Published:
Canadian Solar Reports Third Quarter 2008 Results
TORONTO, Canada, Nov. 21 /PRNewswire/ --
Q308 Highlights
-- Q308 net revenues of $252.4 million, up 160% from Q307 net revenue of
$97.4 million; and up 18.7% sequentially from Q208 net revenues of
$212.6 million
-- Q308 gross margin of 15.5%, consistent with Q208 of 15.8%
-- Q308 GAAP net income per diluted share of $0.31 including foreign
exchange loss of $17.3 million and offset by change in fair value of
derivatives of $7.4 million; compared to Q208 GAAP net income per
diluted share of $0.36.
-- Q308 non-GAAP net income per diluted share of $0.41, which excludes
charges related to stock-based compensation.
-- Q308 shipments of approximately 60 MW, up 27.3% from Q208 shipments of
47.1 MW
-- Q308 shipments included about 10MW of proprietary low-cost e-Module
products
Canadian Solar Inc. ("the Company", "CSI" or "we") (Nasdaq: CSIQ) today
reported financial information for the third quarter 2008.
Net revenues for the quarter were $252.4 million, compared to net revenues
of $97.4 million for the third quarter of 2007 and $212.6 million for the
second quarter of 2008.
Net income for the quarter on a GAAP basis was $11.1 million, or $0.31 per
diluted share, compared to $0.5 million, or $0.02 per diluted share, for the
third quarter of 2007 and $10.5 million, or $0.36 per diluted share, for the
second quarter of 2008. The non-GAAP net income for the quarter was $0.41 per
diluted share and excludes stock based compensation.
Dr. Shawn Qu, Chairman and CEO of CSI, commented: "We are pleased with our
top line, gross margin and operating income results for the quarter. These
results directly reflected our conservative approach to the business and our
balanced financial management. This marks our sixth consecutive quarter of
sequential top-line growth. We have successfully ramped up the production of
our proprietary low-cost e-Modules products, which helped us to maintain our
gross margin in the quarter. We are, however, operating in a challenging
macroeconomic environment with a very volatile foreign exchange situation,
which continues to impact our bottom line. In July, we took measures to hedge
against our currency risk, which we believe will help to offset the impact of
Euro against US Dollar foreign exchange fluctuations in Q4 and in Q1 2009."
Revenue by Geographical Location (US $ millions)
Q308 Q208 Q307
Region Revenue % Revenue % Revenue %
Europe 222.4 88.1% 188.3 88.6% 93.0 95.5%
Asia 16.5 6.5% 13.1 6.2% 4.1 4.2%
America 13.5 5.4% 11.2 5.2% -- --
Others -- -- -- -- 0.3 0.3%
Total Net Revenue 252.4 100% 212.6 100% 97.4 100%
Outlook
-- On the basis of Q4 expectations the Company is reverting to May
guidance for FY 2008 of $650-750 million in revenue.
-- Guiding down Q4 expectations for shipments, margins and earnings.
-- Conditionally re-iterating 2009 shipment and margin guidance of
500 to 550 MW with margins of 13-15%.
-- E-Module average conversion efficiency is now 14.2% with improved
production yield. Further improvements are expected.
-- Capacity expansions will be slowed or delayed pending further
evaluation of supply and demand environment.
Given the uncertainty of project and customers' financing coupled with
softening solar market demand inEurope andUSA at the year-end, the Company
has shifted its short-term operational emphasis to preserving cash and
minimizing risk from the credit environment. Based on this adjustment, Q4
shipments are estimated to be approximately 20 - 25 MW. This will result in
revenues of approximately $70 million to $85 million. Accordingly, the Company
is returning to its previously stated May annual revenue estimate of $650-750
million.
The Company continues to achieve significant progress on its proprietary
low-price e-Modules with average UMG e-cell conversation efficiency increasing
to 14.2% in recent weeks. The yield also continues to improve and raw
materials cost per watt has declined. We expect these improvements to continue
in the coming quarters. While the Company has secured sufficient UMG feedstock
to produce at least 25 MW of e-Modules in Q4, market and credit conditions may
lead the Company to implement a more conservative production plan and ship
only 6~8 MW.
Our ingot and wafer plant will be completed to support the e-Module
program, but on a more modest schedule. We have postponed further expansions
of our cell plant past the current capacity of approximately 270 MW. We will
revisit our capital expenditures in the coming months, depending on the market
demand, margins and supply prices.
Due to the present market environment, adjustments to the balance sheet
may be necessary in order to reflect the market value of inventory and
receivables that could result in a net loss for the 4th quarter of 2008.
The Company has maintained a sound cash position and one of the best debt-
equity ratios in the solar industry. In Q4, the expectation is to be
operationally cash-flow positive and to maintain a cash position of
approximately $100M. The Company anticipates that it will have $40 million
available in unused credit lines by the end of Q4 and is actively negotiating
more credit facilities with local banks. The Company believes that its
balanced financial management strategy will help to mitigate risks, and
preserve an adequate cash position in order to respond to future growth
opportunities.
For 2009, The Company is maintaining its guidance of 500-550 MW. Based on
discussions with its long-term customers and suppliers it believes that it can
price both its traditional high-efficiency modules and the low-price e-Modules
competitively while maintaining gross margins of 13 - 15%. These estimates are
contingent on the following factors: First, wafer and silicon prices decline
to a realistic level, consistent with the Company's expectations; and second,
the availability and the cost of project financing. PV projects are a highly
creditworthy asset class, and customers have to date been able to finance
their 2009 projects under reasonable terms. However, a substantial increase in
the cost of capital could put further pressure on module prices, while a
decline in availability of debt or equity would impact demand. It is
anticipated that the PV market will recover starting in Q2 or Q3 of 2009 with
fewer but stronger players. The Company believes that the decline in average
selling prices of solar modules has already prompted rapid pricing adjustments
across the entire supply chain. This is a healthy development for the industry
in the longer term. Canadian Soar, as one of the major world-wide solar cell
and module producer we expect to benefit from this development and further
solidify our industry position.
Shawn Qu CEO, remarked: "Canadian Solar is the first and probably the only
major solar company to adopt and maintain a flexible vertical integration
business model. This model is an important component of our strategy and has
proven to be a key advantage in a volatile environment as it allows us to
quickly adjust our expenditures and to take advantage of cost declines at any
point in the supply chain. Our unique product mix is another component of our
strategy and a key differentiator in the industry for Canadian Solar. Our e-
Modules are a lower priced and higher margin product line, even with
significantly lower poly-silicon costs. Third, our modest capital plant and
low fixed costs enables us to quickly turn operational cash positive in a
market downturn. These three components together allow us to rapidly change
our purchasing mix, our product mix and our total output depending on the
market conditions. We will use this flexibility to protect our margins and
preserve cash so that we can capitalize on opportunities to capture market
share once the market resumes growing."
Arthur Chien, CFO of CSI, noted: "We have delayed our capital expenditures
temporarily in order to conserve cash as the Company currently has both ample
capacity and wafer supply to match the current market demand. We do not
foresee the need for additional capital expenditures until the first or second
quarter of next year. We will revisit capital expenditures as the market
conditions warrant it. We currently have a sound cash position with more than
$100 M cash in hand, positive cash flow and additional lines of credit with
local banks. We established an active hedge against the Euro in July, with a
current hedge of more than 100 M Euro for Q4 cash flow, which will be settled
November through January. We will continue our hedging policy going forward,
which will provide visibility and some mitigation of foreign exchange risks."
Investor Conference Call / Webcast Details
A conference call has been scheduled for Friday, November 21, 2008 at 8:00
a.m. ET or Friday, November 21, 2008, 9:00 p.m.Jiangsu time. During the call,
time will be set-aside for analysts and interested investors to ask questions
of senior executive officers of the Company.
The dial-in number for the live audio call is +1-800-299-7098 (U.S) or +1-
617-801-9715 (International). The passcode is 14729383. A live webcast of the
conference call will be available on Canadian Solar's website at
http://www.csisolar.com .
A replay of the call will be available 1 hour after the conclusion of the
conference call, for one week, through 11:00 p.m. on Friday, November 28, 2008
(inJiangsu) or 10:00 a.m. on Friday, November 28, 2008 (inNew York) at
http://www.csisolar.com and by telephone at +1-888-286-8010 (U.S.) or +1-617-
801-6888 (International). The passcode to access the replay is 22054834.
About Canadian Solar Inc. (Nasdaq: CSIQ)
Founded in 2001, Canadian Solar Inc. (CSI) is a vertically integrated
manufacturer of solar cell, solar module and custom-designed solar application
products serving customers worldwide. CSI is incorporated inCanada and
conducts its businesses worldwide and manufacturing operations inChina.
Backed by years of experience and knowledge in the solar power market and the
silicon industry, CSI has become a major global provider of solar power
products for a wide range of applications. For more information, please visit
http://www.csisolar.com .
Safe Harbor/Forward-Looking Statements
Certain statements in this press release 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 U.S. Private Securities Litigation Reform Act of
1995. In some cases, you can identify forward-looking statements by such
terms as "believes," "expects," "anticipates," "intends," "estimates," the
negative of these terms, or other comparable terminology. Factors that could
cause actual results to differ include general business and economic
conditions and the state of the solar industry; governmental support for the
deployment of solar power; future shortage or availability of the supply of
high-purity silicon; demand for end-use products by consumers and inventory
levels of such products in the supply chain; changes in demand from
significant customers, including customers of our silicon materials sales;
changes in demand from major markets such asGermany; changes in customer
order patterns; changes in product mix; capacity utilization; level of
competition; pricing pressure and declines in average selling price; delays in
new product introduction; continued success in technological innovations and
delivery of products with the features customers demand; shortage in supply of
materials or capacity requirements; availability of financing; exchange rate
fluctuations; litigation and other risks as described in the Company's SEC
filings, including its annual report on Form 20-F originally filed on May 29,
2007. Although the Company believes that the expectations reflected in the
forward looking statements are reasonable, it cannot guarantee future results,
level of activity, performance, or achievements. You should not place undue
reliance on these forward-looking statements. All information provided in
this press release is as of today's date, unless otherwise stated, and
Canadian Solar undertakes no duty to update such information, except as
required under applicable law.
FINANCIAL TABLES BELOW
Q3 2008 Q2 2008 Q3 2007 2008 1~9 2007 1~9
Net Revenues -
Products 252,362 212,585 97,437 636,183 175,339
Cost Of Revenues -
Products 213,256 179,509 91,088 535,765 166,172
Gross Profit 39,106 33,076 6,349 100,418 9,167
Operating Expenses:
Selling Expenses 3,482 2,852 2,214 8,839 4,560
General And
Administrative
Expenses 9,267 6,485 4,527 21,178 11,378
Research And
Development
Expenses 603 447 287 1,352 677
Total Operating
Expenses 13,352 9,784 7,028 31,369 16,615
Income/(Loss) From
Operations 25,754 23,292 (679) 69,049 (7,448)
Other
Income/(Expenses):
Interest Expenses (3,379) (3,162) (601) (8,787) (943)
Interest Income 819 59 70 979 396
Debt Conversion
Expenses -- (10,170) -- (10,170) --
Gain On Change In
fair Value Of
Derivatives 7,424 -- -- 7,424 --
Others - Net (17,298) (600) 1,716 (9,724) 1,716
Income/(Loss) Before
Taxes 13,320 9,419 506 48,771 (6,279)
Income Taxes (2,250) 1,127 16 (8,158) 77
Net Income/(Loss) 11,070 10,546 522 40,613 (6,202)
Basic
Earnings/(Loss) Per
Share $0.32 $0.38 $0.02 $1.35 ($0.23)
Basic Weighted
Average Number
of Outstanding
Shares 34,802,363 28,085,875 27,290,298 30,110,549 27,279,021
Diluted
Earnings/(Loss) Per
Share $0.31 $0.36 $0.02 $1.30 ($0.23)
Diluted Weighted
Average Number
of Outstanding
Shares 35,580,187 29,384,701 27,416,859 31,146,591 27,279,021
Canadian Solar Inc.
Reconciliation of US GAAP Gross Profit, Operating Income (Loss) and Net
Income (Loss) to
Non-US GAAP Gross Profit, Operating Income (Loss) and Net Income (Loss)
(Unaudited)
Use of Non-GAAP Financial Information
To supplement its condensed consolidated financial statements presented in
accordance with GAAP, CSI uses the following measures as defined as non-
GAAP financial measures by the SEC: adjusted gross profit, adjusted
operating income (loss) and adjusted net income (loss), each excluding
share-based compensation and other one-time non-cash charges, expenses or
gains, which we refer to as special items. CSI believes that non-GAAP
adjusted gross profit, adjusted operating income (loss) and adjusted net
income (loss) measures indicate the company's baseline performance before
subtracting those charges. In addition, these non-GAAP measures are among
the primary indicators used by the management as a basis for its planning
and forecasting of future periods. The presentation of these non-GAAP
measures is not intended to be considered in isolation or as a substitute
for the financial information prepared and presented in accordance with
GAAP.
Q3 2008 Q2 2008
Gross Operating Net Gross Operating Net
Profit Income Income Profit Income Income
(Loss) (Loss) (Loss) (Loss)
US GAAP
Profit/(Loss) 39,106 25,754 11,070 33,076 23,292 10,546
Share-Based
Compensation 86 3,538 3,538 88 2,336 2,336
Debt Conversion
Expenses -- -- -- -- -- 10,170
Total Special
Items 86 3,538 3,538 88 2,336 12,506
Non-US GAAP
Profit 39,192 29,292 14,608 33,164 25,628 23,052
Non-US GAAP
Earnings Per
Diluted Share $0.41 $0.78
Adjusted Gross
Margin 15.53% 15.60%
Adjusted
Operating Margin 11.61% 12.06%
Q3 2007
Gross Operating Net
Profit Income Income
(Loss) (Loss)
US GAAP Profit/(Loss) 6,349 (679) 522
Share-Based Compensation 36 2,428 2,428
Debt Conversion Expenses -- -- --
Total Special Items 36 2,428 2,428
Non-US GAAP Profit 6,385 1,749 2,950
Non-US GAAP Earnings Per
Diluted Share $0.11
Adjusted Gross Margin 6.55%
Adjusted Operating Margin 1.80%
2008 Q1-Q3 2007 Q1-Q3
Gross Operating Net Gross Operating Net
Profit Income Income Profit Income Income
(Loss) (Loss) (Loss) (Loss)
US GAAP
Profit/(Loss) 100,418 69,049 40,613 9,167 (7,448) (6,202)
Share-Based 265 8,073 8,073 162 7,018 7,018
Compensation
Debt Conversion -- -- 10,170 -- -- --
Expenses
Total Special Items 265 8,073 18,243 162 7,018 7,018
Non-US GAAP 100,683 77,122 58,856 9,329 (430) 816
Profit/(Loss)
Non-US GAAP
Earnings Per
Diluted Share $1.89 $0.03
Adjusted Gross 15.83% 5.32%
Margin
Adjusted
Operating Margin 12.12% -0.25%
Non-US GAAP adjusted condensed consolidated statements of operations are
intended to present the Company's operating results, excluding special
items.
Canadian Solar Inc.
Unaudited Condensed Consolidated Balance Sheets
(In Thousands of U.S. Dollars)
30-Sep-2008 31-Dec-2007
ASSETS
Current assets:
Cash And Cash Equivalents 108,914 37,667
Restricted Cash 28,190 1,625
Accounts Receivable, Net 153,117 58,637
Inventories 101,631 70,921
Value-Added Tax Recoverable 21,177 12,247
Advances To Suppliers 44,855 28,745
Financial Instruments Related To
Foreign Currency Options 7,424 --
Prepaid and Other Current Assets 14,674 10,058
Total Current Assets 479,982 219,900
Property, Plant and Equipment, Net 137,609 51,486
Intangible Assets 230 136
Long-Term Deferred Assets 39 3,296
Long-Term Portion Of Advances To
Suppliers 42,666 4,103
Prepaid Lease Payments 12,549 1,616
Deferred Tax Assets - Non-Current 7,561 3,966
TOTAL ASSETS 680,636 284,503
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Short-Term Borrowings 127,234 40,374
Accounts Payable 19,086 8,251
Other Payables 21,411 6,153
Advances From Customers 9,446 1,962
Income Tax Payable 5,502 143
Amounts Due To Related Parties 30,266 209
Other Current Liabilities 8,903 2,121
Total Current Liabilities 221,848 59,213
Accrued Warranty Costs 10,191 3,879
Provision For Uncertain Tax Issue 3,530 2,278
Convertible Notes 1,000 75,000
Long-Term Debt 63,165 17,866
TOTAL LIABILITIES 299,734 158,236
Stockholders' Equity
Common Shares 293,947 97,454
Additional Paid-In-Capital 34,509 26,436
Retained Earnings/(Losses) 37,008 (3,604)
Accumulated Other Comprehensive
Income 15,438 5,981
TOTAL STOCKHOLDERS' EQUITY 380,902 126,267
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 680,636 284,503
For more information, please contact:
In Canada
Alex Taylor, IR Director
Canadian Solar Inc.
Tel: +1-905-530-2334
Fax: +1-905-530-2001
Email: ir@csisolar.com
In the U.S.
John Robertson
The Ruth Group
Tel: +1-646-536-7024
Email: jrobertson@theruthgroup.com
SOURCE Canadian Solar Inc.
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