JA Solar Holdings Co., Ltd., (Nasdaq:JASO) ("JA Solar" or the "Company"), one of the world's largest manufacturers of high-performance solar power products, announced its unaudited financial results for its third quarter ended September 30, 2012.
Third Quarter 2012 Highlights
Shipments were 418 MW, above the high end of the Company's previous guidance of 370 MW, and flat from the 418 MW shipped in the second quarter of 2012
Net revenue was RMB 1.6 billion ($260.9 million), a decrease of 9.2% from RMB 1.8 billion ($287.5 million) in the second quarter of 2012
Gross margin was negative 5.9%, compared with positive 4.8% in the second quarter of 2012. Excluding an inventory provision of RMB 51.4 million ($8.2 million) and a reversal of prior provisions for anti-dumping and countervailing duties in the United States of RMB 15.8 million ($2.5 million), gross margin would have been negative 3.7%
Operating loss was RMB 631.3 million ($100.4 million), compared with operating loss of RMB 155.9 million ($24.8 million) in the second quarter of 2012. Excluding a long-lived asset impairment of RMB 250.7 million ($39.9 million) and a prepayment impairment of RMB 75.2 million ($12.0 million), operating loss would have been RMB 305.4 million ($48.5 million)
Net loss was RMB 371.4 million ($59.1 million), compared with net loss of RMB 457.8 million ($72.8 million) in the second quarter of 2012. Loss per diluted ADS was RMB 1.91 ($0.30), compared with loss per diluted ADS of RMB 2.34 ($0.37) in the second quarter of 2012
Operating cash flow was positive RMB 545.3 million ($86.8 million), compared with negative RMB 254.0 million ($40.4 million) in the second quarter of 2012
Cash and cash equivalents at the end of the quarter were RMB 3.4 billion ($543.7 million), compared with RMB 3.7 billion ($595.5 million) at the end of the second quarter of 2012
Dr. Peng Fang, CEO of JA Solar, commented, "In spite of tough market conditions, shipments exceeded the top end of our guidance in the third quarter, thanks to robust sales across emerging markets. The proportion of modules in our overall sales mix continued to increase, accounting for 68% of revenue and 59% of total shipments in the quarter. In light of the current slowdown in demand and ongoing trade issues in Europe, we continued to explore opportunities in nascent growth markets while stringently managing our cash position."
Dr. Fang continued, "In China, shipments more than doubled sequentially, largely driven by a strong pipeline of projects from major utility companies. We continue to perform strongly in Japan, where we achieved record quarterly shipments, thanks to our market development efforts and high-efficiency, high-quality product offerings. While the outcome of the recent trade dispute in the United States was disappointing, we are pleased that it has reached a conclusion, and we look forward to further expanding our presence there in the coming quarters. We are also making encouraging inroads into the burgeoning solar markets in Australia, Southeast Asia and South America, where we see strong growth potential.
"While the difficult pricing environment across the industry continues to affect margins and our bottom line, we continued to manage our financial position prudently while expanding market share in all of the major regions," Dr. Fang added. "This quarter, we recorded positive operating cash flow, and purchased a significant portion of our outstanding convertible notes as part of our efforts to reduce our short-term debt. We continue to explore potential channels to fulfill our long-term financing needs. In this challenging environment, customers are demonstrating that they value JA Solar's cost-efficient and reliable products, and our solid financial position. We believe the continued improvements we've made to the output and efficiency of our product portfolio combined with our relentless cost reduction efforts position JA Solar to be one of the long-term winners in the solar market."
Third Quarter 2012 Financial Results
Total shipments in the third quarter of 2012 were 418 MW, above the high end of the Company's previously provided guidance of 350 MW to 370 MW, flat from the 418MW shipped in the second quarter of 2012, and a 6.1% decrease from 445 MW in the third quarter of 2011.
Revenue in the third quarter of 2012 was RMB 1.6 billion ($260.9 million), a decrease of 9.2% from RMB 1.8 billion ($287.5 million) in the second quarter of 2012, and a decrease of 33.7% from RMB 2.5 billion ($393.8 million) in the third quarter of 2011.
Gross loss in the third quarter of 2012 was RMB 96.6 million ($15.4 million), compared with a gross profit of RMB 86.1 million ($13.7 million) in the second quarter of 2012 and a gross loss of RMB 106.1 million ($16.9 million) in the third quarter of 2011. Gross margin was negative 5.9% in the third quarter of 2012, compared with positive 4.8% in the second quarter of 2012 and negative 4.3% in the third quarter of 2011. Excluding an inventory provision of RMB 51.4 million ($8.2 million) and a reversal of prior provisions for anti-dumping and countervailing duties in the United States of RMB 15.8 million ($2.5 million), gross margin would have been negative 3.7%.
Total operating expenses in the third quarter of 2012 were RMB 534.6 million ($85.1 million), compared with RMB 242.0 million ($38.5 million) in the second quarter of 2012 and RMB 170.2 million ($27.1 million) in the third quarter of 2011. The increase in total operating expenses quarter over quarter was primarily due to a long-lived asset impairment of RMB 250.7 million ($39.9 million) related to the Company's multi-crystalline wafer manufacturing facilities in Donghai, Jiangsu province, China, and a prepayment impairment of RMB 75.2 million ($12.0 million).
Operating loss in the third quarter of 2012 was RMB 631.3 million ($100.4 million), compared with an operating loss of RMB 155.9 million ($24.8 million) in the second quarter of 2012 and an operating loss of RMB 276.3 million ($44.0 million) in the third quarter of 2011. Excluding the long-lived asset impairment and prepayment impairment discussed above, operating loss would have been RMB 305.4 million ($48.5 million). Operating margin was negative 38.5% in the third quarter of 2012, compared with a negative operating margin of 8.6% in the second quarter of 2012 and a negative operating margin of 11.2% in the third quarter of 2011.
Other income in the third quarter of 2012 was RMB 363.7 million ($57.9 million), compared with other loss of RMB 48.4 million ($7.7 million) in the second quarter of 2012 and other loss of RMB 13.0 million ($2.1 million) in the third quarter of 2011. Included in other income in the third quarter of 2012 was a one-time gain of RMB 369.2 million ($58.7 million) from sales proceeds of certain rights pertaining to a claim against Lehman Brothers International (Europe) Limited ("LBIE"), originating from an American Depository Share lending agreement between the Company and LBIE, dated May 13, 2008.
Tax benefit in the third quarter of 2012 was RMB 25.4 million ($4.0 million), compared with tax expense of RMB 120.0 million ($19.1 million) in the second quarter of 2012 and a tax benefit of RMB 28.9 million ($4.6 million) in the third quarter of 2011.
Loss per diluted ADS in the third quarter of 2012 was RMB 1.91 ($0.30), compared with loss per diluted ADS of RMB 2.34 ($0.37) in the second quarter of 2012 and loss per diluted ADS of RMB 2.28 ($0.36) in the third quarter of 2011.
In the third quarter of 2012, the Company had a positive operating cash flow of RMB 545.3 million ($86.8 million).
Liquidity
As of September 30, 2012, the Company had cash and cash equivalents of RMB 3.4 billion ($543.7 million) and total working capital of RMB 2.0 billion ($312.6 million). Total short-term bank borrowings and convertible notes due 2013 were RMB 1.6 billion ($253.2 million). Total long-term bank borrowings were RMB 4.5 billion ($720.1 million), among which RMB 2.0 billion ($315.6 million) were due in one year. The total face value of outstanding convertible notes due 2013 was RMB 804.5 million ($128.0 million) as of September 30, 2012.
Notice from the NASDAQ Stock Market LLC of Non-compliance with Continued Listing Standards
The Company received a notice on October 11, 2012 from the NASDAQ Stock Market LLC stating that, based upon the closing bid price of the Company's American Depositary Shares ("ADS") for 30 consecutive business days, the Company no longer meets the requirement set forth in NASDAQ Marketplace Rule 5450(a) (1), which requires listed securities to maintain a bid price of US$1.00 per ADS (the "Minimum Bid Price Rule"). In accordance with NASDAQ Marketplace Rule 5810(c)(3)(A), the Company was provided with a period of 180 calendar days, or until April 9, 2013, to regain compliance with the Minimum Bid Price Rule.
ADS Ratio Change
In November, the Company announced that it will change the ratio of its American Depositary Shares ("ADSs") to ordinary shares from one (1) ADS representing one (1) ordinary share to one (1) ADS representing five (5) ordinary shares, effective on December 10, 2012. Pursuant to the ratio change, each shareholder of record at the close of business on December 7, 2012 will be required to exchange every five ADSs then held for one new ADS. The effect on the ADS price will take place on December 10, 2012. The Company expects that the ratio change will bring the Company back into compliance with all NASDAQ listing standards.
Business Outlook
For the fourth quarter of 2012, the Company expects total cell and module shipments to be between 380 MW and 420 MW. For the full year 2012, the Company now expects total cell and module shipments to be between 1.55 GW and 1.65 GW, compared with the previously provided full year guidance of 1.5 GW to 1.8 GW.