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The rapid demand cooling down in the third quarter of 2016 has put stress on many Chinese and Taiwanese solar companies. Taiwan’s tier-one solar manufacturer, Gintech Energy (Gintech), reported a gross margin of -104.9% due to weak demand and falling average selling prices (ASPs) across the solar value chain in the third quarter.
For 3Q16, Gintech reported net sales of NT$2,167 million, down 53.1% QoQ and down 49.6% YoY. Gross loss was NT$2,274 million, and gross margin was -104.9%. In comparison, gross profit for 2Q16 was NT$302 million and gross margin was 6.5%, and gross profit for 3Q15 was NT$417 million and gross margin was 9.7%.
“Gross margin declined sequentially due to lower ASPs and utilization rates, inventory write-downs, as well as a one-time charge related to a long-term contract,” noted Gintech in the statement.
In 3Q16, Gintech wrote off prepayments of NT$1,200 million related to one of its material supply contracts because the supplier would be unable to honor the contract. Gintech therefore took the charge in compliance with the conservatism principle under GAAP.
“Excluding this one-off item, gross loss and gross margin in Q3/2016 would be NT$1,075 million and -49.6%, separately,” explained Gintech.
Net loss for 3Q16 was NT$2,562 million, compared to net profit of NT$93 million in 2Q16 and net profit NT$139 million in 3Q15. Net loss per share came in at NT$5.17. If excluded the charges related to the long-term contract, net loss per share would be adjusted to at NT$2.72.
Gintech believes that the third quarter was the bottom of 2016 as the demand and ASPs have started warming up throughout the fourth quarter. The company will gradually increase its utilization rates to meet the growing demand and is expecting to see a better performance in the fourth quarter of 2016.