Canadian Solar 3Q13 Financial Report Analysis:Total Solutions Business Boosts,Company to Number One Spot in China

published: 2013-12-16 10:42 | editor: | category: Analysis

Canadian Solar like many other PV manufacturers profited in 3Q13. The company had a net lossof US $12.60 million in 2Q13 largely due to exchange loss. Gross margin was 12.8%, just one step short of becoming profitable. Net incomein 3Q13reached US$27.69 million, with a gross margin of 20.4% surpassing the company’s guidanceand making it the company with the highest net profit in the Chinese PV industry.

Chinese PV Manufacturers’ 3Q13 Net Income(Loss) and Gross Margin Comparison:

Source: Companies’ financial results / data collected by EnergyTrend

Net revenue grew 29.1% in 3Q13to US $490 million, compared to 2Q13US $380 million. Debt to asset ratio was 83.8%, current ratio was 0.97, and quick ratio was at 0.84. The company’s financial situation was maintained at 2Q levels.

The company was finally able to turn loss into profit in 3Q with main profit source driven by total solutions business, making up 41% of total revenue in 3Q13 compared with 26% in 2Q13.

Increase in revenue from total solutions business revenue proportion reflects on the benefits the company has reaped since transforming from a module manufacturer to a one-stop shop provider of PV power solution company.

Company performance in total solutions business:

Following Canadian Solar’s sell of 10MW Brockville 1 project to TransCanada in 2Q13, the company bought two more utility-scale PV power plant valuing CAD 95 million. Canadian Solar sold two power plants with capacity of 20MW to BlackRock for CAD 120 million. Canadian Solar partnered with Samsung to construct a 130MW DC power plant in Ontario, as mentioned in last quarter’s financial statement. Constructions began in 3Q this year. This project is estimated to inject CAD 310 million into the company’s revenue.

Projects in late-stage and EPC contracts in Canada have currently reached 500MW. After the grid-connections of these projects and, revenue is anticipated to surpass CAD 1.7 billion. The company also showed good performance in the Japanese market. Japanese residential system business alone accounted for 40% of total solutions business revenue. In 2Q13, the projects in late-stage utility scale pipeline are 166MW and expected to increase to 278MW in 3Q13. All projects are supported by the FIT policy to guarantee the revenue. Canadian Solar plans to begin construction on its first power plant in the beginning of 2014. Canadian Solar has completed the construction of three projects totaled 35MW during 3Q in the U.S. Towards the end of 3Q13, the company’s U.S. pipelines of utility-scale projects reached 198MW. However, the company’s projects in China were not that good, with pipelines of utility-scale projects at the end of 3Q reaching 40MW. Canadian Solar has recently signed an agreement with Zhanyi County in Yunnan to establish a 200MW PV power plant. Following the turn around in the Chinese market, it is estimated that the company will become more focused on domestic projects.

Module Business:

Canadian Solar’s 3Q module shipment was 478MW. Shipments for the first two quarters was 340MW and 455MW respectively showing a growth trend. This also reflected a trend of increased market demand for the first three quarters, driven bythis year’s three main markets: U.S., Japan, and China. Canadian Solar has already established its brand name in the Japanese market. The company estimates that yearly shipment volumes for Japan will surpass 500MW, making up 8-9% market share.

Canadian Solar estimated 4Q shipment at 480MW-500MW targeting Japanese, Chinese, Canadian, U.S., and other emerging Asian markets. Shipment in 2013 for modules was adjusted from 1.6-1.8GW to 1.75-1.77GW, including the modules used on Canadian Solar’s own project.   

Negative effects from the anti-dumping tariffs have resulted in weakened demand in the European market. Revenue percentage dropped from 24.7% in 1Q13 to 9.5% in 3Q. Canadian Solar is gradually decreasing its dependence on the European market, which resulted in the company’s continued total shipment volume growth in the first three quarters.

Focus on thefuture developments

Canadian Solar’s future development will focus on continual developments in new emerging markets,expansion of its module businesses and continual decrease in production costs. And to obtain multi-business models through expanding total solutions business, to make the company maintain its profitable position.

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