RENESOLA LTD
RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2007
ReneSola Ltd (AIM: SOLA) ("ReneSola" or the "Group"), a leading manufacturer of
wafers for the photovoltaic (PV) industry, is pleased to announce results for
the first quarter ended 31 March 2007 and provide details of the finalisation
of the 2006 audited accounts.
First Quarter 2007 Highlights:
Quarter ended Quarter ended Year ended
31 Mar 2007 31 Dec 2006 31 Dec 2006
Unaudited Unaudited Audited
Revenue (US$000) 36,597 35,104 87,561
Gross profit (US$000) 8,945 8,924 24,828
Gross margin 24.4% 25.4% 28.4%
Profit before tax 7,340 8,062 22,527
(US$000)
Production output (MW) 15.3 15.7 38.9
Mr. Li Xian Shou, CEO of ReneSola, said: "We have successfully achieved several
key milestones in our expansion plan, in particular the commissioning of 96 new
monocrystalline furnaces, bringing the total installed capacity up to 165 MW.
Demand remains strong and we are confident of continuing good progress over the
remainder of the year. As a result, we have announced separately today a
significant increase in our planned 2007 year end production capacity."
First Quarter 2007 Results
Total revenue for the first quarter 2007 was US$36.6 million, an increase of
4.3% sequentially and 426% year on year.
Gross profit for the first quarter was US$8.9 million, an increase of 0.2%
sequentially and 401% year on year. Gross margin for the first quarter was
24.4%, compared with 25.4% in the fourth quarter 2006 and 25.7% in the first
quarter 2006. The reduction in gross margin was primarily due to an expected
increase in raw material costs over the fourth quarter 2006.
Operating expenses in the first quarter were US$1.0 million, compared with
US$1.2 million in the fourth quarter 2006 and US$0.3 million in the first
quarter 2006.
Operating income for the first quarter was US$7.9 million, an increase of 1.7%
sequentially and 415% year on year.
Profit before tax for the first quarter was US$7.3 million, a decrease of 9%
sequentially and an increase of 391% year on year. The reduction in profit
before tax reflected a higher finance cost during the quarter as a result of
bank borrowings increasing from approximately US$15 million at the end of 2006
to approximately US$46 million.
Profit after tax for the first quarter was US$6.4 million, including a charge
for income tax which was paid at a rate of 12%. No income tax was paid in the
fourth quarter 2006 due to a tax holiday. As a result of the increase in the
registered capital of Zhejiang Yuhui Solar Energy Source Co. Ltd. ("Zhejiang
Yuhui"), the Company's principal trading subsidiary, in 2006, the Group is
eligible for a tax holiday in accordance with Chinese tax law. The Group has
started the application process for a new tax holiday. Until the application is
approved by the relevant tax authority, a tax rate of 12% 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 and the tax credit available as a result of capital
equipment purchased by the Group in China. Zhejiang Yuhui will be able to
offset the tax paid against future tax credits.
Business Highlights
Production Output
Production output in the first quarter was 15.3 MW, approximately 2.9 MW below
net full capacity. During the first quarter, production is affected by both New
Year and Chinese New Year holidays. In addition, this year there was a two day
black out due to annual transmission line maintenance carried out by the local
electricity authority. Also, the previously announced higher breakage rate
arising from the initial learning curve on the in-house slicing of wafers had
an short term impact on production output. The breakage rate has now dropped
significantly to a level within industry norms, but the Company is focusing on
improving performance even further.
Production Capacity
ReneSola completed a key milestone in its expansion programme with an increase
in the number of monocrystalline furnaces from 90 to 186 providing annualised
capacity of 165 MW. Of the 96 new furnaces, 48 were delivered in March and are
in full operation and the remaining 48 were delivered in April and are expected
to become fully operational during June.
With 19 new NTC wire saws also being brought into operation in the quarter,
ReneSola has the capability to slice all of the ingot output from the first 90
monocrystalline furnaces, rather than outsourcing to third parties, thereby
enhancing the Group's gross margins.
The Group is in the process of adding a further 25 NTC wire saws which will
have the capability to slice the ingot output from the 96 new monocrystalline
furnaces. Of these new saws, 13 are being installed and the remaining 12 are to
be delivered in the third quarter 2007.
As set out in a separate announcement today, the Company has decided to
increase the 2007 year end monocrystalline capacity from 165 MW to 213 MW and
the multicrystalline capacity from 100 MW to 160MW. The new furnaces will be
delivered over the remainder of the year. In addition, the Group has ordered
sufficient wire saws to enable the in-house slicing of all the output of the
new furnaces.
Procurement
Raw materials in stock were over 420 tonnes at the end of first quarter 2007,
sufficient for the planned output in the second quarter. With the ongoing
programme of purchases under contract and on spot, as well as raw materials to
be provided under tolling arrangements, the Group is well placed in respect of
raw material procurement for the increasing production capacity.
Funding
The Company raised US$120 million through the issue of convertible bonds in
March 2007. This funding is intended to enable the Company to finance the
revised 2007 capacity expansion as well as part-finance further expansion in
2008.
Corporate
In addition to the establishment of ReneSola America Inc. a wholly-owned
subsidiary incorporated in Delaware, USA in 2006, the Company has incorporated
a wholly owned subsidiary in Singapore, and is in the process of establishing
an office in Germany in order to supplement the existing raw material
procurement network.
In order to expand the recycling capability close to raw material sources,
ReneSola has continued to work on establishing a recycling plant in Malaysia.
Outlook
Total production output is anticipated to rise to approximately 25 MW in the
second quarter with the implementation of the new production capacity. Both
productivity and management efficiency are improving which will mitigate the
impact of margin pressure as a result of increasing raw material costs in the
second quarter. Demand for wafers remains strong and we are confident of
continuing good progress over the remainder of the year.
Finalisation of audit for year ended 31 December 2006
The audit of the 2006 accounts has now been completed by Deloitte Touche
Tohmatsu. In finalising the accounts, adjustments to certain non-operational
items were made to the preliminary results which were announced on 27 April
2007. The principal adjustment comprised the creation of a contribution
reserve, in accordance with IFRS 2 - Share based payment, in relation to
certain transfers of shares by existing shareholders prior to admission to AIM.
Also in accordance with IFRS 2, a charge of US$264,000 to the income statement
has been made in relation to the following share based payments made or
potentially made to executive officers of the Company. As disclosed in the
Company's AIM admission document dated 3 August 2006, the existing shareholders
of the Company agreed to transfer, in aggregate, 333,333 shares to Charles Bai,
the Chief Financial Officer, in three equal tranches. In addition Professor
Huang Binghua, Chief Technical Officer, and Dr. Li Panjian, Chief Executive
Officer of ReneSola America Inc. and Vice President, International Business
Development, have conditionally been granted the issue of 20,000 shares and
40,000 shares respectively for each year of their employment contracts with
ReneSola. The first such issues are due to take place on 29 November 2007.
Annual accounts
It is expected that the annual accounts for the year ended 31 December 2006
will be posted to shareholders and available from the ReneSola's website during
the week commencing 11 June 2007.
For more information, please contact:
In China: In London
Charles Bai, CFO Charles Ryland / Suzanne Brocks /
Catherine Breen
ReneSola Ltd
Buchanan Communications
Tel: +86 573 477 3061 / 00 86 573 477
3058 Tel: +44 20 7466 5000
Email: charles.bai@renesola.com Tim Feather/Richard Baty
Hanson Westhouse Limited
Tel: +44 20 7601 6100
INCOME STATEMENT
Three months ended Year ended
31 March 31 December
2007 2006* 2006
Unaudited Audited Audited
US$000 US$000 US$000
Revenue 36,597 6,963 87,561
Cost of sales (27,652) (5,177) (62,733)
Gross profit 8,945 1,786 24,828
Other income 50 22 189
Selling and distribution (104) (83) (350)
expenses
Administrative expenses (994) (193) (1,968)
Other expenses/income - - (20)
Investment income 59 312
Finance costs (616) (36) (464)
Profit before tax 7,340 1,496 22,527
Taxation (924) - 2,679
Profit for the year 6,416 1,496 25,206
BALANCE SHEET
As at
31 March 31 December 31 March
2007 2006 2006*
Unaudited Audited Audited
US$000 US$000 US$000
Non-current assets
Property, plant and equipment 26,829 19,200 4,965
Deposits for acquisition of property, 25,700 15,810 -
plant and equipment ("PPE")
Deferred expense (issue cost of bond) 4,224 - -
Prepaid lease payments 4,228 4,187 -
Deferred tax assets 3,391 3,359 -
64,372 42,556 4,965
Current assets
Inventories 60,077 44,849 8,878
Trade and other receivables 32,026 34,202 10,275
Prepaid lease payments 82 108 -
Cash and cash equivalents 131,034 9,862 2,733
223,219 89,021 21,886
Total assets 287,591 131,577 26,851
Current liabilities
Trade and other payables 38,485 41,909 20,711
Tax payable 928 - 1
Bank loans 45,983 14,675 2,488
85,396 56,584 23,200
Net current assets/(liabilities) 137,823 32,437 (1,314)
Non current liabilities
Convertible bond payables 105,449 - -
105,449 - -
Total liabilities 190,845 56,584 23,200
Net assets 96,746 74,993 3,651
Capital and reserves attributable to
equity holders
Share capital - - 1,513
Reserves 96,746 74,993 2,138
Total equity 96,746 74,993 3,651
CASH FLOW STATEMENT
Three months ended Year ended 31
31 March December
Unaudited Audited Unaudited
2007 2006* 2006
US$000 US$000 US$000
CASHFLOWS FROM OPERATING
ACTIVITIES
Profit before tax 7,340 1,496 22,527
Adjustments for
Investment revenue (59) - (312)
Finance cost 616 19 464
Employees shares incentives 110 - 264
Depreciation 516 60 740
Amortisation 26 - 31
Loss on disposal of fixed - - -
assets
Allowance for doubtful debts - 26 7
Operating cash flows before 8,549 1,601 23,721
movements in working capital
Increase in inventory (15,574) (5,777) (40,859)
Increase in receivables and 2,524 (6,594) (31,319)
prepayments
Increase in payables and (3,423) 14,026 35,254
accruals
Cash (used in) / generated by (7,924) 3,256 (13,203)
operations
Interest paid (616) (20) (464)
Net cash (used in) / (8,540) 3,236 (13,667)
generated by operating
activities
CASHFLOWS FROM INVESTING
ACTIVITIES
Interest received 59 1 312
Proceeds on disposal of PPE - - -
Purchase of PPE (7,811) (2,685) (14,789)
Deposits for acquisition of (9,890) - (15,810)
PPE
Purchase of prepaid lease - - (4,140)
payment
Acquisition of subsidiary - -
Payment to a shareholder for - (2,878)
transfer of a subsidiary
Net cash used in investing (17,642) (2,684) (37,305)
activities
CASHFLOWS FROM FINANCING
ACTIVITIES
Proceeds from capital - - 50,000
contribution
Proceeds from bond 119,995 - -
Share issue costs (4,224) - (3,734)
Short-term bank borrowings 38,273 1,764 27,880
Repayment of bank loans (7,106) - (13,941)
raised
Net cash from financing 146,938 1,764 60,205
activities
NET INCREASE IN CASH AND CASH 120,756 2,316 9,233
EQUIVALENTS
Cash and cash equivalents at 9,862 404 404
beginning of period
Effect of foreign exchange 416 13 225
rates
Cash and cash equivalents at 131,034 2,733 9,862
end of period
*The audited balance sheet at 31 March 2006 and the audited income and cash
flow statements for the three months ended 31 March 2006 are those of Zhejiang
Yuhui Solar Energy Source Co. Ltd. ReneSola Ltd's wholly owned subsidiary and
have been included for comparative purposes.
END
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