According to solar companies’ financial statements, vertically integrated manufacturers still held their leading positions and delivered stronger performance in terms of gross profit, compared to the manufacturers which were specifically engaged in producing silicon wafers, cells or modules. However, due to the narrowing gap betweewn products’ prices and costs and the under performing sales of certain products, manufacturers of larger scales have to undertake higher operating costs. Even the Chinese manufacturers with cost advantages, not immune to the downturn, suffered from deficit.
Compromised by the weak demand and the steep price drop, solar companies faced issues such as high inventory levels, deficit recognition and selling products at a loss in 3Q11. In such a predicament, most companies made shipments the first priority. Major module makers with solid financial management not only extend days of sales outstanding, but also provide downstream system makers with certain financial solutions, in the hope of propelling the sales of their products and avoiding high inventory levels.
Looking at the manufacturers’ financial health, it shows concerns such as decreasing cash flow, increasing receivables, rising inventory levels, which badly affect financial indicators including liquidity ratio and quick ratio. Hence, rumors about a number of major manufacturers’ cash flow problems and postponed payment preceded the announcements of 3Q11 financial statements. Given the unbalanced supply and demand in the market, manufacturers have been conservative about their strategies and delayed capacity expansion, putting more emphasis on inventory digestion and capacity downsizing to maintain their cash flow and lower liquidity risk. Based on the 3Q11 financial statements and current price trends, EnergyTrend, a research division of TrendForce, believes that certain manufacturers have kept inventories under control. But in light of no immediate demand surge in sight, major makers with solid financial stability, brand image and the ability to produce high-efficiency products will dominate the solar market.