Trina Solar Limited (TSL)

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Trina Solar Ltd. (TSL)

Q1 2010 Earnings Call

May 25, 2010 8:00 a.m. ET

Executives

Thomas Young - Senior Director, IR

Jifan Gao - Chairman and CEO

Terry Wang - CFO

Sean Tzou - COO

Analysts

Dan Ries - Collins Stewart

Kelly Dougherty - Macquarie

Sam Dubinsky - Wells Fargo Securities

Gordon Johnson - Hapoalim Securities

Pavel Molchanov - Raymond James

Christine Hersey - Wedbush

Vishal Shah - Barclays

Nitin Kumar - Nomura

Nimal Vallipuram - Gilford Securities

Mark Bachman - Auriga USA

Edwin Mok - Needham & Company

Presentation

Operator

At this time, I would like to welcome everyone to the Trina Solar first quarter earnings conference call. (Operator Instructions)

I would now like to turn the call over to Thomas Young, Senior Director of Investor Relations. Thank you, Mr. Young, you may begin your conference.

Thomas Young

Good day to all and welcome to Trina Solar's first quarter 2010 earnings conference call. This is Thomas Young, Trina Solar's Senior Director of Investor Relations. With us today are Trina Solar's Chairman and CEO, Jifan Gao; Chief Financial Officer, Terry Wang; and Chief Operating Officer, Sean Tzou.

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. In addition, any projections as to the company's future performance represent management's estimates as of today, May 25, 2010. 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 our website at www.trinasolar.com.

With that, it's my pleasure to turn the call over to Trina Solar's Chairman and CEO, Mr. Jifan Gao.

Jifan Gao

Thank you, Thomas. Welcome everyone and thank you all for joining us today. We are pleased to announce another outstanding performance in the first quarter. We believe there were four drivers for our continued growth as a leading group of solar brands: increased brand recognition, higher quality productive volume, the entire team's acknowledgment, efficiency in production.

During the fourth quarter, we had exceeded our company's guidance to achieve record shipment of 193 megawatt. We continued to improve our cost of structure and reduced our branded and non-silicon costs to $0.76 per watt in Q1 from $0.78 per watt in Q4. Our cost reduction is (on check) and exceeded to the period beyond 2011.

We leveraged our (inaudible) innovation in products such as Quad MAX square mono modules with higher power output and the large utility-scale modules. We have also increased our capital network efficiency for mono to 19% and average commercial production efficiency for mono to 18.1%.

Our balance sheet grew strongly with increased cash balances due to our positive operating cash flows. Our performance in the fourth quarter reflected continued strength of our vertically integrated model, effective sales and marketing strategy, with new announced customer contracts in U.S. and Asia.

We are the first Chinese solar company to sign a strategic agreement with CPV Testing Center, TUV Rheinland, UL and China General Certification Centre.

We continue to see strong demand for our products in all market segments. In the second quarter and second half of the year, this was (inaudible) as our successful customer unit. Our customers from around the world have shown us confidence in the market and continue to support Trina Solar in the choice of solar products. We continue to monitor the economy and have taken measures to minimize the negative impact.

With that, I would like to turn the call to our CFO, Terry Wang, to share our first quarter 2010 financial results.

Terry Wang

Thank you, Mr. Gao, and welcome to everyone today. I would like to present an overview of our recent financial results followed by the company's guidance for the second quarter.

As a housekeeping item, I would like first to bring your attention to the new accounting rules, ASC 470-20. Now we are about to generate first 2010, the prior-year period financial to retroactively adjust to reflect the adoption of this new accounting guidance. Please refer to today's earning release for detail.

First quarter was another outstanding quarter with a record shipment volume and a gross margin of about our previous company guidance. We continue to sustain attractive margins as we focus on further reducing our manufacturing costs while increasing productivity, supply chain and efficiency gains throughout our core value area.

Our total net revenue in the first quarter was $336.8 million, an increase of 7.5% from fourth quarter and an improvement by sequential shipment volume growth of 18% over the previous quarter. Our record shipment volume of 193 megawatts exceeded our guidance of 180 megawatts to 190 megawatts, reflecting increased market recognition for the company's brand and a strong demand ahead of the mid-year subsidy revisions in Germany.

Despite of the ASP declines, gross profit was $104.2 million in the first quarter. Gross margin was 30.9% in the first quarter of 2010, exceeding our previous guidance of between 26% and 28% compared to 22.6% in the fourth quarter.

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