RENESOLA LTD
RESULTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2006
ReneSola Ltd (AIM: SOLA) ("ReneSola" or the "Company"), a leading manufacturer
of wafers for the photovoltaic (PV) industry, today announces results for the
third quarter and nine months ended 30 September 2006.
The results for the third quarter and first nine months of 2006, which are set
out below, are those of Zhejiang Yuhui Solar Energy Source Co. Ltd., the
wholly-owned trading subsidiary of ReneSola.
Third Quarter 2006 Highlights:
* Revenue increased by 64.6% over the second quarter to RMB225.6 million
(US$28.4 million)
* Gross profit increased by 51.5% over the second quarter to RMB67.8 million
(US$8.5 million)
* Gross margin reduced to 30.1% from 32.7% in the second quarter due to an
anticipated increase in feedstock prices
* Production output exceeded the projected 13 MW
* Net profit increased by 55.7% over the second quarter to RMB63.0 million
(US$7.9 million)
* Production capacity successfully increased, more than doubling during the
quarter, with a further 54 monocrystalline furnaces installed, bringing the
total number in operation to 90 by the end of the quarter
* One wire saw fully commissioned and operational and a further four
installed during the quarter -- additional 19 wire saws to be delivered
over the remainder of 2006, bringing the total to 24
Mr. Li Xian Shou, CEO of ReneSola, said: "During the third quarter we continued
the expansion of our production capacity with the installation of 54 new
furnaces and four wire saws.
"We have also entered into major new long term sales contracts with terms
between three and five years' duration. Over 90% of our existing production
capacity has now been pre-sold for 2007 and the feedstock required for the
pre-sold production output has been secured through a combination of long term
supply contracts and our ongoing procurement programme."
Third Quarter 2006 Results
Total revenue for the third quarter of 2006 was RMB225.6 million (US$28.4
million), an increase of 64.6% over the second quarter. The strong growth rate
was primarily due to the production capacity more than doubling from 36
furnaces at the end of the second quarter to 90 furnaces at the end of third
quarter.
Gross profit for the third quarter was RMB67.8 million (US$8.5 million), an
increase of 51.5% over the second quarter. Gross margin for the third quarter
was 30.1%, compared with 32.7% in the second quarter and 25.7% for the first
quarter. The gross margin decreased due to the anticipated rise in feedstock
prices, which was partially offset by continuing technological improvements and
more stringent cost control measures.
Operating expenses in the third quarter were RMB4 million (US$0.51 million),
compared with RMB3.4 million (US$0.43 million) in the second quarter. The rate
of this increase was well below the expansion in the scale of ReneSola's
business.
Operating income for the third quarter of 2006 was RMB63.7 million (US$7.9
million), an increase of 55.6% over the second quarter. The operating margin
was 28.2%, compared with 30.0% in the second quarter.
Net profit for the third quarter of 2006 was RMB63.0 million (US$7.92 million),
an increase of 55.7% over the second quarter.
Business Highlights
In the third quarter, ReneSola completed a key milestone in its expansion
programme with an increase in the monocrystalline furnaces in operation from 36
to 90.
The Company acquired an 11 acre plot of land for the new buildings to house the
planned 100MW 2007 capacity expansion programme. Design of the new facility has
begun and construction is expected to be completed early in the first quarter
of 2007. The Company recently signed a contract with ALD Vacuum Technologies
GmbH in Germany for the delivery of multicrystalline furnaces during the course
of 2007.
In addition to one wire saw becoming fully operational, ReneSola also installed
a further four wire saws during the third quarter. An additional 19 wire saws
are to be delivered during the remainder of 2006, bringing the total number to
24. When these wire saws are fully operational, the Company will be able to
improve gross margin by slicing all the ingot output from the existing
production capacity, rather than outsourcing it to third parties. ReneSola
recently signed a contract with Meyer Burger AG in Switzerland to purchase
additional wire saws which will enable the Company to slice all the ingots from
the planned 2007 capacity increase.
During the quarter, ReneSola entered into new long term contracts with major
cell and module manufacturers with terms of between three and five years.
Customers include Suntech Power Co. Ltd and Topco Technologies Corporation.
Together with the contracts signed during the second quarter, over 90% of the
existing capacity for 2007 has been pre-sold and the feedstock required
secured.
The silicon feedstock procurement programme for 2007 is well advanced with
ReneSola having approximately 400 tonnes in stock, close to 400 tonnes to be
delivered in 2007 under long term procurement contracts, on-going monthly
purchases of between 60 and 90 tonnes and a certain amount from its customers
under tolling arrangements. Following substantial increases earlier in the
year, raw material prices now appear to have stabilised.
The Company has commenced the establishment of a new R&D centre at its existing
site with equipment currently being delivered. The centre will be staffed by 20
engineers. It is expected that the new R&D centre will be in full operation by
the end of the year.
Outlook for Fourth Quarter
Total production output is anticipated to rise to approximately 18MW in the
fourth quarter. In addition, with the increase of wire saw production, the
benefits of in-house wafer-slicing should start to appear for the first time.
INCOME STATEMENT
Three Three Six Nine Year ended
months months months months
ended 30 ended 30 ended 30 ended 30 31 Dec
Sep 2006 Jun 2006 Jun 2006 Sep 2006
2005
Audited
US$000 US$000 US$000 US$000 US$000
Sales 28,395 17,099 24,062 52,457 6,224
Cost of sales (19,861) (11,515) (16,692) (36,553) (4,888)
Gross profit 8,534 5,584 7,370 15,904 1,336
Selling and marketing expenses (9) (42) (125) (134) (110)
Administrative expenses (504) (387) (580) (1,084) (381)
Loss on disposal of fixed assets - - - - (243)
Other profit 207 - 22 229 -
Operating profit 8,228 5,155 6,687 14,915 602
Net finance cost (305) (109) (145) (450) (28)
Profit before and after income 7,923 5,046 6,542 14,465 574
tax
Profit for the period 7,923 5,046 6,542 14,465 574
BALANCE SHEET
As at
30 Sep 2006 30 Jun 2006 31 Dec 2005
Audited
US$000 US$000 US$000
Non-current assets
Property, plant and equipment 18,198 9,839 2,664
Current assets
Inventories 25,555 18,655 3,055
Trade and other receivables 32,363 17,249 3,295
Cash and cash equivalents 19,620 6,714 404
77,538 42,618 6,754
Current liabilities
Trade and other payables (38,775) (33,401) (6,571)
Tax payable (5) (2) (1)
Bank loans (13,030) (10,336) (712)
(51,810) (43,739) (7,284)
Net current assets/(liabilities) 25,728 (1,121) (530)
Net assets 43,926 8,718 2,134
Capital and reserves attributable to
equity holders
Paid-up capital 28,513 1,513 1,513
Statutory surplus reserve 212 212 63
Foreign currency translation reserve 342 57 15
Retained earnings 14,859 6,936 543
Total equity 43,926 8,718 2,134
CASH FLOW STATEMENT
Three Three Six Nine Year
months months months months ended
ended 30 ended 30 ended 30 ended 30
Sep 2006 Jun 2006 Jun 2006 Sep 2006 31 Dec
2005
Audited
US$000 US$000 US$000 US$000 US$000
Cash flows from operating
activities
Cash (used by)/generated from (7,060) 3,405 6,661 (399) 851
operations
Interest paid (18) (89) (109) (127) (27)
Net cash (used by)/generated (7,078) 3,316 6,552 (526) 824
from operating activities
Cash flows from investing
activities
Purchase of property, plant (9,616) (7,211) (9,896) (19,512) (1,975)
and equipment
Proceeds from sales of - - - - 3
property, plant and equipment
Interest received 12 5 6 18 1
Net cash used in investing (9,604) (7,206) (9,890) (19,494) (1,971)
activities
Cash flows from financing
activities
Proceeds from capital 27,000 - - 27,000 1,050
contribution
Short-term bank borrowings 2,694 7,848 9,612 12,306 458
Net cash provided by 29,694 7,848 9,612 39,306 1,508
financing activities
Effects of exchanges rates on *106*E� 5, (70) 3
cash d cash equivalents 19
Ef
Net crease in t cash 12,906 3,981 6,310 19,216 364
sh and cash equivalents 714 2,733 404 404 40
beginning of the riod 7,
sh and cash equivalents ,620 714 714 ,620 404
end of the riod 7,
NOTE TO THE SH FLOW STATEMENT
Cash nerated from operations
ree Three Six Nine ar
mo months months nths months ded
ded 30 ended 30 ded 30 ended 30
p 2006 Jun 2006 n 2006 Sep 2006 Dec
2005
dited
$000 US$000 $000 US$000 US$000
C
ofit for the period 923 5, 046 6,542 14 ,465 4
Adjustment for:
ss on d les of operty, pl - - 3- - 243
ant and equipment
Depreciation 227 106 166 393 44
Net movement on doubtful debt 5- 8 52 10
provision
Write off bad debts - - - - 121
Interest revenue () (1 ( ( 8() (8 )
Interest penses (5 245 89 109 354 27
Changes in working capital:
(Increase)/decrease in:
ventories (6,900) (9,733) (15,510) (22,410) (3,038)
Trade VAT d other pa (3,165) (1,219) (2,034) (5,199) (1,372)
ceivables 32
Prepayment for raw materials (10,525) (3,737) (9,180) (19,705) (1,158)
Receivables form prepayments (118) - (6) (454) (600)
to related parties
Increase/(decrease) in:
Trade payables d other pa 519 961 1,403 1,922 1,341
yables (3
Unearned revenue 4,595 11,590 25,136 29,731 4,406
Tax yables (3 5 5 1
Accrued penses (5 113 305 366 479 89
Unearned revenue and yables - - (23) (23) 164
to related parties
sh (used by)/generated from (7 ,060) 3,405 661 (399) 851
operations
For more information, please contact:
In China: In London
Charles Bai, CFO Charles Rynd to/ Suzanne Brocks /
Catherine Breen
neSola Ltd (A
Buchanan Communications
Tel: +86 573 477 3061 / 00 86 573 477
3058 Tel: +44 20 7466 5000
Email: charles.bai@reSosola.com Tim Feher th
Hanson Westhouse LLP
Tel: +44 113 246 2610
END
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