RENESOLA LTD
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
ReneSola Ltd ("ReneSola" or the "Company") (AIM: SOLA), a leading manufacturer
of solar wafers for the photovoltaic industry, is pleased to announce its
consolidated preliminary results for the year ended 31 December 2006, as well
as provide a trading update incorporating output guidance for the first and
second quarters of 2007.
Highlights
* Revenue increased to US$87.6 million (2005: US$8.4 million)
* Gross profit increased to US$24.8 million (2005: US$1.4 million)
* Profit before tax increased to US$22.8 million (2005: US$0.6 million)
* Successful IPO on AIM in August 2006 raising US$50 million
* Substantial growth achieved with annualised production capacity increased
from 14MW to 80 MW during 2006
* Expansion plan increased to annualised production capacity of 265 MW by the
end of 2007
* Convertible bond issue in March 2007 raising approximately US$120 million
Li Xian Shou, CEO of ReneSola, commented:
"2006 has been an outstanding year for ReneSola. We successfully implemented
the expansion plan set out for the remainder of 2006 at the time of the IPO in
August and have substantially increased our plans for 2007, which we are on
track to deliver. Demand for our products remains extremely strong and our
procurement programme is delivering the necessary feedstock.
"We believe that ReneSola is making a valuable contribution in addressing the
wafer shortage in the market and is well placed to grow its position as a major
player in the global solar sector, which is continuing to benefit from
political support around the world."
There will be a conference call for analysts and institutional investors at 5pm
on Monday 30 April 2007. Please call Buchanan Communications for dial-in
details.
For further information, please contact:
ReneSola Ltd 0086-573-477-3061 (today)
Charles Bai 00 44 (0)20 7466 5000 (30 April 2007)
charles.bai@renesola.com
Buchanan Communications 020 7466 5000
Charles Ryland
Suzanne Brocks
Catherine Breen
Hanson Westhouse Limited 020 7601 6100
Tim Feather tim.feather@hansonwesthouse.com
Richard Baty richard.baty@hansonwesthouse.com
CHAIRMAN'S STATEMENT
I am pleased to be able to report a year of outstanding progress, during which
ReneSola successfully implemented the first stages of a rapid expansion plan to
become one of the largest suppliers of solar wafers in the world.
Financial review
In only the second year of operations, the Company generated revenue of US$87.6
million, profit before tax of US$22.8 million and profit after tax of US$25.5
million. We consider this to be an excellent achievement which far exceeds
forecasts made at the time of the IPO in August.
On 16 February 2007, the Company indicated that the consolidated profit before
and after tax for 2006 would be in the range of US$22-23 million. Reported
profit before tax is US$22.8 million. Total IPO costs were US$4.1 million, of
this amount US$0.4 million has been charged against profit for the year and
US$3.7 million against the share premium account.
The consolidated profit after tax figure for 2006 benefits from an income tax
credit of US$2.7 million. This represents an unrealised tax credit from the
Chinese tax authorities in relation to purchases of Chinese-made capital
equipment in China. As at 31 December 2006, the consolidated balance sheet
included a total deferred income tax credit of US$3.3 million.
The Group was not subject to income tax on earnings in China for either 2005 or
2006 due to a tax holiday. Zhejiang Yuhui Solar Energy Source Co. Ltd.
("Zhejiang Yuhui"), the wholly-owned trading subsidiary of the Company, has
commenced the process of applying for a further tax holiday starting from 2006,
during which ReneSola increased the registered capital of Zhejiang Yuhui. Until
the application is approved by the relevant tax authority, a tax rate of 12 per
cent. will be applied to the earnings of Zhejiang Yuhui. The tax payable for
2007 will be assessed by the tax authority in early 2008 by taking into
consideration the current tax holiday, the potential further tax holiday
arising from increased registered capital of Zhejiang Yuhui in 2006 and the tax
credit available for capital equipment purchased by the Company in China.
Production capacity
Current capacity
During 2006, ReneSola's annualised production capacity grew from 14 MW to 80
MW, provided by 90 monocrystalline furnaces.
In the second half of the year, the Company commenced the installation of wire
saws for in-house slicing of silicon ingots into wafers, which was previously
sub-contracted to third parties. 24 wire saws are now in operation and provide
the capability to slice in-house the whole of the 2006 year-end capacity of
80MW.
The initial operation of the wire saws involved a learning curve for staff,
which was made steeper by a planned reduction in wafer thickness. This resulted
in a higher than expected level of wafers which did not pass ReneSola's high
quality control standards and therefore required reprocessing. The Directors
are pleased to report that, whilst they will continue to seek improvements,
this issue has now been largely resolved and that sawing efficiency is now in
line with industry norms.
Capacity expansion
On 30 November 2006, the Company announced an increase in its target for 2007
year-end capacity from 180 MW to 265 MW.
During March and April 2007, ReneSola took delivery of 96 new monocrystalline
furnaces, bringing the total to 186. Of the new furnaces, 48 are installed and
in trial production while the other 48 are in the process of being installed.
All of the furnaces are expected to be fully operational during May 2007,
bringing the annualised production capacity to 165 MW. The furnaces are housed
in a newly constructed 10,400 m� facility. 25 further wire saws to slice ingot
from these new furnaces, which are scheduled to be delivered before the end of
the second quarter, will also be housed in this facility.
Construction of the new 24,000 m� facility to house the multicrystalline
capacity is also expected to be completed during May 2007, ready for the
installation of the first two multicrystalline furnaces, which will be in trial
production during June. A further 18 multicrystalline furnaces are planned to
be installed before the end of the third quarter.
ReneSola maintains a long-term target of an equal distribution between mono and
multicrystalline capacity in order to service the requirements of its customers
and to maintain flexibility with respect to future raw material supplies.
Sales
Demand for solar wafers has continued to grow. ReneSola has signed sales
contracts for approximately 91 MW of monocrystalline wafers for 2007 delivery,
representing approximately 83 per cent. of the planned 2007 monocrystalline
wafer output. Customers include Suntech Power Co. Ltd. (20 MW), Motech
Industries Inc. (19 MW), Jiangsu Linyang Solarfun Co. Ltd. (17 MW) and BP Solar
(10 MW). The Directors expect that contracts for the remainder of the 2007
monocrystalline capacity will be signed within the next three months.
Negotiations over sales contracts for the output from the new multicrystalline
furnaces with both existing and potential customers will commence at the end of
the second quarter of 2007.
Procurement
The silicon feedstock procurement programme for 2007 is well advanced with
approximately 410 tonnes currently in stock, 800 tonnes to be delivered in 2007
under procurement contracts, approximately 200 tonnes to be supplied by
customers under tolling arrangements and ongoing monthly purchases of between
60 and 90 tonnes.
The total silicon feedstock required for the 2007 planned production output is
anticipated to be approximately 1,600 tonnes.
Output
Total production output is anticipated to be approximately 150 MW in 2007, more
than three times the output in 2006.
Production in the first quarter of 2007 was approximately 15 MW and is expected
to rise to approximately 25 MW in the second quarter as production from the new
monocrystalline furnaces comes on stream.
Funding
In addition to the placing at the time of the IPO, ReneSola raised US$120
million through the issue of convertible bonds in March 2007. The Company is
also currently in discussions with an international bank regarding a potential
loan for working capital purposes to provide funds for the capacity expansion
and to provide additional working capital.
Corporate developments
As previously announced, ReneSola has established ReneSola America Inc. a
wholly-owned subsidiary incorporated in Delaware, USA. The initial objectives
of the subsidiary include identifying potential feedstock suppliers,
establishing direct links with the ultimate feedstock suppliers and enhancing
sourcing efficiency.
In addition, the Company has incorporated a wholly owned subsidiary in
Singapore, which is mandated to source raw materials from, and manage
operations in, South East Asian countries.
ReneSola is also seeking to expand its recycling operations in locations close
to raw material sources. The first element of this strategy will be the
establishment of a plant in Malaysia to increase the Company's recycling
capacity.
ReneSola plans to open an office in Shanghai during the course of the second
quarter. The office will act as the main base for the marketing, business
development and investor relations divisions.
Outlook
ReneSola is on track with the implementation of the accelerated capacity
expansion plan and progress with sales and feedstock procurement contracts are
in line with the revised plan.
2008 expansion plans are currently being reviewed and are expected to be
finalised before the end of the second quarter.
The Directors believe ReneSola is extremely well placed to take advantage of
the growth in the sector and look forward to a year of further substantial
progress.
Martin Bloom
Chairman
27 April 2007
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 31 December 2006 or 2005. The
financial information for the year ended 31 December 2005 is derived from the
statutory accounts for that year and have been restated within this unaudited
preliminary statement, details of this restatement are included as note 3. The
auditors reported on those accounts; their report was unqualified. The
statutory accounts for the year ended 31 December 2006 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement following the Company's annual general meeting.
While the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs.
CONSOLIDATED INCOME STATEMENT for the year ended 31 december 2006
2006 2005
US$'000 US$'000
Notes (unaudited) (restated)
Continuing operations
Revenue 87,561 8,422
Cost of sales (62,733) (7,039)
Gross profit 24,828 1,383
Other operating income 189 -
Selling and distribution (350) (110)
expenses
Administrative expenses (1,997) (381)
Other operating expenses (20) (243)
Operating profit 22,650 649
Investment income 605 -
Finance costs (464) (28)
Profit before tax 22,791 621
Taxation 2,679 600
Profit for the year 25,470 1,221
Attributable to equity holders 25,470 1,221
Earnings per share 1 US$ US$
From continuing operations
Basic and diluted 0.32 0.02
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 december 2006
Paid in Retained Share Statutory Translation Acquisition Hedging Total
capital earnings premium surplus reserve reserve reserve
reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Balance at 1 - 26 - 6 - - - 32
January 2005
Addition of - - - - - 1,500 - 1,500
acquisition
reserve
Net profit for the - 1,221 - - - - - 1,221
year
Appropriation of - (57) - 57 - - - -
reserve fund
Exchange - - - - 31 - - 31
differences
Balance at 1 - 1,190 - 63 31 1,500 - 2,784
January 2006
(restated)
Issue of equity - - 50,000 - - - - 50,000
Share issue costs - - (3,734) - (3,734)
Net profit for the - 25,470 - - - - - 25,470
year
Appropriation of - (152) - 152 - - - -
reserve fund
Exchange - - - - 1,218 - - -
differences
Gain on cash flow - - - - - - 59 59
hedge
Addition of - - - - - (2,878) - (2,878)
acquisition
reserve
As at 31 December - 26,508 46,266 215 1,249 (1,378) 59 72,919
2006
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006
2006 2005
US$'000 US$'000
(Unaudited) (restated)
Non-current assets
Property, plant and equipment 35,010 2,480
Prepaid lease payment 4,187 179
Deferred tax assets 3,359 603
42,556 3,262
Current assets
Inventories 44,503 2,967
Trade and other receivables 34,548 3,295
Prepaid lease payment 108 5
Derivative financial instrument 59 -
Cash and cash equivalents 9,862 404
89,080 6,671
TOTAL ASSETS 131,636 9,933
Current liabilities
Trade and other payables 44,042 6,437
Bank loans 14,675 712
58,717 7,149
Net current assets / 30,363 (478)
(liabilities)
Total liabilities 58,717 7,149
NET ASSETS 72,919 2,784
EQUITY
Share capital - -
Share premium account 46,266 -
Other reserves 145 1,594
Retained earnings 26,508 1,190
TOTAL EQUITY 72,919 2,784
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 december 2006
2006 2005
US$'000 US$'000
(Unaudited) (restated)
Cash flows from operating activities
Operating profit from continuing 22,650 649
operations
Adjustments for:
Net foreign exchange loss 62 -
Depreciation of property, plant and 740 44
equipment
Amortisation of prepaid lease payment 31 -
Loss on disposals of property, plant and - 243
equipment
Allowances for doubtful debts 7 131
Operating cash flows before movements in 23,490 1,067
working capital
Increase in inventories (41,536) (2,966)
Increase in trade and other receivables (32,445) (3,206)
Increase in trade and other payables 36,210 5,948
Cash (used in) / generated by operations (14,281) 843
Interest paid (464) (28)
Net cash (used in)/generated by (14,745) 815
operating activities
Cash flows from investing activities
Interest received 605 -
Proceeds on disposal of property, plant - 3
and equipment
Purchase of property, plant and (30,493) (1,975)
equipment
Prepaid lease payment (4,246) -
Acquisition of subsidiary (2,878) -
Net cash used in investing activities (37,012) (1,972)
Cash flows from financing activities
Proceeds from share issue 50,000 1,043
Share issue costs (3,734) -
Short-term bank borrowings 27,880 458
Repayment of bank loans raised (13,941) -
Net cash from financing activities 60,205 1,501
Net increase in cash and cash 8,448 344
equivalents
Cash and cash equivalents at beginning 404 40
of year
Effect of foreign exchange rate changes 1,010 20
Cash and cash equivalents at end of year 9,862 404
NOTES
1 Earnings per share
The calculation of the basic and diluted earning per share is based on the
following data:
2006 2005
US$'000 US$'000
(Unaudited) restated
Earnings for the purposes of basic and 25,470 1,221
diluted earnings per share being net
profit attributable to equity holders of
the parent
2006 2005
Number of shares
Weighted average number of ordinary 79,928,348 66,666,699
shares for the purposes of basic and
diluted earnings per share
2. Distribution
Copies of the full report and financial statements for the year ended
31 December 2006 are expected to be sent to shareholders on or around 4 June
2007 and will be available to download from the Company's website at
www.renesola.com at that time.
3. Restatement of financial statements for the year ended 31 December 2005
The financial statements for the year ended 31 December 2005 have been restated
as follows:
Retained
earnings
US$'000
At 1 January 2006 as previously reported 543
Restatement of revenue and cost of sales (i) 47
Deferred tax (ii) 600
At 1 January 2006 as restated 1,190
(i) Restatement of revenue and cost of sales
During the year ended 31 December 2005 the Group entered into certain sales and
purchase transactions with third parties which were not properly recognised in
that period. The 2005 financial statements have been restated and the effect of
this restatement on reported profit is US$47,000.
(ii) Deferred tax
Deferred tax assets relating to tax credits of US$600,000 were not recognised
in the 2005 Group financial statements. The income statement for the year ended
31 December 2005 has been restated accordingly.
(iii) Prepaid lease payment
The Group has changed its accounting policy for the recording of prepaid land
use rights which was previously reported under property, plant and equipment in
2005 and has now been reclassified as a prepaid lease payment. The change has
no effect on the reported profit for 2005.
END
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