ReneSola Ltd today announced its unaudited financial results for the third quarter ended September 30, 2014.
Financial and Operational Highlights for Q3 2014
- Total solar module shipments were 462.2MW, compared to 498.7MW in Q2 2014 and 462.9MW in Q3 2013. Total solar wafer and module shipments were 663.8MW, compared to 698.3MW in Q2 2014 and 851.0MW in Q3 2013.
- Net revenues were US$372.5 million, compared to US$387.1 million in Q2 2014 and US$419.3 million in Q3 2013.
- Gross profit was US$57.1 million with a gross margin of 15.3%, compared to a gross profit of US$56.9 million with a gross margin of 14.7% in Q2 2014 and gross profit of US$36.7 million with a gross margin of 8.7% in Q3 2013.
- Operating income was US$8.5 million with an operating margin of 2.3%, compared to an operating income of US$10.6 million with an operating margin of 2.7% in Q2 2014 and an operating loss of US$180.3 million with an operating margin of negative 43.0% in Q3 2013.
- Net loss attributable to holders of ordinary shares was US$11.7 million, representing basic and diluted loss per common share of US$0.06 and basic and diluted loss per American depositary share ("ADS"), each representing two common shares, of US$0.12.
- Cash and cash equivalents plus restricted cash totaled US$196.7 million as of the end of Q3 2014, compared to US$218.8 million as of the end of Q2 2014 and US$438.5 million as of the end of Q3 2013.
- Net cash outflow from operating activities was US$10.7 million, compared to net cash outflow from operating activities of US$40.6 million in Q2 2014 and net cash inflow from operating activities of US$79.6 million in Q3 2013.
"Our results in Q3 2014 were mainly impacted by the depreciation of the European currencies that led to a foreign exchange loss of US$13.7 million, and by a delay in shipments due to the anticipation of new lower minimum imported prices in Europe, which were announced towards the end of Q3 2014. However, our fully integrated international sales, support, and logistics platform, our global manufacturing footprint, and our focus on retail-oriented and downstream opportunities continue to keep us in an advantageously competitive position," said Mr. Xianshou Li, ReneSola's chief executive officer. "Our platform gives us the flexibility to adjust to changes in demand across all of our major markets while maintaining operating efficiency and, as in the case of the third quarter, improving our gross margin to 15.3%. Moreover, we continue to move away from low-margin markets and to direct more of our resources toward higher-margin commercial and residential projects and total-solution opportunities.
"While we remain focused on our retail and residential-oriented business development, we selectively pursue downstream project opportunities with high quality and low risk in developed countries such as the United Kingdom. As of November 2014, we have started construction on a second downstream project in the UK and are also in the process of conducting due diligence on other quality projects there, which we expect to sell and generate revenue from in the coming quarters."
Mr. Daniel K. Lee, ReneSola's chief financial officer, said, "While we focus on expanding our commercial, retail and downstream initiatives, we continue to follow a prudent financial approach and asset-light strategy in order to grow our margins while improving our cash flow. Our Q3 gross margin of 15.3% represents two straight quarters of margin improvement. Furthermore, our cash flow from operations improved from an outflow of US$40.6 million in 2Q14 to an outflow of US$10.7 million, of which almost US$10 million was payment used for our downstream projects in the UK."
Third Quarter 2014 Results
Solar Wafer and Module Shipments
The module shipments of 462MW were below the Company's guidance and reflected a postponement of shipments to Q4 and Q1 for a small number of commercial projects, mostly in Europe. The decrease in wafer shipments year over year reflects the Company's strategic decision to continue to use the majority of its wafer for internal module production.
Net Revenues and Gross Profit
* Adjusted according to the Company's current accounting classification for warranty expense, which is recognized as a selling expense rather than as a cost of goods sold, as was done prior to Q1 2014. Before the adjustment, the gross profit for Q3 2013 was $34.1 million and the gross margin was 8.1%.
Net revenues decreased quarter over quarter in line with the decrease in module shipments. The sequential increase in the Company's gross margin was a result of a higher average selling price ("ASP") due to a more favorable geographic shipment mix, as well as efficient operational process controls.
Operating Income (Loss)
Adjusted according to the Company's current accounting classification for warranty expense, which is recognized as a selling expense rather than as a cost of goods sold, as was done prior to Q1 2014. Before the adjustment, the operating expense for Q3 2013 was $214.3 million.
The sequential increase in operating expenses was primarily due to an increase in sales and marketing expenses in international markets and a bad debt provision of US$1.9Million recorded in Q3 2014 comparing to a bad debt reversal of US$1.7 million recorded in Q2 2014.
Foreign Exchange Loss
In Q3 2014, the Company had a foreign exchange loss of US$13.7 million and recognized a US$2.2 million gain on derivatives. The foreign exchange loss was primarily due to the depreciation of European currencies against the US dollar and RMB.
Change in Fair Value of Warrant Derivative Liabilities
The Company recognized a gain from a change in the fair value of warrant derivative liabilities of US$0.7 million in Q3 2014, primarily due to the decrease in the Company's stock price.
Net Income (Loss) Attributable to Holders of Ordinary Shares
Liquidity and Capital Resources
Net cash outflow from operating activities was US$10.7 million in Q3 2014, compared to net cash outflow of US$40.6 million in Q2 2014.
Net cash and cash equivalents plus restricted cash totaled US$196.7 million as of September 30, 2014, compared to US$218.8 million as of June 30, 2014.
Total debt was US$748.8 million as of September 30, 2014, compared to US$760.3 million as of June 30, 2014, excluding US$111.6 million of convertible notes due March 15, 2018, unless repurchased or converted at an earlier date. Short-term borrowings were US$692.2 million as of September 30, 2014, compared to US$696.2 million as of June 30, 2014.
Project Business Update
The Company has started construction on a second utility-scale project of 6.4MW in the UK that is expected to connect to the grid in February 2015. The first 13.4MW project is expected to connect to the grid in December of this year. Both of the projects are expected be sold in the coming quarters.
The Company is in the late stage of its due diligence process regarding a number of utility-scale projects in the UK.
The Company currently has a total of 62MW in existing projects including 25MW in utility-scale projects in Bulgaria and Romania, and 37MW in distributed generation "Golden Sun" projects in mainland China. All existing projects have been completed and connected to their respective grid. The Company is generating income from power generation while evaluating sales of these assets at the same time.
The Company's total output of polysilicon in Q3 was 1694.3 metric tons, compared to an output of 1815.6 metric tons in Q2 2014. Currently the polysilicon plant is running at full capacity and continues to generate positive cash flow for the Company.
Geographic Breakdown of Module Shipments
Research and Development
In Q3 2014, the Company invested $13.3 million in research and development, compared to $13.9 million in Q2 2014 and $14.2 million in Q3 2013. The Company will continue to invest in research and development to enhance its solar technical capabilities and expand its green energy product portfolio.
Recent Business Developments
- In September 2014, the Company announced its Residential Financing Program to better serve the fast-growing U.S. residential solar and LED markets. The new financing program will equip the Company's network of installers with market-leading loan products to help them reach a wider customer base and secure more business.
- In September 2014, ReneSola announced a new partnership initiative with Swiss inverter manufacturer, Sputnik Engineering AG to distribute its SolarMax solar inverters in Australia. The partnership is an extension of ReneSola's distribution agreement with local distributors in North America. Australia will be the second country in the world where ReneSola will sell SolarMax's inverters directly to the Company's customers.
- In September 2014, the Company announced that it would provide 10MW of solar modules to Juwi India Renewable Energies Pvt. Ltd., a Bangalore-based engineering, procurement and construction firm, specializing in solar and wind energy plants. The modules will power a utility-scale project in Rajasthan to be developed by Atha Group, an India-based conglomerate with operations in mining, steel manufacturing, power, and renewable energy.
- In September 2014, ReneSola announced that it would develop a 13MW solar project in Dorset, England. The Company expects the solar farm to be fully operational and connected to the national energy grid by end of 2014.
- In August 2014, ReneSola announced that the ReneSola Jiangsu Product Center Laboratory had joined SATELLITE, a global data acceptance program administered by Intertek, a leading quality solutions provider to industries worldwide. As an accredited member, ReneSola can conduct testing at its in-house facilities and mark qualifying modules with Intertek's proprietary ETL certification.
- In August 2014, the Company announced that it would provide 5.4MW in solar modules to Welspun Energy Pvt. Ltd., a New Delhi-based engineering, procurement and construction (EPC) firm, for a utility-scale project in India.
- In August 2014, the Company announced that ReneSola UK will supply 22MW of its high-efficiency polycrystalline Virtus I and Virtus II solar modules for use in two ground-mounted, utility-scale projects in the UK.
- In July 2014, the Company announced its industry-leading results in a series of reliability tests conducted by PV Evolution Labs ("PVEL"). The Company's modules achieved top performance rankings on PVEL's "PV Module Reliability Scorecard" for 2014 in four testing categories: Dynamic Mechanical Load, Damp Heat, Potential Induced Degradation, and Humidity-Freeze.
- In July 2014, ReneSola announced the delivery of 30 ReneSola Novaplus 2KW energy storage systems to a national distributor in Chelmsford, England for onward sale to Essex installation company Think Green Energy. An additional 10 units were on order for use by Think Green Energy customers in the southeast of England.
- In July 2014, the Company announced it had entered a framework agreement with China Seven Star Holdings Limited regarding a partnership in potential sales to China Seven Star of no less than 200MW of existing and new PV projects within 18 months. The parties subsequently signed a Memorandum of Understanding that stipulates ReneSola will sell to China Seven Star two utility-scale projects, both of which are completed and connected to the grid, with a total capacity of 9.7MW in Bulgaria.
For Q4 2014, the Company expects its total solar module shipments to be in the range of 460MW to 480MW, and its gross margin to be approximately 13%.