JA Solar Holdings, Co., Ltd. (JASO)

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JA Solar Holdings, Co., Ltd. (JASO)

Q3 2012 Earnings Conference Call

November 28, 2012 8:00 AM ET


Nick Beswick – IR, Brunswick Group

Peng Fang - CEO

Christoph Flinck - Head of Strategic Planning and Corporate Development

Min Cao – CFO


Edwin Mok – Needham & Company

Matt Frank – Macquarie

Pavel Molchanov – Raymond James

Edwin Mok – Needham & Co

Brandon Heiken – Credit Suisse

Jeff Osborne - Stifel Nicolaus & Co.



Hello and thank you for standing by for JA Solar’s third quarter 2012 earnings conference call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I’d now like to turn the call over to your host for today's conference, Mr. Nick Beswick of Brunswick Group. Please go ahead.

Nick Beswick

Thank you. Welcome to JA Solar’s third quarter 2012 earnings conference call. Joining us from the company today are Dr. Peng Fang, CEO; Mr. Min Cao, CFO; and Dr. Christoph Flinck, Head of Strategic Planning and Corporate Development.

As stated in the press release, the oversimplified translation of CNY into US dollars, which is set at 6.343 RMBs to the dollar, is made solely for the convenience of the audience. References to dollars are the lawful currency of the USA.

The press release published today provides detailed financial tables for the conversion from CNY to USD. On this call, Dr. Fang will begin with an overview of the company's Q3 2012 results covering the business and market developments and outlook. Following that, Christoph will provide details of the company’s financial performance.

After the prepared remarks, we will open up for questions for the remainder of the call. We expect the entire call to last approximately one hour.

Before we begin the formal remarks, I’d like to remind you that certain statements on today’s call, including statements regarding expected future financial and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.

Factors that could cause actual results to differ into general, business and economic conditions in the solar industry; governmental support for the development of solar power; future shortage or availability of the supply of high purity silicon; demand for end-user products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in demand for our major markets; changes in product mix, capacity utilization, level of competition, pricing pressures, and declines in average selling prices; delays in the introduction of new product lines; continued success in technological innovations; shortage in supply of raw materials; availability of financing; exchange rate fluctuation, litigation and other risks as described in the company’s SEC filings including its annual report on Form 20-F filed with the SEC.

Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results. You should not place undue reliance on these forward-looking statements. All information provided on today’s conference call speaks as of today’s date unless otherwise stated and the company undertakes no duty to update such information except as required under applicable law.

I will now turn the call over to Dr. Peng Fang, CEO of JA Solar.

Dr. Peng Fang

Thank you, Nick and thank you everyone for joining today’s call. We continued to see significant industry wide over capacity and we expected this pattern to continue for a few quarters before the market returns to a more normal balance of supply demand. In spite of this challenging condition, we posted a shipment of 418 MW, above the high end of our guidance. Thanks to a solid performance across our key growth markets, in Q3 modules constituted about 60% of our total shipments of volume and about 70% of the revenue. This is a testament to JA Solar’s successful transform into the module company over the last three years.

Despite our negative gross margin this quarter, we continued to manage our cash position well, positioning a positive operating cash flow and as part of our effort to maintaining a competitive balance sheet, we bought back a significant portion of our outstanding convertible notes and continued to explore potential channels to meet our long term financial needs.

Taking the right balance between maintaining a solid financial footing and a strong position in key growth market remains controlled to our long term success and we will continue to expand our market share in key regions in the coming quarters.

On the technology side, we maintained a strong progress we have made in increasing the quality, efficiency and reliability of our product offering. We’ve remained confident that we were emerging from the current industry environment as a market leader.

Let’s take a look at some key metrics for the quarter. We posted a shipment of 418 MW this quarter which was above the high end of our guidance. This comes on the back of a strong performance across key growth markets with partnerships and several utility share projects in China playing an important role.

Gross margin declined to negative 5.9% in this quarter. This was largely a consequence of the continued ASP pressure across the industry as well as the high proportion of our modules shipments that went to ASD markets like China and Germany. Gross margin was also negatively impacted by an inventory provision which was partly offset by reverse of AD quality provision in the US. Excluding this impact, gross margin would have been negative 3.7%.

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