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Canadian Solar One Step Away from Profiting in 2Q13

published: 2013-09-09 11:36
Out of top Chinese manufacturers, Canadian Solar had the least losses in 1Q13, while Jinko Solar Co., LTD. had the highest gross margin for 1Q13. Since manufacturers began publishing their financial results in 2Q13, Jinko became the first company to profit, with its gross profit up to 17.7%. Although, Canadian Solar’s gross margin reached 12.8% in 2Q13, the company’s net loss was US$ 12.6 million, an increase of 188% compared to net loss US$ 4.38 million in 1Q13. In the conference call, Canadian Solar revealed its currency exchange loss in 2Q13 was US$ 20.5 million mainly caused by the greenbuck’s appreciation against other currencies which excludes the Chinese Yuan. If it was not for the excessive currency exchange losses, Canadian Solar would have profited in 2Q13, said the company. 

A comparison of China’ssolar manufacturers’ net income, net losses, and gross margin in 2Q13:


Source: Financial results of different manufacturers/ Organized by EnergyTrend

Total revenue in 2Q13 reached US$ 380 million, in which revenue from EPC, utility-scale projects and solar system kits business accounted for 25.7% of total revenues. Japan’s residential system kit business accounted for 40% of total solution revenue. Gross margin for 2Q13 reached 12.8%, and was up 3.1% compared to 9.7% in 1Q13. Gross margins were driven by higher module shipments , lower production costs, stable Average Selling Price (ASP), and the sale of Brockville 1.
Canadian Solar’s 2Q13 module shipment  was 455MW, surpassing 1Q estimations. The high-powered module demands mostly come from Japan, with sales reaching 162 MW, and accounting for 35.7% of shipment. Including of which, 18MW were concentrated in the residential roof-top kits market while Japan claimed 24.5% share of 1Q13 shipments. The company is estimated to increase its shipments to Japan in 3Q13. Canadian Solar has reduced its reliance on the European market, with 1Q13 revenues down from 24.7% to below 11%. The trade agreement reached between China and EU after much friction, places the company in an advantageous position in the   volume limit policy, therefore the European market remains a target market in the future. At the moment more than half of the company’s revenues still comes from Asia, accounting for 51.6%, an extension of its high proportion from the first quarter.
Canadian Solar has been working hard during its transition from a pure module supplier to a system solution provider. In 2Q13, the company’s 10MW Brockville 1 project that valued CA$ 55 million (US$ 53.2 million) in 2Q13 was sold to TransCanada Corp. The company has also announced selling its 53.9MW DC project to BluEarth Renewables, and its 68MW DC solution to Concord Green Energy. The total value of these projects is CA$ 560 million, and will be generating revenue in 2014. Projects that have been approved or in its final stages totaled 796MW DC, including Canada’s 370MW project,  220 MW in U.S., 166MW in Japan, and 36MW  being constructed in China. Projects in their initial and mid-term phases reached several GW, and are located in U.S., China and Japan. Canadian Solar has set up its emerging market strategy in advance to establish its own brand and sales channel that has contributed to the company’s shipment and gross profit.
Besides constructing its own solar power stations, Canadian Solar is actively searching opportunities in large EPC, and has signed an agreement with Samsung Renewable Energy for a 130 MW utility-scale project in Ontario. This EPC agreement is Canadian Solar’s largest EPC agreement, and is estimated to generate CA$ 310 million revenue. The project is expected to further expand into phase two and phase three, and both phases will be implementing 130 MW DC. This project helps Canadian Solar acquire an advantageous position in the Canadian market.
Canadian Solar’s 3Q13 gross margin is expected to be 10-12%, a bit lower than 12.8% from 2Q13. Shipment volume is expected to reach 410-430 MW, and the driving force is expected to mainly come from Japan, Canada, U.S., Asia and emerging markets in 3Q13. The annual shipment is expected to reach 1.6-1.8 GW includes in-house modules used to Canadian Solar’s solar power stations.
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