Solarfun Reports Fourth Quarter 2009 Results

Submitted by orville on March 5, 2010
in

Solarfun Power Holdings Co., Ltd., a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the quarter ended December 31, 2009.

Fourth Quarter 2009 Highlights

  • Total net revenues were RMB 1,252.7 million (US$183.5 million) in 4Q09, an increase of 26.9% from 3Q09 and an increase of 11.6% from 4Q08.
  • PV module shipments reached 110.8 MW, an increase from 102.6 MW in 3Q09 and from 47.6 MW in 4Q08.
  • Average selling price, excluding module processing services, declined, as expected, to US$1.95 per watt in 4Q09.
  • Gross profit was RMB 235.6 million (US$34.5 million) and the gross margin was 18.8%.
  • Net income attributable to shareholders on a non-GAAP basis was RMB 95.9 million (US$14.1 million), an increase of 40.6% from 3Q09.
  • Annualized ROE on a non-GAAP basis improved to 17.4% from 13.4% in 3Q09.
  • As of December 31, 2009, the Company had cash and cash equivalents of RMB 645.7 million (US$94.6 million) and working capital of RMB 1,900.4 million (US$278.4 million).
  • Net cash from operating activities was RMB 336.9 million (US$49.4 million).

Peter Xie, President of Solarfun, commented, "We are pleased with our 4Q results. In particular, the net income attributable to shareholders on a non-GAAP basis increased by 40.6% in 4Q as compared to the previous quarter. In addition, the annualized ROE on a non-GAAP basis improved significantly to 17.4% in 4Q as compared to 13.4% in the previous quarter, which reflects management's keen focus on optimizing its use of capital."

Fourth Quarter 2009 Results

  • Total net revenues were RMB 1,252.7 million (US$183.5 million) in 4Q09, an increase of 26.9% from RMB 986.8 million in 3Q09 and an increase of 11.6% from RMB 1,122.7 million in 4Q08. The increase in net revenue from 3Q09 was primarily due to higher shipment volumes reflecting improved industry demand as well as a change in the revenue mix.
  • PV module processing services contributed 6.3% of the total net revenues in 4Q09 as compared to 17.1% of total net revenues in 3Q09. The percentage contribution from PV module processing services decreased as more production capacity during the quarter was used for the Company's own PV module shipments.
  • PV module shipments reached 110.8 MW in 4Q09, an increase from 102.6 MW in 3Q09 and from 47.6 MW in 4Q08. In 4Q09, excluding module processing services, the Company recorded greater geographic diversity in its PV module sales, with German-based customers accounting for 57% of the Company's total PV module revenues, down from 60% and 83% in 3Q09 and 2Q09, respectively. Shipments to the Czech Republic continued to grow, reaching 12% of total PV module revenues. More significantly, the Company saw strong growth in shipments in China, which accounted for 11% of total PV module revenues as compared to 1% in the previous quarter. Other key markets in 4Q09 were Australia, Korea and France, which in total accounted for 17% of total PV module revenues.
  • Average selling price, excluding module processing services, declined, as expected, to US$1.95 per watt in 4Q09 from US$2.03 per watt in 3Q09. The decline in ASP was in line with the decrease in the market prices of PV products.
  • Gross profit was RMB 235.6 million (US$34.5 million) in 4Q09, compared to gross profit of RMB 204.4 million in 3Q09 and a gross loss of RMB 377.8 million in 4Q08. Gross margin was 18.8% in 4Q09 compared to 20.7% in 3Q09. The lower gross margin in 4Q09 reflects the lower average selling price.
  • Operating profit was RMB 125.7 million (US$18.4 million) in 4Q09, compared to operating profit of RMB 129.4 million in 3Q09 and an operating loss of RMB 439.2 million in 4Q08. Operating margin for 4Q09 was 10.0% as compared to 13.1% in 3Q09 and negative 39.1% in 4Q08. Operating expenses as a percentage of total net revenues increased to 8.8% in 4Q09 as compared to 7.6% in the previous quarter, primarily due to higher selling expenses incurred to serve an expanding customer base as well as higher R&D expenses incurred during the quarter.
  • Interest expense was RMB 39.7 million (US$5.8 million) in 4Q09, representing a slight decrease from RMB 40.8 million in 3Q09, and an increase from RMB 26.8 million in 4Q08.
  • The loss from the change in the fair value of the conversion feature of the Company's convertible bonds was RMB 71.3 million (US$10.4 million) in 4Q09 as compared to a gain of RMB 82.4 million in 3Q09. The change, arising from the adoption of ASC 815-40, was due to a number of factors, including changes in the Company's ADS price during the quarter. This line item, over which the Company has no control, has fluctuated, and is expected to continue to fluctuate quarter-to-quarter.
  • On a non-GAAP basis, excluding the accounting impact of the adoption of ASC 815-40, net income attributable to shareholders was RMB 95.9 million (US$14.1 million) in 4Q09, compared to net income attributable to shareholders of RMB 68.2 million in 3Q09 and a net loss attributable to shareholders of RMB 418.8 million in 4Q08. Net income per basic ADS, on a non-GAAP basis, was RMB 1.66 (US$0.25) in 4Q09, compared to net income per basic ADS of RMB 1.26 in 3Q09 and a net loss per basic ADS of RMB 7.79 in 4Q08.
  • On a GAAP basis, net income attributable to shareholders was RMB 10.6 million (US$1.6 million) in 4Q09, compared to net income attributable to shareholders of RMB 136.6 million in 3Q09 and a net loss attributable to shareholders of RMB 418.8 million in 4Q08. Net income per basic ADS was RMB 0.18 (US$0.03) in 4Q09, compared to a net income per basic ADS of RMB 2.53 in 3Q09 and a net loss per basic ADS of RMB 7.79 in 4Q08.
  • On a non-GAAP basis, excluding the accounting impact of the adoption of ASC 815-40, the Company had an annualized return on equity of 17.4% in 4Q09 as compared to an annualized return on equity of 13.4% in 3Q09 and negative 72.1% in 4Q08. On a GAAP basis, the Company had an annualized return on equity of 1.5% in 4Q09 as compared to an annualized return on equity of 21.0% in 3Q09 and negative 72.1% in 4Q08.

Financial Position

As of December 31, 2009, the Company had cash and cash equivalents of RMB 645.7 million (US$94.6 million) and working capital of RMB 1,900.4 million (US$278.4 million). Total short-term bank borrowings were RMB 404.8 million (US$59.3 million), a decrease from RMB 1,013.7 million as of September 30, 2009. Solarfun believes that the stable level of cash on hand and steady payback of a substantial amount of short-term bank borrowings indicates a strengthening in the Company's financial position.

As of December 31, 2009, the Company had total long-term debt of RMB 1,128.7 million (US$165.3 million), comprising both bank loans and convertible notes payable. The Company's bank loans are to be repaid in installments until their maturity in 2011 and 2012. The first maturity of the convertible notes payable is in 2015.

Net cash from operating activities in 4Q09 was RMB 336.9 million (US$49.4 million), an increase from RMB 160.3 million in 3Q09 and RMB 124.2 million in 4Q08.

The Company believes that cash on hand, cash flow from operations and undrawn bank credit lines collectively represent adequate funds to finance the Company's near-term growth.

As of December 31, 2009, accounts receivable decreased to RMB 587.5 million (US$86.1 million) from RMB 707.2 million as of September 30, 2009. Days sales outstanding improved from 56 days in 3Q09 to 47 days in 4Q09.

Inventories decreased to RMB 784.0 million (US$114.9 million) from RMB 808.4 million as of September 30, 2009. Days inventory outstanding improved from 88 days in 3Q09 to 71 days in 4Q09.

Capital expenditures were RMB 23.7 million (US$3.5 million) in 4Q09. For the full year of 2009, the total capital expenditures were RMB 242.9 million.

Business Outlook

The Company provides the following guidance based on current operating trends and market conditions.

For 1Q10, the Company expects:

Total module shipments to be 130MW to 140MW, of which approximately 30% will be for PV module processing services.
Average selling prices for PV module shipments to decline by approximately 10% from 4Q09 on the assumption that the Euro/US dollar exchange rate stays at approximately 1.35 for the rest of the quarter.

For the full 2010 fiscal year, the Company expects:

Shipment volumes to total approximately 600MW, including PV module processing that would account for approximately 20-30% of the total shipments.
Capital expenditures to be approximately RMB 650 million (US$95 million), which would be routinely re-evaluated based on prevailing market conditions.

Peter Xie concluded, "In a year of significant quarter-to-quarter changes in the global solar industry, we achieved significant shipment growth as we crossed the 300MW shipment threshold in 2009, which represented over 80% growth from 2008. After a transition year for Solarfun in 2009, we expect 2010 to be a year of renewed focus on manufacturing cost, product quality and differentiation as well as investment in customer service as we strive to maintain high growth and gain market share. "

About Solarfun

Solarfun manufactures both PV cells and PV modules, provides PV cell processing services to convert silicon wafers into PV cells, and supplies solar system integration services in China. Solarfun produces both monocrystalline and multicrystalline silicon cells and modules. Solarfun sells its products both through third-party distributors, OEM manufacturers and directly to system integrators. Solarfun was founded in 2004 and its products have been certified to TUV and UL safety and quality standards.

Source: Solarfun