover the increasing percentage of our total revenue in the coming years. Our target for 2013 is 20%. To increase our market penetrations to new regions in the third quarter, expand our presence into Latin America by establishing a sales and business development office in Santiago, Chile and putting to formal operation our APMEA headquarters in Singapore.

Amidst the challenging industry condition, we continue to be committed to improving our manufacturing and product quality. In the third quarter, we achieved that the Carbon Footprint Verification from BSI and became the first PV company to be awarded the CTDP certification by UL.

In summary, Q3 was streamlining our operations and expanding into profitable markets strategy maintaining leadership as the PV industry works through consolidation. We’re also encouraged by increasing product development for China’s PV market growth, which we believe can support we are developing.

With that, I would now like to hand the call to our CFO, Terry Wang, to share our third quarter 2012 financial results and other updates. Terry?

Terry Wang

Thank you, Mr. Gao, and welcome, everyone, to our call today. I’d like to present our overview of our third quarter financial results, followed by our commercial organization updates and our company guidance for the fourth quarter the full year of 2012.

Average selling price of PV modules continued to decline in the third quarter due to worldwide supply imbalance linked to the reduction and the transition of our feed-in tariffs program to PPA-based investment models, existing and newer PV solar markets.

Related to market factors, as we have discussed shortly, our third quarter shipments were approximately 380 megawatts compared to our revised guidance of 375 megawatts to 385 megawatts.

Our gross profit was $2.4 million. Gross margin was 0.8% compared to the revised guidance of zero to 1.5% and to 8.4% in the second quarter of 2012. Gross profit includes a non-cash inventory write-down totaling $13.3 million and a reversal for prior provision for anti-dumping and countervailing duties in the United States totaling $25.8 million.

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