Trina’s Financial Result Evaluation: Flexible Strategies Boost the Amount of Shipments

published: 2013-09-24 13:25 | editor: | category: Analysis

Trina recently announced its 2Q13 financial results. Performance this quarter turned out to be just like what EnergyTrend projected in the previous analyses “Trina’s 1Q13 financial results evaluation” – the amount of shipment increased significantly. Total module shipment hit the record high and ranked second in the world, reaching 647MW, a 65% rise and a 54% rise compared to the 393MW in 1Q13 and the 419MW in 2Q12, respectively. Net sales in the second quarter were US$440.7M, a 69% rise in contrast to the US$260.2M in 1Q13. Gross margin also reached its peak to 11.6%. Although Trina still had net loss of US$33.6M, the amount of shipment is likely to increase from 2.0GW-2.1GW to 2.3GW-2.4GW in 2013 as the company is optimistic about future trend.

Adjust export strategies with good flexibility

Trina’s explosive growth in the amount of shipment was mainly caused by its outstanding distributed strategies. Net sales from the European market accounted for 26.4% in 4Q12, 54.1% in 1Q13, and 38.1% in 2Q13 and that from China represented 32.4% in 4Q12, 4.6% in 1Q13, and 26.8% in 2Q13. It shows that company has been aggressively adjusting market share proportion during EU-China trade wars. The company seized the opportunity to export to not only the EU, but also countries with strong demand this year, such as China, USA, India, and Japan. Currently, Trina’s market share in Australia is above 10% while market share in China, USA, and Europe is also around 10%. 

Gross Margin Increases but financial structure is slightly weakened

In terms of balance sheet, Trina has remained better financial structure during market downturn in the past. However, although net sales have gradually increased recently, current assets continued to decline. With current liabilities increasing in the second quarter, current ratio and quick ratio significantly decreased. Trina indicated in the conference call that convertible note that were due by July have been redeemed, but total amount was not large, which may not be helpful to the financial structure that’s deteriorating. Yet, due to the proper inventory control, inventories reduced significantly in contrast to last quarter.

In terms of income statement, because of the increased amount of shipment in the second quarter, Trina ranked second among Chinese PV manufacturers’ net sales ranking, which was next to Yingli with largest amount of module shipment. In terms of gross margin, most of the first-tier Chinese manufacturers achieved high gross margin in the second quarter Comparing Trina’s gross margin of 11.6% with other first-tier manufacturers, Jinko was the first one to turn around losses with gross margin obtaining 17.7%. If any of the manufacutrers can increase gross margin to above 15% in the future, they can be profitable once again.

Based on the minimum price and volume limit agreement that have been set during EU-China trade wars, Chinese manufacturers will have to share the export quota of 7GW. Due to the large amount of shipment to Europe previously, Trina is likely to get the most quotas. The company’s amount of shipment should increase more in the third quarter due to the increased shipments to China, USA, India, and Japan. In addition, gross margin may continue to increase since advanced technology will bring down the cost. If Trina can reach gross margin above 15%, they may be able to turn around losses. For now, the company will respond to the increased demand in PV market through OEM. Not until the anti-dumping and countervailing policy has been finalized by the end of the year, the company will expand the production capacity.

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