Trina Solar Limited (TSL)

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Trina Solar Limited (TSL)

Q2 2013 Results - Earnings Call Transcript

August 20, 2013 08:00 AM ET

Executives

Kevin Zhang - Head of Investor Relations

Jifan Gao - Chairman and CEO

Terry Wang - Chief Financial Officer

Zhiguo Zhu - President, Module Business Unit

Analysts

Vishal Shah - Deutsche Bank

Rob Stone - Cowen & Company

Brandon Heiken - Credit Suisse

Matt Koranda - Roth Capital Partners

Dan Ries - Maxim Group

Gordon Johnson - Axiom Capital Management

Pranab Sarmah - Daiwa Capital Markets

Shawn Yuan - RBC Capital Markets

Colin Rusch - Broadpoint Capital

Presentation

Operator

Good morning. My name is Tiffany and I'll be your conference operator today. At this time, I would like to welcome everyone to the Trina Solar second quarter 2013 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). Mr. Zhang, you may begin your conference.

Kevin Zhang

Thank you, Tiffany. Good day to all and welcome to Trina Solar second quarter 2013 earnings conference call. This is Kevin Zhang, Trina Solar’s Head of Investor Relations. With us today are Trina Solar’s Chairman and CEO, Mr. Jifan Gao; Chief Financial Officer, Mr. Terry Wang and President of Trina Solar’s Module Business Unit, Mr. Zhiguo Zhu.

Before I turn the call over to Mr. Gao, may I remind our 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 a more detailed discussion of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission.

For those of you unable to listen to the entire call at this time, a recording will be made available via webcast for 90 days at the Investor Relations section of our website at www.trinasolar.com.

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

Jifan Gao

Thank you, Kevin, and thank you everyone for joining us today. First of all, I am pleased to announce that we achieved record quarterly shipment numbers in the second quarter of 2013, exceeding our original guidance by more than 100 megawatts. With robust global demand, we took full advantage of our global sales network and strong brand to seize available commercial opportunities.

In terms of pricing, the ASP of modules has stabilized compared to the falling trend seen in previous quarters. As a result of our ongoing efforts to improve operational efficiency and cost control, we achieved continuing reductions in non-silicon costs that contributed to quarter-on-quarter margin improvement.

In the second quarter, there was regulatory uncertainty surrounding the E.U.'s anti-dumping case against PV imports from China. Geographic diversification of revenue was important to mitigate such regulatory risks. We achieved strong shipment increasing growth markets, including China, the U.S., India and Japan, which added to our stable shipments to Europe.

We continue to monitor the latest developments in the trade case and encouraged by the recent solution negotiated between the E.U. and China. We remain committed to continuing to serve our customers and business partners in Europe, with whom we have built strong relationships.

In terms of project development, we made good progress in the 50 megawatt power plant project in Wuwei, Gansu Province, China in the second quarter. Construction has been completed and we expect the facility to be grid connected and beginning electricity generation by the end of the third quarter of 2013.

Following the end of the second quarter, we completed the redemption of all remaining outstanding CD when they became due in July 2013. We continue to manage our balance sheet and liquidity position carefully, which will ensure that we have the necessary resources to develop downstream opportunities.

Finally, I would like to update you that Trina Solar has received the global No. 1 ranking in SVTC’s Solar Scorecard. The strategy based on sustainability and social justice benchmarks, (inaudible).

With that, I would now like to turn the call to our CFO, Terry Wang to share our second quarter 2013 financial results and other updates. Terry?

Terry Wang

Thank you, Mr. Gao, and welcome everyone to our call. I would like to present an overview of our second quarter financial results, followed by the company’s guidance for the third quarter and full year of 2013.

Due to improving supply/demand balance and pricing rationalization, module ASP in the second quarter is stable from the first quarter. Our manufacturing cost improved noticeably, which allowed to achieve double digit gross margin in the second quarter, exceeding our initial guidance of a middle single digit in the percentage terms.

We achieved module shipments of 647 megawatts which is within our revised guidance of 630 to 650 megawatts and the total net revenue of $440.7 million in the second quarter. Quarter-on-quarter shipment volume decreased approximately 64.6%. Our second quarter shipment number [exceed] our previous quarterly guidance by more than 200 megawatts, impacted by inventories with higher carrying costs and $9.1 million fixed assets charges relating to discontinuation of operating our multi-crystalline equipment.

Our gross profit was $51.2 million, a sequential increase from $4.4 million in the first quarter. Overall, gross margin was 11.6%, in line with our revised guidance of 11% to 12%. Our gross margin excluding the effect of the fixed asset charge was approximately 13.7%.

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