RENESOLA LTD
RESULTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2007
ReneSola Ltd ("ReneSola" or the "Company") (AIM: SOLA), a leading manufacturer
of silicon wafers for the solar PV industry, is pleased to announce its
financial results for the third quarter ended 30 September 2007 and to provide
a trading update.
Highlights for Third Quarter 2007
* Production output up 56.5% to 36 MW compared with 23 MW in the second
quarter, exceeding the guidance range of 30 MW to 35 MW
* Total net revenues increased by 63.2% to US$74.4 million from US$45.6
million in the second quarter
* Net profit increased by 106.7% to US$11.2 million from US$5.4 million in
the second quarter
* Successful installation of 15 multicrystalline furnaces with a total
capacity of 75 MW as at 19 November 2007
* Construction on track for the first phase of the polysilicon joint venture
in Henan Province, China with a projected annualised capacity of 300
tonnes. Trial production is expected to commence in the first quarter of
2008
* Development of a wholly-owned green field polysilicon plant with a
projected annualised capacity of 1,500 tonnes in Sichuan Province, China.
Trial production is expected to commence in the second half of 2009
* Two long term polysilicon purchase contracts signed for a total of 4,650
tonnes in the first three years, including delivery of 350 to 400 tonnes in
2008
* Agreement signed with Suntech Power to supply 510 MW of wafers over a four
year period with delivery to begin in 2008
* Completion of construction of facility at overseas recycling subsidiary,
ReneSola Malaysia
Q3 2007 Q2 2007 9 months 9 months
ended 30 ended 30
Sept 2007 Sept 2006
Net revenue (US$000) 74,375 45,582 156,554 52,457
Gross profit (US$000) 15,216 9,653 33,814 15,904
Gross margin (%) 20.5 21.2 21.6 30.3
Operating profit (US$000) 12,955 7,387 28,301 14,915
Foreign exchange loss (US$000) (562) (2,249) (2,873) -
Profit for the period (US$000) 11,215 5,426 23,057 14,465
Production output (MW) 36.0 23.0 74.3 23.2
Mr. Li Xian Shou, Chief Executive Officer of ReneSola, said, "We continued our
production capacity expansion during the quarter. With 15 multicrystalline
furnaces in the initial phase of production, we now have a balanced product
offering to better meet customers' needs. We believe this will enhance our
existing customer relationships and provide the potential for significant
customer gains.
"We have also taken further steps to increase and diversify our feedstock
sources by signing additional long term polysilicon supply contracts and
continuing our efforts to secure reclaimable raw materials through our global
sourcing network. In addition to our polysilicon joint venture in Henan
Province which is expected to commence trial production during the first
quarter 2008, we have initiated the development of a wholly-owned green field
polysilicon plant in Sichuan, China. We believe this strategy will help us
secure feedstock and further improve our position in an increasingly
competitive market.
"Demand for wafers remained robust through the third quarter. We announced
several multi-year wafer sales contracts and strengthened our long term
customer partnerships.
"Feedstock costs continued increasing during the third quarter reflecting the
ongoing industry shortage of polysilicon. Higher feedstock costs are expected
to continue in fourth quarter 2007, which may lead to a decline in our gross
margin sequentially over the next two quarters. We will continue to focus on
implementing strict cost controls, achieving further technical productivity
improvements and increasing toll production in order to mitigate the negative
impact. In addition to securing long term polysilicon supply contracts, we
expect an incremental supply from our upstream polysilicon manufacturing due to
come onstream in 2008. Together with our continuing efforts to achieve
productivity gains, this will help alleviate the pressure on our gross margins
in the future."
Financial Review
Net revenue
ReneSola reported net revenues of US$74.4 million for the third quarter 2007,
an increase of 63.2% sequentially and 161.9% year-on-year. Excluding revenue
from tolling production and ingot sales of approximately US$6.9 million during
the quarter, revenue from wafer sales was US$67.5 million on shipment of
approximately 29.3 MW. Tolling contracts accounted for 18.9% of total output
and 8.8% of net revenue in the third quarter. The net revenue growth rate was
higher than that of production output due to an increased average selling price
("ASP") of wafers during the quarter.
Gross profit
Third quarter gross profit was US$15.2 million, a 57.6% increase sequentially
and 78.3% year-on-year. The gross margin for the third quarter 2007 was 20.5%
compared to 21.2% in the second quarter 2007. The change in gross margin was
attributable to an increase of over 10% in average feedstock costs during the
quarter. The negative impact was mitigated both by improvements in in-house
slicing yields, due to a significantly lower wafer breakage rate and the use of
thinner wires, as well as an increase in wafer ASPs.
Operating profit
Operating profit in the third quarter 2007 was US$13.0 million, an increase of
75.4% sequentially and a 57.5% increase year-on-year. Operating margin was
17.4% in the third quarter compared to 16.2% in the second quarter.
Administration expenses increased by US$0.1 million compared to the second
quarter, but decreased as a percentage of revenue from 4.8% to 3.0%, reflecting
economies of scale.
Profit before tax
Profit before tax in the third quarter was US$11.1 million, an increase by
142.8% sequentially and 39.8% year-on-year. Finance costs increased by 11.6%
sequentially, reflecting increased bank borrowings and interest rates. Finance
costs as a percentage of net revenue decreased from 3.7% to 2.5% during the
quarter. The third quarter foreign exchange loss was significantly reduced to
US$0.6 million from US$2.2 million in the second quarter due to decreased
assets denominated in US dollars.
Taxation
ReneSola's subsidiary, Zhejiang Yuhui Solar Energy Source Co. Ltd, recognised a
tax credit of US$0.1 million in the third quarter 2007, down from US$0.86
million in the second quarter, due to a decrease in domestic equipment
purchases.
Net profit
Third quarter 2007 net profit increased 106.7% sequentially and 41.5%
year-on-year to US$11.2 million due to the reasons stated above.
Business Review
Furnace delivery and installation
The number of monocrystalline furnaces remained unchanged in the third quarter
of 2007. In line with our expansion plan, 40 new monocrystalline furnaces are
expected to be delivered by the end of the year to increase our mono
manufacturing capacity to 218 MW.
ReneSola commenced the installation of multicrystalline furnaces in September
following the delivery of the coated crucibles. 15 multicrystalline furnaces,
with a combined manufacturing capacity of 75 MW, have now been delivered and
installed and are in initial production. The remaining 17 furnaces will be
delivered and installed, as planned, by the end of 2007.
As such, the Company remains on track to achieve the slightly increased year
end ingot production capacity target of 378 MW.
Investment in solar grade virgin polysilicon plant
Construction of the polysilicon joint venture in Henan Province, which was
announced on 23 August 2007, is on schedule and the first phase, with a
projected annualised capacity of 300 tonnes is expected to commence trial
production in the first quarter 2008. ReneSola has committed to purchase 90% of
the joint venture's production output, which will help alleviate pressure on
gross margins.
The Company has committed to invest approximately RMB102.9 million in cash for
a 49% interest and has paid RMB60.3 million with the remaining RMB42.6 million
to be paid within a year.
To provide an additional secure, stable and lower-cost source of feedstock, the
Company has incorporated a wholly-owned subsidiary in Sichuan Province, China,
to develop a polysilicon production facility with a projected annualised
capacity of 1,500 tonnes. Trial production of this facility is expected to
commence in the second half of 2009. The Company has also signed contracts to
purchase some of the equipment from suppliers.
The Directors believe this facility will add an important new component to its
sources of feedstock and will complement the polysilicon joint venture in Henan
Province.
Feedstock procurement
In addition to the long term purchase contract with Sichuan Yongxiang
Polysilicon Co. Ltd. announced on 22 October 2007, which is expected to deliver
200 tonnes of polysilicon in 2008, the Company has signed a long term
polysilicon contract with Daqo New Material Co. Ltd. for a supply of 150 to 200
tonnes of polysilicon in 2008 and 2,000 tonnes of polysilicon over five years,
starting from the second half of 2008.
ReneSola has made significant progress in securing feedstock for the planned
production output in 2008. In addition to 350 to 400 tonnes of polysilicon
secured from long term supply contracts and 200 to 300 tonnes expected from the
polysilicon joint venture in Henan Province, the Company has been able to
purchase a monthly average of over 70 tonnes of feedstock over the first nine
months of 2007 despite the industry shortage of polysilicon and believes that
it can continue to do so in 2008. The shortfall in feedstock for the planned
output in 2008 is expected to be filled through tolling arrangements.
Additional recycling facility
ReneSola Malaysia has completed construction of a new recycling facility which
is ready for full commissioning subject to receiving final approval from the
local government. The new Malaysian facility is expected to provide an
annualised recycling capacity of 1,000 tonnes, supplementing the existing
recycling capacity in Zhejiang. The Directors believe this new facility will
further strengthen its recycling capacity and will bolster its continuing
efforts to secure feedstock at competitive rates.
Sales contracts
In addition to the previously announced wafer sales contracts with JA Solar Co.
Ltd. and Jetion Holding Limited, ReneSola recently announced an agreement with
Suntech Power to supply 510 MW of wafers over a four year period beginning in
January 2008.
Appointment
The Directors are pleased to announce that Mr. Cheng Hsien Yeh has been
appointed Chief Operating Officer. Mr. Yeh has extensive experience in the
solar industry. Prior to joining ReneSola, he was the general manager of Motech
(Suzhou) New Energy Co., Ltd. from 1999 to 2007. From 1997 to 1999, Mr. Yeh
served as the sales manager of Leoco (Suzhou) Electronics. The Directors
believe that Mr. Yeh will make a valuable contribution in improving management
efficiency and helping to enhance the Company's competitiveness.
Share incentive plan
In September 2007 the Board adopted a share incentive plan with 7,500,000 new
shares reserved for issuance under the plan. In October 2007, the Board granted
to certain officers and employees options over 4,250,000 shares. Options
granted under the 2007 share incentive plan generally vest over a five-year
period following the date of grant. The plan is intended to attract and retain
the best available personnel for positions of substantial responsibility and to
provide an additional incentive to employees, directors and consultants and
promote the success of our business.
Production Output Guidance
We maintain our production output guidance range of 120MW to 125MW for 2007.
INCOME STATEMENT
Three Three Nine Three Nine
months months months months months
ended 30 ended 30 ended ended 30 ended 30
Sep 2007 Jun 2007 Sep 2006 Sep 2006
30 Sep * *
2007
US$000 US$000 US$000 US$000 US$000
Sales 74,375 45,582 156,554 28,395 52,457
Cost of sales (59,159) (35,929) (122,740) (19,861) (36,553)
Gross profit 15,216 9,653 33,814 8,534 15,904
Selling and marketing expenses (180) (195) (479) (9) (134)
Administrative expenses (2,266) (2,171) (5,369) (504) (1,084)
Other operating expenses (11) (11) - -
Other operating income 185 111 346 207 229
Operating profit 12,955 7,387 28,301 8,228 14,915
Investment revenue 551 1,095 1,705 - -
Foreign exchange loss (562) (2,249) (2,873) - -
Finance costs (1,864) (1,670) (4,150) (305) (450)
Profit before income tax 11,080 4,563 22,983 7,923 14,465
Taxationbenefits 98 863 37 - -
Profit for the period 11,178 5,426 23,020 7,923 14,465
Minority interest 37 - 37 - -
Profit for the period 11,215 5,426 23,057 7,923 14,465
BALANCE SHEET
As at
30 Sep 2007 30 Jun 2007 30 Sep 2006*
US$000 US$000 US$000
Non-current assets
Property, plant and equipment 93,774 52,879 18,198
Deposits and prepayments 29,539 41,647 -
Deferred tax asset 4,597 3,479 -
127,910 98,005 18,198
Current assets
Inventories 94,263 75,214 25,555
Trade and other receivables 72,319 65,721 32,363
Cash and cash equivalents 68,935 67,899 19,620
235,517 208,834 77,538
Total assets 363,427 306,839 95,736
Current liabilities
Trade and other payables 50,170 35,235 38,775
Tax payable - 14 5
Bank loans 74,554 58,929 13,030
124,724 94,178 51,810
Net current assets/(liabilities) 110,793 114,656 25,728
Non Current Liabilities
Convertible bond payable 117,002 112,948 -
Warranty cost 65 65 -
Long-term bank loans 6,657 4,739 -
123,724 117,752 -
Net assets 114,979 94,909 43,926
Equity
Reserves 105,352 94,909 43,926
Capital and reserves attributable to 105,352 94,909 43,926
equity holders
Minority interests 9,627 - -
Total equity 114,979 94,909 43,926
CASH FLOW STATEMENT
Three Three Nine Three Nine
months months months months months
ended 30 ended 30 ended 30 ended 30 ended 30
Sep 2007 Jun 2007 Sep 2007 Sep 2006 Sep 2006
* *
US$000 US$000 US$000 US$000 US$000
Cash flows from operating
activities
Cash used by operations (759) (48,298) (57,261) (7,060) (399)
Interest paid (1,688) (905) (2,797) (18) (127)
Net used by operating activities (2,447) (49,203) (60,058) (7,078) (526)
Cash flows from investing
activities
Purchase of property, plant and (32,958) (22,018) (61,757) (9,616) (19,512)
equipment
Deposits for property, plant and 15,272 (10,904) (6,469) - -
equipment
Interest received 551 1,095 1,705 12 18
Net cash used in investing (17,135) (31,827) (66,521) (9,604) (19,494)
activities
Cash flows from financing
activities
Contribution from minority 361 - 361 - -
shareholder of subsidiaries
Proceeds from capital contribution 2,133 - 2,133 27,000 27,000
Net proceeds from bond issue - - 115,771 - -
Net proceeds of bank loans 16,646 16,730 64,604 2,694 12,306
Net cash provided by financing 19,140 16,730 182,869 29,694 39,306
activities
Net (decrease) / increase in cash (442) (64,300) 56,290 13,012 19,286
and cash equivalents
Cash and cash equivalents at 67,899 131,034 9,862 6,714 404
beginning of the period
Effects of exchange rate 1,478 1,165 2,783 (106) (70)
restatements on cash and cash
equivalents
Cash and cash equivalents at end 68,935 67,899 68,935 19,620 19,620
of the period
NOTE TO THE CASH FLOW STATEMENT
Three Three Nine Three Nine
months months months months months
ended 30 ended 30 ended 30 ended 30 ended 30
Sep 2007 Jun 2007 Sep 2007 Sep 2006 Sep 2006
* *
US$000 US$000 US$000 US$000 US$000
Profit before tax 11,080 4,563 22,983 7,923 14,465
Adjustment for:
Depreciation 1,205 705 2,428 227 393
Net movement on doubtful debt 3 32 91 36 62
provision
Amortization of lease payment 49 27 103 - -
Employees share compensation cost 95 95 259 - -
Deferred tax (926) (120) (1,046) - -
Interest revenue (551) (1,094) (1,705) (12) (18)
Interest expenses 1,864 1,670 4,150 245 354
Changes in working capital:
(Increase)/decrease in:
Inventories (17,619) (14,701) (46,738) (6,900) (22,410)
Trade VAT and other receivables (14,067) (10,424) (31,384) (3,165) (5,199)
Prepayment for raw materials 6,280 (22,916) (9,940) (10,643) (20,159)
Increase/(decrease) in:
Trade payables and other payables 2,870 1,151 3,834 519 1,899
Unearned revenue 8,972 (6,437) (361) 4,595 29,731
Tax payables -14 (914) - 2 4
Accrued expenses - 65 65 113 479
Cash used by operations (759) (48,298) (57,261) (7,060) (399)
* The income and cash flow statements for the three and nine month periods
ending 30 September 2006 and the balance sheet at 30 September 2006 are those
of Zhejiang Yuhui Solar Energy Source Co. Ltd, ReneSola Ltd's wholly owned
subsidiary and have been included for comparative purposes.
Enquiries:
ReneSola Ltd 00 86 573 8477 3061
Charles Bai charles.bai@renesola.com
Buchanan Communications 020 7466 5000
Charles Ryland, Suzanne Brocks,
Catherine Breen
Hanson Westhouse Limited 020 7601 6100
Tim Feather/Richard Baty
END
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