RENESOLA LTD
RESULTS FOR THE SECOND QUARTER ENDED 30 JUNE 2007
ReneSola Ltd ("ReneSola" or the "Company") (AIM: SOLA), a leading manufacturer
of wafers for the solar PV industry, is pleased to announce its financial
results for the second quarter ended 30 June 2007, the production capacity
expansion plans for 2008 and an update on current trading.
Highlights
* Production output of 23MW in the second quarter of 2007, compared to 15.3MW
in Q1 2007
* Successful testing of multicrystalline production
* Investment in new polysilicon plant, expected to commence production in the
first quarter of 2008
* Annualised production capacity of 645MW planned for the end of 2008
Q2 2007 Q1 2007 H1 2007 Q2 2006
Net revenue (US$000) 45,582 36,597 82,179 17,099
Gross profit (US$000) 9,653 8,945 18,598 5,584
Gross margin (%) 21.1% 24.4% 22.6% 32.7%
Operating profit (US$000) 7,387 7,959 15,346 5,155
Foreign exchange loss (US$000) (2,249) (62) (2,311) -
Profit for the period (US$000) 5,426 6,416 11,842 5,046
Production output (MW) 23.0 15.3 38.3 7.5
Mr. Li Xian Shou, Chief Executive Officer of ReneSola, said: "We achieved a
number of key milestones during the quarter, in particular the full
implementation of the 96 new monocrystalline furnaces, which brought the total
installed capacity up to 165MW.
"As previously announced, monocrystalline furnace upgrades to enable the
production of larger wafers reduced the anticipated output for the quarter. In
addition, delays in the delivery of crucibles for our new multicrystalline
furnaces have put back the commencement date of full multicrystalline
production. As a result of these factors, we are reducing our production output
guidance for 2007 from 150MW to between 120 MW and 125MW, which will have an
adverse impact on our financial target for the year.
"We have taken further steps to address the issue of increasing raw material
prices, which resulted in pressure on margins during the second quarter,
through implementing cost reduction measures and increasing and diversifying
our sources of silicon feedstock. In addition, we have taken firm steps to
expand upstream through an investment in a polysilicon production facility
which is expected to commence production in the first quarter of 2008.
"We believe ReneSola is well positioned to continue its strong growth, taking
advantage of the growth in the solar industry, and are announcing today our
plans for a further substantial increase in production capacity in 2008."
Conference Call & Presentation
A conference call for analysts and investors will be held today at 2.00 p.m.
BST (9:00 a.m. EST / 9.00 p.m. Beijing). Dial-in details are below. The
presentation will be available on http://www.citycomments.co.uk/
renesola0807.pdf from 1.50 p.m. BST.
UK Access Number +44 (0)20 8609 1435
UK Toll Free Number 0808 109 1498
US Toll Free Number 1866 793 4279
China - North Toll Free Number 10 800 712 1407
China - South Toll Free Number 10 800 120 1407
Passcode 294476#
Financial Review
Demand for wafers remained robust through the second quarter and pricing for
our wafers was stable. We have made strong progress in diversifying our
feedstock sources, formulated a new upstream strategy for the manufacturing of
polysilicon and made good progress towards the pre-sale of a substantial
portion of our output on a multi-year basis.
The results for the quarter were adversely impacted by the previously announced
upgrades to some of the monocrystalline furnaces, delays in the delivery of
crucibles required for multicrystalline trial production and an increased
operating cost base which is required for the expansion of the business. A
foreign exchange loss of US$2.25 million and an accrued interest charge of
US$1.1 million relating to the convertible bonds, which is included within the
net financing costs, had no cash impact, but led to further erosion of the
profit in the period.
Net revenue
Production output of 23MW was in line with our revised guidance and represented
an increase of 50% sequentially and 206% year on year.
Net revenue of US$45.6 million, on sales of 22.5MW, an increase by 24%
sequentially and 166% year on year. The rate of growth in net revenue was
impacted by a number of factors.
In the first quarter, net revenue included US$3.35 million derived from the
trading of feedstock which had no impact on production output. Excluding the
net revenue from the trading of feedstock, the net revenue of the second
quarter increased by 37% compared with first quarter. Secondly, the increasing
proportion of tolling contract production has the effect of reducing net
revenue as the income statement records only the tolling fee paid by the
customer within net revenue, rather than the full sales price and associated
cost of feedstock. Finally, we were advised by our auditors that a significant
contract, which was treated in the first quarter as a full cost and sale
contract, should now be treated as a tolling contract for accounting purposes.
In aggregate, tolling contracts accounted for 11% of the total output in the
second quarter. We expect the proportion of tolling production output to
increase in the third quarter and beyond.
Gross profit
Gross profit of US$9.6 million, increased by 8% sequentially and 72% year on
year. Whilst wafer pricing remained stable, the impact of the well-publicised
raw material cost increases reduced gross margin to 21.1% in the second
quarter, down from 24.4% in the first quarter 2007.
Operating profit
Operating profit of US$7.4 million rose by 43% year on year, but declined by 7%
sequentially. Higher operating expenses were incurred in the quarter due to
significant recruitment, staff training, external consultancy fees and start-up
costs to prepare for the introduction of the multicrystalline lines in the
third quarter.
Profit before tax
Profit before tax of US$4.6 million declined by 10% year on year and 38%
sequentially. The effective bank interest rates remained stable through the
second quarter. A foreign exchange loss of US$2.25 million and an accrued
interest charge of US$1.1 million relating to the convertible bonds, which is
included within the net financing costs, have no cash impact, but significantly
eroded the profit in the period.
Taxation
ReneSola injected US$39 million into its wholly-owned subsidiary, Zhejiang
Yuhui Solar Energy Source Co. Ltd. ("Zhejiang Yuhui"), to increase the
registered capital. In July 2007 Zhejiang Yuhui received approval from relevant
Chinese authorities of a new tax holiday on US$27 million and is applying for a
similar tax holiday for the remainder of the capital injected in 2006. A refund
of the tax paid by the Company in the first two quarters of 2007 will be
assessed by the tax authorities in early 2008, taking into consideration the
further tax holiday and the tax credits available for capital equipment
purchased by the Company in China.
Zhejiang Yuhui recognised a tax credit of US$0.86 million in the second quarter
due to the purchase of domestically manufactured capital equipment.
Net profit
Net profit of US$5.4 million increased by 8% year on year, but declined 15%
sequentially due to the issues outlined above.
Business Review
Production capacity
As previously announced, the Company's 2007 year end production capacity target
is 373MW, which remains on track. We are pleased to announce a preliminary 2008
year end capacity target of 645MW. The substantial increase in planned capacity
is a result of both the continuing demand-supply imbalance for wafers and
growing confidence in the Company's feedstock procurement.
Monocrystalline capacity
In addition to the annualised monocrystalline production capacity of 213MW
targeted for the end of 2007, the Company plans to add 112MW of new capacity in
2008.
With the successful installation of 96 new monocrystalline furnaces, the
Company's monocrystalline production capacity reached 165MW during the second
quarter. Wire saws, sufficient to slice the ingot from all 186 installed
monocrystalline furnaces, are in full operation.
The delivery of additional monocrystalline furnaces with total capacity of 48MW
is expected by the end of 2007. Purchase contracts have been signed to procure
further 112MW of furnace capacity for delivery in 2008, as well as for wire
saws sufficient to slice all the ingot output from the plannednew furnaces.
Multicrystalline capacity
In addition to the planned 160 MW of multicrystalline production capacity being
installed in 2007, ReneSola plans to add a further 160MW in 2008.
The trial production of the Company's first multicrystalline furnaces was
deferred from the second quarter into the third quarter of 2007 due to a delay
in the delivery of crucibles from the supplier. 60MW of multicrystalline
furnaces have already been installed, with the remaining 100MW to be delivered
and installed as planned by the end of 2007.
Trial multicrystalline production has commenced and ReneSola has successfully
produced 400kg of multicrystalline ingot.
Investment in solar grade polysilicon plant
In order to provide a secure, independent, lower-cost source of polysilicon,
ReneSola has signed an agreement with a domestic Chinese company to establish a
joint venture to manufacture solar grade polysilicon using Siemens technology.
The joint venture has secured an experienced management team of chemical and
process engineers with a proven track record of solar grade polysilicon
production in China.
The facility is planned to have annual capacity of 750 tonnes and will be
completed by the end of 2008. Construction will be undertaken in two phases and
the first phase of the facility with 300 tonnes of annual capacity is underway.
Capital equipment for the first phase has been ordered and is scheduled for
delivery during 2007. Production from this phase is expected to commence in the
first quarter of 2008. The second phase of 450 tonnes of annualised capacity is
projected to be operational in the fourth quarter of 2008.
The Company will invest approximately RMB 100 million (US$14 million) in the
polysilicon project with 90% of the silicon output from the joint venture being
supplied to ReneSola. The Directors believe that this will add an important
component to the Company's sources of feedstock supply.
Feedstock procurement
The Company has explored ways and has made strong progress to both diversify
and simplify its feedstock supply chain by purchasing feedstock directly from
international semiconductor manufacturers and establishing direct links with
international polysilicon producers. Both of these sources are increasingly
important to the Company's feedstock supply chain.
At the end of July 2007, ReneSola had approximately 419 tonnes of feedstock in
inventory. Sufficient feedstock is secured for the whole of the revised
targeted output in the remainder of 2007. Existing feedstock sources, the
adoption of an upstream vertical integration strategy and procurement from both
polysilicon producers and semiconductor manufacturers will yield sufficient
feedstock to produce a minimum of 170MW of output in 2008 before taking account
of tolling production.
Sales contracts
ReneSola has recently signed three year sales contracts with both JA Solar Co.
Ltd. and Jetion Holding Limited, both based in China, each for a total of 60MW
of wafers for delivery from 2008 to 2010. In addition, the Company has signed a
sales contract with CSI Solar Technologies Inc. for an initial shipment of
approximately 5MW of wafers during the remainder of 2007. For 2008, the total
volume of pre-sales under contract is 140 MW.
Production Output Guidance
ReneSola anticipates that total production output for the third quarter will be
30MW to 35MW and total production output for 2007 will be approximately 120 MW
to 125MW.
INCOME STATEMENT
Three months Three months Six months Six months
ended ended
ended ended
30 Jun 2007 31 Mar 2007
30 Jun 2007 30 Jun 2006*
Unaudited Unaudited Unaudited Unaudited
US$000 US$000 US$000 US$000
Net revenue 45,582 36,597 82,179 24,062
Cost of sales (35,929) (27,652) (63,581) (16,692)
Gross profit 9,653 8,945 18,598 7,370
Selling and distribution (195) (104) (299) (125)
expenses
Administrative expenses (2,171) (932) (3,103) (580)
Other operating expenses (11) - (11) -
Other operating income 111 50 161 22
Operating profit (before 7,387 7,959 15,346 6,687
finance costs)
Investment revenue 1,095 59 1,154 -
Foreign exchange loss (2,249) (62) (2,311) -
Finance costs (1,670) (616) (2,286) (145)
Profit before income tax 4,563 7,340 11,903 6,542
Taxation 863 (924) (61) -
Profit for the period 5,426 6,416 11,842 6,542
BALANCE SHEET
As at As at As at
30 Jun 2007 31 Dec 2006 30 Jun 2006
Unaudited Audited Unaudited
US$000 US$000 US$000
Non-current assets
Property, plant and equipment 52,879 19,200 9,839
Deposits and prepayments 41,647 19,997 -
Deferred tax asset 3,479 3,359 -
98,005 42,556 9,839
Current assets
Inventories 75,214 44,849 18,655
Receivables and prepayments 65,721 34,310 17,249
Cash and cash equivalents 67,899 9,862 6,714
208,834 89,021 42,618
Total assets 306,839 131,577 52,457
Current liabilities
Payables and accruals 35,235 41,909 33,401
Tax liabilities 14 - 2
Bank loans 58,929 14,675 10,336
94,178 56,584 43,739
Net current assets / (liabilities) 114,656 32,437 (1,121)
Non current liabilities
Convertible bond payable 112,948 - -
Warranty cost 65 - -
Non current bank loans 4,739 - -
117,752 - -
Net assets 94,909 74,993 8,718
Capital and reserves attributable to
equity holders
Reserves 94,909 74,993 8,718
Total equity 94,909 74,993 8,718
CASH FLOW STATEMENT
Three Three Six months Six months
months months
ended ended ended ended
30 Jun 2007 31 Mar 2007 30 Jun 2007 30 Jun 2006
Unaudited Unaudited Unaudited Unaudited
US$000 US$000 US$000 US$000
Cash flows from operating
activities
Cash (used)/generated by (43,699) (7,924) (51,623) 6,661
operations
Interest paid (537) (616) (1,153) (109)
Net cash (used) / provided by (44,236) (8,540) (52,776) 6,552
operating activities
Cash flows from investing
activities
Purchase of property, plant (26,783) (7,811) (34,594) (9,896)
and equipment
Deposits for property, plant (11,655) (9,890) (21,545) -
and equipment
Interest received 1,095 59 1,154 6
Net cash used in investing (37,343) (17,642) (54,985) (9,890)
activities
Cash flows from financing
activities
Net proceeds from bond issue - 115,771 115,771 -
Proceeds from borrowing 17,771 38,273 56,044 9,612
Repayment of bank loans (803) (7,106) (7,909) -
Net cash provided by financing 16,968 146,938 163,906 9,612
activities
Net (decrease) / increase in (64,611) 120,756 56,145 6,274
cash and cash equivalents
Cash and cash equivalents at 131,034 9,862 9,862 404
beginning of the period
Effects of exchanges rate 1,476 416 1,892 36
restatements on cash and cash
equivalents
Cash and cash equivalents at 67,899 131,034 67,899 6,714
end of the period
For further information, please contact:
In China:
Charles Bai, CFO
ReneSola Ltd
Tel: +86 573 8477 3061, +86 573 8477 3058
Email: charles.bai@renesola.com
In the UK:
Charles Ryland/Suzanne Brocks/Catherine Breen
Buchanan Communications
Tel: +44 20 7466 5000
Tim Feather/Richard Baty
Hanson Westhouse Limited
Tel: +44 20 7601 6100
Email: tim.feather@hansonwesthouse.com
END
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