Yingli Green Energy Holding Company Limited (NYSE: YGE) ("Yingli Green Energy" or the "Company"), a leading solar energy company and one of the world's largest vertically integrated photovoltaic manufacturers, which markets its products under the brand "Yingli Solar," today announced its unaudited consolidated financial results for the quarter ended September 30, 2011.
Third Quarter 2011 Consolidated Financial and Operating Highlights
- Total net revenues were RMB 4,258.6 million (US$667.7 million).
- PV module shipment increased by 21.9% from the second quarter of 2011, reaching another historical high.
- Gross profit was RMB 458.5 million (US$71.9 million), representing a gross margin of 10.8%, which included a non-cash inventory provision of RMB 258.6 million (USD$40.6 million). Gross margin for in-house PV module excluding a non-cash inventory provision was 19.0%.
- Operating loss was RMB 5.5 million (US$0.9 million), representing a negative operating margin of 0.1%. Excluding a non-cash inventory provision and a non-cash bad debt expense of RMB 41.9 million (US$6.6 million), operating income would be RMB 295.0 million (US$46.3 million) and operating margin would be 6.9%.
- Net loss(1) was RMB 180.5 million (US$28.3 million) and diluted loss per ordinary share and per American depositary share ("ADS") was RMB 1.14(US$0.18).
- On an adjusted non-GAAP(2) basis, net income was RMB 142.7 million (US$22.4 million) and diluted earnings per ordinary share and per ADS were RMB 0.89(US$0.14).
"I'm pleased to see that we emerged stronger under the challenging market dynamics in the third quarter. With a 21.9% increase in PV module shipments in this quarter, we marked another record of quarterly shipment volumes. This was attributable to our well-recognized brand, diversified customer portfolio, strong product bankability, outstanding after-sales services, leading cost structure and cutting-edge technology," commented Mr. Liansheng Miao, Chairman and Chief Executive Officer of Yingli Green Energy.
"In Europe, we have cemented existing partnerships and developed new customers to maintain a leading presence. In non-European markets, our commitments were rewarded with enhanced presence and market share. Particularly in China, our shipment volume in the third quarter alone exceeded our cumulative shipments as of June 30, 2011. After eight years' strategic planning and execution, we look forward to strengthening cooperation with our customers and continuing our strong growing momentum in China. In the United States, results from the third quarter were in line with our plan. Furthermore, we have taken important steps to support the development of multiple markets in Latin America and established a presence in those areas poised for growth," Mr. Miao continued.
"In order to seize growth opportunities in a challenging environment, we will further enhance our efforts on technological innovation, cost control and brand globalization to strengthen our comprehensive competitiveness. As a result of our active renegotiations with our suppliers, our average purchase price of raw materials dropped by 24% from June to November. In addition, we have seen continuous cost savings from technological improvements. The average efficiency of PANDA cells has reached 18.9% on commercial production lines. As an extension of Project PANDA, we have launched a research project with ECN and Amtech Systems on the N-MWT PV cell and module, which is expected to further improve cell efficiency towards 20% and module efficiency of 18% and more," Mr. Miao concluded.
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(1) For convenience purposes, all references to "net loss (income)" in this press release, unless otherwise specified, represent "net loss (income) attributable to Yingli Green Energy" for all periods presented. |
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(2) All non-GAAP measures exclude share-based compensation, non-cash interest expense, gain on bargain purchase from an acquisition, the amortization of intangible assets arising from purchase price allocation in connection with a series of acquisitions of equity interests in Baoding Tianwei Yingli New Energy Resources Co., Ltd. ("Tianwei Yingli"), an operating subsidiary of the Company, non-cash inventory provision and non-cash valuation allowance for deferred tax assets. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of the Company's use of non-GAAP information set forth elsewhere in this press release. |
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Third Quarter 2011 Financial Results
Total Net Revenues
Total net revenues were RMB 4,258.6 million (US$667.7 million) in the third quarter of 2011, compared to RMB 4,398.8 million in the second quarter of 2011 and RMB 3,284.2 million in the third quarter of 2010. The slight decrease in total net revenues quarter over quarter was due to the decline of average selling price, partially offset by increased PV module shipment that was attributable to diversified customer portfolio geographically.
Gross Profit and Gross Margin
Gross profit was RMB 458.5 million (US$71.9 million), compared to RMB 970.1 million in the second quarter of 2011 and RMB 1,094.5 million in the third quarter of 2010. Overall gross margin was 10.8% in the third quarter of 2011, compared to overall gross margin of 22.1% in the second quarter of 2011 and 33.3% in the third quarter of 2010. The decrease in gross margin from the second quarter of 2011 was primarily due to the decline of the average selling price and a non-cash inventory provision of RMB 258.6 million (US$40.6 million), partially offset by the reduced total cost of PV modules as a result of the decline in the prices of polysilicon and auxiliary materials, as well the continuous processing cost reduction.
In the third quarter of 2011, the Company made a non-cash provision of RMB 258.6 million (US$40.6 million) upon review of its inventory.
Gross margin for in-house PV module excluding a non-cash inventory provision was 19.0% in the third quarter of 2011.
Operating Expenses
Operating expenses were RMB 464.1 million (US$72.8 million) in the third quarter of 2011, compared to RMB 443.7 million in the second quarter of 2011 and RMB 358.7 million in the third quarter of 2010. The slight increase in operating expenses quarter over quarter was due to a non-cash bad debt expense of RMB 41.9 million (US$6.6 million), partially offset by the better control of sales and marketing related expenses.
The non-cash bad debt expense recorded in this quarter mainly related to the failure by one of the Company's customers to perform its obligations under contractual arrangements it had entered into with the Company regarding certain accounts receivable outstanding as of September 30, 2011. The Company has been informed that such customer has filed for bankruptcy, and the Company is currently seeking legal advice on its options to protect its interest. Given the fact that a majority of the total amount of the account receivable was insured, the Company made a non-cash bad debt provision to cover the remaining balance of the receivables, which the Company may or may not be able to recover in future periods.
Operating expenses as a percentage of total net revenues was 10.9% in the third quarter of 2011, compared to 10.1% in the second quarter of 2011 and 10.9% in the third quarter of 2010.
Operating Loss and Margin
As a result of the foregoing, operating loss was RMB 5.5 million (US$0.9 million) in the third quarter of 2011, compared to an operating income of RMB 526.4 million in the second quarter of 2011 and RMB 735.8 million in the third quarter of 2010.
The operating margin was negative 0.1% in the third quarter of 2011, compared to operating margin of 12.0% in the second quarter of 2011 and 22.4% in the third quarter of 2010.
Excluding the non-cash inventory provision and non-cash bad debts expense, operating income would be RMB 295.0 million (US$46.3 million) and operating margin would be 6.9%.
Interest Expense
Interest expense was RMB 156.4 million (US$24.5 million) in the third quarter of 2011, compared to RMB 157.8 million in the second quarter of 2011 and RMB 92.4 million in the third quarter of 2010. As of September 30, 2011, the Company had an aggregate of RMB 13.8 billion (US$2.2 billion) borrowings, medium-term notes and convertible notes, an increase of 13.7% from RMB 12.1 billion as of June 30, 2011. The weighted average interest rate for these borrowings was 6.19% in the third quarter of 2011, a decrease from 6.44% in the second quarter of 2011.
Foreign Currency Exchange Losses (Gains)
Foreign currency exchange loss was RMB 153.2 million (US$24.0 million) in the third quarter of 2011, compared to a foreign currency exchange gain of RMB 35.5 million in the second quarter of 2011 and RMB 52.3 million in the third quarter of 2010. The foreign currency exchange loss in the third quarter of 2011 was primarily due to the depreciation of the Euro and U.S. dollar against the Renminbi.
Income Tax Benefit (Expense)
Income tax benefit was RMB 34.4 million (US$5.4 million) in the third quarter of 2011, compared to income tax expense of RMB 73.5 million in the second quarter of 2011 and RMB 106.4 million in the third quarter of 2010. Income tax benefit in the third quarter of 2011 was mainly the result of a deferred tax benefit recognized in connection with the net operating losses incurred in the quarter.
Net Loss (Income)
Net loss was RMB 180.5 million (US$28.3 million) in the third quarter of 2011, compared to net income of RMB 375.6 million in the second quarter of 2011 and RMB 456.1 million in the third quarter of 2010. Diluted loss per ordinary share and per ADS was RMB 1.14(US$0.18) in the third quarter of 2011, compared to diluted earnings per ordinary share and per ADS of RMB 2.34 in the second quarter of 2011 and RMB 2.92 in the third quarter of 2010.
Adjusted non-GAAP net income was RMB 142.7 million (US$22.4 million) in the third quarter of 2011, compared to RMB 354.0 million in the second quarter of 2011 and RMB 556.6 million in the third quarter of 2010. Adjusted non-GAAP diluted earnings per ordinary share and per ADS were RMB 0.89(US$0.14), compared to RMB 2.21 in the second quarter of 2011 and RMB 3.57 in the third quarter of 2010.
Balance Sheet Analysis
As of September 30, 2011, Yingli Green Energy had RMB 5,926.3 million (US$929.2 million) in cash and restricted cash, compared to RMB 7,063.4 million as of June 30, 2011.
As of September 30, 2011, inventory was RMB 2,641.5 million (US$414.2 million), compared to RMB 2,556.1 million as of June 30, 2011.
As of September 30, 2011, accounts receivable were RMB 3,342.8 million (US$524.1 million), compared to RMB 2,999.0 million as of June 30, 2011. Days sales outstanding were 71 days in the third quarter of 2011, compared to 61 days in the second quarter of 2011.
As of September 30, 2011, accounts payable were RMB 3,618.8 million (US$567.4 million), an increase from RMB 3,153.1 million as of June 30, 2011. Days payable outstanding increased to 86 days in the third quarter of 2011 from 83 days in the second quarter of 2011.
As of September 30, 2011, working capital representing current assets less current liabilities was RMB 434.0 million (US$68.0 million), compared to RMB 2,174.9 million as of June 30, 2011.
As of the date of this press release, the Company had approximately RMB 6,685.8 million in unutilized short-term lines of credit, and RMB 3,084.5 million committed long term facility that can be drawn down in the near future.
Business Outlook for Full Year 2011
Based on current market and operating conditions, estimated production capacity and forecasted customer demand, the Company revises its PV module shipment target to be in the estimated range of 1,580 MW to 1,630 MW from the previous expected range of 1,700 MW to 1,750 MW for fiscal year 2011, which represents an increase of 48.8% to 53.5% compared to fiscal year 2010.
Non-GAAP Financial Measures
To supplement the financial measures calculated in accordance with GAAP, this press release includes certain non-GAAP financial measures of adjusted net income and adjusted diluted earnings per ordinary share and per ADS, each of which is adjusted to exclude items related to share-based compensation, non-cash interest expense, gain on bargain purchase from an acquisition, the amortization of intangible assets arising from purchase price allocation in connection with a series of acquisitions of equity interests in Tianwei Yingli, non-cash inventory provision and non-cash valuation allowance for deferred tax assets. The Company believes excluding these items from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's on-going performance as such items are not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. The Company also believes these non-GAAP financial measures are important to help investors understand the Company's current financial performance and future prospects and compare business trends among different reporting periods on a consistent basis. These non-GAAP financial measures should be considered in addition to financial measures presented in accordance with GAAP, but should not be considered as a substitute for, or superior to, financial measures presented in accordance with GAAP. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the financial information included elsewhere in this press release.
Currency Conversion
Solely for the convenience of readers, certain Renminbi amounts have been translated into U.S. dollar amounts at the rate of RMB 6.3780 to US$1.00, the noon buying rate in New York for cable transfers of Renminbi per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board as of September 30, 2011. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollar amounts at such rate, or at any other rate. The percentages stated in this press release are calculated based on Renminbi.
Conference Call
Yingli Green Energy will host a conference call and live webcast to discuss the results at 8:00 AM Eastern Standard Time (EST) on November 23, 2011, which corresponds to 9:00 PM Beijing/Hong Kong time on the same day.
The dial-in details for the live conference call are as follows:
U.S.Toll Free Number: +1-866-519-4004 -- International dial-in number: +1-718-354-1231 -- Passcode: 26220673
A live and archived webcast of the conference call will be available on the Investors section of Yingli Green Energy's website at www.yinglisolar.com. A replay will be available shortly after the call on Yingli Green Energy's website for 90 days.
A replay of the conference call will be available until November 30, 2011 by dialing:
U.S.Toll Free Number: +1-866-214-5335 -- International dial-in number: +1-718-354-1232 -- Passcode: 26220673
