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

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JA Solar (JASO)

Q2 2011 Results

August 18, 2011 8:00 a.m. ET


Martin Reidy - Brunswick Group

Peng Fang - CEO

Anthea Chung - Outgoing CFO

Ming Yang - VP of Business Development and Corporate Communications

Min Cao - CFO


[Ming Chu] - Jeffries

[unintelligible] - Credit Suisse

Vishal Shah - Deutsche Bank

Kelly Dougherty - Macquarie

Edwin Mok - Needham & Company

Sanjay Shrestha - Lazard Capital Markets

Dan Ries - Colllins Stewart

Colin Rusch - ThinkEquity

Liu Yong - UBS

Pavel Molchanov - Raymond James

Nitin Kumar - Nomura Capital

Sam Dubinsky - Wells Fargo



Hello and thank you for standing by for JA Solar’s second quarter 2011 earnings conference call. [Operator instructions.] I would now like to turn the meeting over to your host for today’s conference, Martin Reidy of Brunswick Group. Please proceed.

Martin Reidy

Thank you. Welcome to JA Solar’s second quarter 2011 earnings conference call. Joining us from the company are Dr. Peng Fang, CEO; Ms. Anthea Chung, CFO; and Mr. Ming Yang, VP of Business Development and Corporate Communications; and Mr. Min Cao, who will assume the role of CFO from August 19.

As stated in the press release, the oversimplified translation of CNY into US dollars, which is set at CNY6.4635 to the U.S. 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 under conversion from CNY to USD.

On this call Dr. Fang will begin with an overview of our Q2 2011 results, covering business and operational developments. Following that, Ming Yang will discuss technology developments and cost saving initiatives. Then, Anthea will provide details of the company’s financial performance. After 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 would 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 include 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 the 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 and 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.

Peng Fang

Hello everyone, and welcome to today’s call. We appreciate your interest in JA Solar. I will start today with an overview of our second quarter results. Q2 was a challenging period for the entire industry, and JA Solar was not immune. However, I’m pleased to note that we made our shipment guidance with shipments of 481 megawatts. This is an important metric, because it indicates that, despite the market disruption, we retained our market share and saw sustained demand for our products.

As you know, many of our peers have struggled with demand over the quarter, so we are encouraged by this continued demand for JA Solar’s products and believe that this illustrates how the market recognized our strength in terms of technology and cost.

[unintelligible] in the second quarter, both our gross margin and our bottom line were affected by a decline in ASPs that was steeper than anticipated, as we [unintelligible] the impact of high-cost inventory provisions. In terms of ASPs, the sharp drop in installation level in Germany, combined with uncertainty in Italy, resulted in a sudden and severe market disruption. Because of this, we saw average solar cell price dropping more than 20% quarter over quarter and average wafer price dropping in the low teens percentage range, quarter over quarter.

But while this ASP decline for the sales and the modules began in April, price for materials including wafer and [poly] did not decline until middle-May. This was a lag of approximately 6 weeks in the middle of the quarter. This timing difference between when the product prices started to decline versus when the material prices started to decline means that cost of goods sold was abnormally high this quarter. This resulted in a [unintelligible] impact to our gross margin and net income. In recent weeks, we have begun to see material price bottoming out and the product ASPs stabilizing.

Looking to the quarters ahead, let me first spend a few minutes to update you on what we are seeing and hearing from our customers across some of our most important markets. In Germany, from January to May, installations were below our expectations. Based on available market research information, total installations declined by 38% year over year to 1.1 gigawatts compared to 1.7 gigawatts in the same period of 2010. Particularly rough was the period from March to May, when the total installations reached just [unintelligible] megawatts or approximately 50% less than the same period of 2010.

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