ReneSola Ltd Announces Second Quarter 2008 Results
Second Quarter Revenues Increased 289.0% Year-Over-Year;
Second Quarter Net Income Increased 294.6% Year-Over-Year
JIASHAN, China, Aug. 19 /Xinhua-PRNewswire/ -- ReneSola Ltd ("ReneSola" or
the "Company"), a leading global manufacturer of solar wafers, today announced
its unaudited financial results for the second quarter of 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080506/CNTU030 )
Financial and Business Highlights
-- Second quarter 2008 net revenues were US$173.0 million (US$171.9
million under the equity accounting method for ReneSola's investment in
the joint venture in Henan province, China (the "Equity Accounting
Method")), an increase of 289.0% from US$44.5 million in the second
quarter of 2007, and an increase of 40.7% from US$123.0 million in the
first quarter of 2008.
-- Second quarter 2008 gross margin was 24.7% (22.4% under the Equity
Accounting Method) compared to 22.1% in the first quarter of 2008.
-- Second quarter 2008 net income was US$23.3 million (US$23.3 million
under the Equity Accounting Method), an increase of 294.6% from US$5.9
million in the second quarter of 2007, and an increase of 31.9 % from
US$17.7 million in the first quarter of 2008.
-- Second quarter 2008 basic and diluted earnings per share were US$0.20
and US$0.19, respectively, and basic and diluted earnings per ADS were
US$0.40 and US$0.38, respectively. Each ADS represents two shares.
-- Second quarter production output was 82.5 MW, an increase of 24.1% from
66.5 MW in the first quarter of 2008, exceeding previously issued
guidance of 75 MW to 80 MW.
-- Silicon consumption rate decreased to 6.24 grams per watt in the second
quarter of 2008 from 6.3 grams per watt in the first quarter of 2008.
Three Three Three
months months months
ended ended ended
6/30/07 3/31/08 6/30/08
Net revenue (US$000) 44,471 122,982 173,007
Gross profit (US$000) 9,950 27,234 42,786
Gross margin (%) 22.4 22.1 24.7
Operating profit (US$000) 8,062 23,187 34,535
Foreign exchange loss(US$000) (2,241) (56) (797)
Profit for the period (US$000) 5,907 17,675 23,309
Production output (MW) 23.0 66.5 82.5
"We achieved significant growth and exceeded our targeted output for the
quarter as we continued to execute our growth strategies," said Mr. Xianshou
Li, ReneSola's chief executive officer. "We experienced strong market demand
for our wafer products and successfully extended our customer base by entering
into a number of wafer sales contracts during the quarter."
"We are excited about the results from our operational and R&D efforts. By
the end of the quarter, our annualized production capacity reached 450 MW and
it remains on track to achieve the targeted capacity of 645 MW by the end of
the year. We continued to improve our production efficiency by further
reducing our average silicon consumption rate to 6.24 grams per watt in the
second quarter of 2008 from 6.3 grams per watt in the previous quarter. In
addition, with a strong focus on R&D, we made significant advancements in the
utilization of alternative silicon materials for future wafer production
including the use of metallurgical grade silicon."
"We completed our equity follow-on offering in June 2008, generating net
proceeds of approximately US$185.2 million. The additional funding provides
ReneSola with sufficient cash sources to fund our 2009 expansion plan,"
continued Mr. Li.
Financial Results for the Second Quarter
Change in Accounting Treatment
In August 2007, ReneSola and Linzhou Zhongsheng Steel Co., Ltd.
("Zhongsheng Steel") established a joint venture company, Linzhou Zhongsheng
Semiconductor, to engage in virgin polysilicon production in Linzhou, Henan
Province, China (the "Joint Venture"). Under the Joint Venture agreement,
ReneSola, which holds a 49% interest, was obligated to purchase 90% of the
Joint Venture's output, at 97% of the market price, for a period of 30 years.
As a result of the terms of the Joint Venture agreement, ReneSola had
previously consolidated the results of the Joint Venture within its own
consolidated accounts.
On June 28, 2008, following a reassessment of the Joint Venture's position
under the Company's multi-pronged feedstock strategy and the Company's raw
material supply sufficiency, ReneSola and Zhongsheng Steel amended the
agreement to reduce the contracted obligation of the Company to purchase the
output of the Joint Venture to a minimum of 55% output at market price for a
period of three years. As a result, the Joint Venture is no longer considered
a variable interest entity under the US GAAP. Effective from June 28, 2008,
the Company no longer consolidates the Joint Venture and records its 49%
interest as "Equity Investment in Joint Venture" on the consolidated balance
sheet. Consequently, the Company's consolidated balance sheet at June 30, 2008
does not include consolidated figures for the Joint Venture. However, the
income statement includes consolidated figures for the Joint Venture up to June
28, 2008. For clarity and comparison purposes, the discussion of figures from
the income statement set out below shows figures with the consolidation of the
Joint Venture and figures calculated using the Equity Accounting Method to
account for the Company's investment in the Joint Venture in the quarter.
With recent developments in our feedstock procurement strategy, the
amendments to the Joint Venture agreement are not expected to have a negative
impact on ReneSola's raw material sufficiency for the planned production output
in 2008. The feedstock procurement contracts recently signed are expected to
provide additional buffer to the Company's raw material sufficiency in 2008 and
beyond.
Net revenues
Net revenues for the second quarter of 2008 were US$173.0 million, an
increase of 40.7% sequentially and 289.0% year-over-year. Under the Equity
Accounting Method, net revenues for the second quarter of 2008 were US$171.9
million, an increase of 39.9% sequentially and 286.5% year-over-year. The
increase in second quarter revenues was primarily attributable to an increase
in output from the expanded production capacity and increasing wafer ASPs.
Gross profit
Gross profit for the second quarter of 2008 was US$42.8 million, a 57.1%
increase sequentially and 330.0% year-over-year. The gross margin for the
second quarter 2008 was 24.7% compared to 22.1% in the first quarter of 2008.
Under the Equity Accounting Method, the gross margin for the second quarter of
2008 increased to 22.4% from 22.1% in the first quarter of 2008 despite the
increase in average feedstock costs of 6.4% sequentially. The increase in
gross margin was primarily attributable to a further reduction in the silicon
consumption rate to 6.24 grams per watt from 6.30 grams per watt in the first
quarter of 2008, the continuing reduction in non-raw material related
production costs, and increases in wafer ASPs due to a high demand for our
wafer products.
Operating profit
Operating profit for the second quarter of 2008 was US$34.5 million, an
increase of 48.9% sequentially and 328.4% year-over-year. The operating margin
was 20.0% in the second quarter compared to 18.9% in the first quarter of
2008. Under the Equity Accounting Method, the operating margin for the second
quarter of 2008 was 17.8% compared to 19.0% in the first quarter of 2008.
Total operating expenses in the second quarter of 2008 increased to US$8.3
million from US$4.0 million in the first quarter of 2008. The increase in
operating expenses was primarily attributable to a substantial increase in R&D
expenditure relating to our investment in developing alternative silicon
feedstock materials.
Profit before tax
Profit before tax for the second quarter of 2008 was US$31.2 million, a
46.6% increase sequentially and 442.6% year-over-year. Under the Equity
Accounting Method, profit before tax for the quarter was US$28.2 million, an
increase of 32.0% sequentially and 389.7% year-over-year. Finance costs
increased by 28.5% sequentially, reflecting increased bank borrowings and
interest rates. Finance costs as a percentage of net revenue decreased from
1.7% in the first quarter of 2008 to 1.6% in the second quarter of 2008. The
second quarter foreign exchange loss was US$0.8 million compared to a foreign
exchange loss of US$0.06 million in the first quarter of 2008.
Taxation
We recognized a tax expense of US$6.8 million in the second quarter of
2008, compared to a tax expense of US$3.6 million in the first quarter of 2008.
Under the Equity Accounting Method, our tax expense was US$4.8 million. The
effective tax rate was 21.9% with consolidation of the Joint Venture and 17%
applying the Equity Accounting Method.
Net profit
Net profit during the second quarter of 2008 increased 31.9% sequentially
and 294.6% year-over-year to US$23.3 million. Net profit for the quarter was
the same applying the Equity Accounting Method.
Other Recent Business Developments
Sichuan Polysilicon Project
On May 14, 2008 ReneSola announced that it had increased the planned annual
polysilicon manufacturing capacity to 3,000 tonnes at the wholly-owned facility
in Meishan, Sichuan Province, China. Construction of this facility is on
track, with completion expected in early 2009. The facility is expected to be
operational in the first half of 2009.
Feedstock procurement
As a part of ReneSola's diverse feedstock procurement strategy, the Company
recently signed a number of polysilicon procurement contracts with
international and domestic suppliers with terms ranging from one to five years.
With two long term polysilicon procurement contracts signed in 2007, a total of
2,500 tonnes of polysilicon will be delivered during 2008 and 2009, with the
majority to be delivered in 2009.
Sales contracts
ReneSola has signed a number of substantial long term sales contracts since
June 24, 2008. The key contracts signed are as follows:
-- An agreement with Suntech Power Co. Ltd. ("Suntech") for the supply
of approximately 1.5 GW of wafers over an eight-and-half-year period
beginning in July 2008. In October 2007, ReneSola and Suntech signed a
four-year contract for the supply of 510MW of silicon wafers. The new
contract provides for the supply of additional wafers to Suntech in
2008 and replaces the remaining term of the contract signed in October.
-- An agreement with Jetion Holdings Ltd. ("Jetion") to deliver 120 MW
of solar wafers over a six-year period beginning in the third quarter
of 2008. This agreement replaces a three-year wafer sales contract
signed in August 2007 with Jetion for 2008 to 2010.
-- A wafer tolling service contract with CSG PV Tech Co., Ltd in Guangdong
province, China to deliver 266 MW of solar wafers over a four-year
period beginning in the third quarter of 2008.
-- A wafer sales contract with a cell manufacturer in northern China to
deliver 225 MW of solar wafers over a five-year period beginning in the
third quarter of 2008.
-- A wafer sales contract with ShanShan Ulica Science & Technology Co.,
Ltd in Jiangsu province, China to deliver 105 MW of solar wafers over a
six-year period beginning in the third quarter of 2008.
Production Capacity
As a part of ReneSola's ingot manufacturing capacity expansion to 645 MW by
the end of 2008, the construction of a facility to house 160 MW of
multicrystalline furnaces is now complete and ready for delivery of the
furnaces which will occur during the third and fourth quarters of 2008.
Construction has begun on a new multicrystalline wafer facility that will
hold an additional 355 MW of multicrystalline furnaces as a part of ReneSola's
2009 wafer manufacturing capacity expansion plan. The facility is expected to
be complete in January 2009. The furnaces are contracted to be delivered in
batches, and the last shipment is expected to be delivered in early third
quarter of 2009.
Third Quarter, 2008 and 2009 Outlook
Production output in the third quarter of 2008 is expected to be in the
range of 90 MW to 95 MW, compared to 82.5 MW in the second quarter of 2008 and
36.0 MW in the third quarter of 2007. Gross margin for the second half of 2008
is expected to remain stable at the level under the Equity Accounting Method
for the Company's investment in the Joint Venture.
Based on strengthened wafer ASPs and increased production output we are
once again increasing our annual production output and revenue estimates for
2008 and expect output to be in the range of 340 MW to 350 MW from the
previously guided 330 MW to 340 MW, and expect estimated annual net revenues to
be in the range of US$640 million to US$670 million from the previously guided
US$570 million to US$590 million.
We maintain our wafer production capacity target to be 1 GW by the end of
2009 and our 2009 annual production output is expected to be in the range of
650 MW to 750 MW, including output from tolling arrangements in the range of
100 MW to 150 MW.
Conference Call Information
ReneSola's management will host an earnings conference call on Tuesday,
August 19, 2008 at 8 AM U.S. Eastern Daylight Time / 8 PM Beijing/Hong Kong
time / 1 PM British Summer Time.
Dial-in details for the earnings conference call are as follows:
U.S. & International: +1-617-597-5313
United Kingdom: +44-207-365-8426
Hong Kong: +852-3002-1672
Please dial in 10 minutes before the call is scheduled to begin and provide
the passcode to join the call. The passcode is "ReneSola Call."
A replay of the conference call may be accessed by phone at the following
number until August 26, 2008:
International: +1-617-801-6888
Passcode: 85970723
About ReneSola
ReneSola Ltd ("ReneSola") is a leading global manufacturer of solar wafers
based in China. Capitalizing on proprietary technologies and technical
know-how, ReneSola manufactures monocrystalline and multicrystalline solar
wafers. In addition, ReneSola strives to enhance its competitiveness through
upstream integration into virgin polysilicon manufacturing. ReneSola possesses
a global network of suppliers and customers that include some of the leading
global manufacturers of solar cells and modules. ReneSola's shares are
currently traded on the New York Stock Exchange (NYSE: SOL) and the AIM of the
London Stock Exchange (AIM: SOLA). For more information about ReneSola, please
visit http://www.renesola.com .
Safe Harbor Statement
This press release contains statements that constitute "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
and as defined in the U.S. Private Securities Litigation Reform Act of 1995.
Whenever you read a statement that is not simply a statement of historical fact
(such as when we describe what we "believe," "expect" or "anticipate" will
occur, what "will" or "could" happen, and other similar statements), you must
remember that our expectations may not be correct, even though we believe that
they are reasonable. We do not guarantee that the forward-looking statements
will happen as described or that they will happen at all. Further information
regarding risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements is included in our
filings with the U.S. Securities and Exchange Commission, including our
registration statement on Form F-1. We undertake no obligation, beyond that
required by law, to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made, even though our
situation may change in the future.
For investor and media inquiries, please contact:
In China:
Mr. Charles Bai
ReneSola Ltd
Tel: +86-573-8477-3061
Email: charles.bai@renesola.com
Mr. Derek Mitchell
Ogilvy Financial, Beijing
Tel: +86-10-8520-6284
Email: derek.mitchell@ogilvy.com
In the United States:
Mr. Thomas Smith
Ogilvy Financial, New York
Tel: +1-212-880-5269
Email: thomas.smith@ogilvypr.com
In the UK:
Mr. Tim Feather / Mr. Richard Baty
Hanson Westhouse Limited
Tel: +44-207-601-6100
Email: tim.feather@hansonwesthouse.com / richard.baty@hansonwesthouse.com
CONSOLIDATED INCOME STATEMENT
Three Three Three
months months months
ended ended ended
June 30, March 31, June 30,
2007 2008 2008
US$000 US$000 US$000
Net revenues: 44,471 122,982 173,007
Cost of revenues: (34,521) (95,748) (130,221)
Gross profit 9,950 27,234 42,786
Operating expenses:
Sales and marketing (114) (267) (231)
General and administrative (1,707) (3,389) (4,869)
Research and development (100) (442) (3,504)
Other general income (expenses) 33 51 353
Total operating expenses (1,888) (4,047) (8,251)
Income from operations 8,062 23,187 34,535
Non-operating (expenses) income:
Interest income 1,094 306 234
Interest expenses (1,162) (2,144) (2,755)
Foreign exchange (loss) gain (2,241) (56) (797)
Total non-operating (expenses) income (2,309) (1,894) (3,318)
Income before income tax 5,753 21,293 31,217
Income tax benefit(expenses) 154 (3,560) (6,844)
Minority interest -- (58) (1,064)
Net income 5,907 17,675 23,309
Net income per share:
- Basic 0.06 0.15 0.20
- Diluted 0.06 0.14 0.19
Net income per ADS:
- Basic 0.12 0.30 0.40
- Diluted 0.12 0.28 0.38
Shares used in computation:
- Basic 100,000,032 113,906,186 120,159,747
- Diluted 110,642,079 124,460,612 130,890,990
CONSOLIDATED BALANCE SHEET
As at As at
December 31, 2007 June 30, 2008
US$000 US$000
ASSETS
Current assets:
Cash and cash equivalents 53,137 274,153
Accounts receivable, net of
allowances for doubtful receivables 8,755 2,735
Inventories 110,630 206,149
Advances to suppliers 53,727 100,128
Amounts due from related parties 17,213 28,019
Value added tax recoverable 117 2,021
Prepaid expenses and other current
assets 9,654 6,218
Deferred tax assets 10,487 5,485
Total current assets 263,720 624,908
Property, plant and equipment, net 136,598 183,991
Prepaid land rent, net 7,502 7,870
Deferred tax assets 284 359
Deferred convertible bond issue costs 3,336 2,760
Equity investment in joint venture -- 16,978
Advances for purchases of property,
plant and equipment 29,648 89,654
Total assets 441,088 926,520
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (71,691) (133,581)
Accounts payable (13,147) (21,702)
Advances from customers (59,626) (94,498)
Amounts due to related parties -- (149)
Other current liabilities (13,912) (16,564)
Total current liabilities (158,376) (266,494)
Convertible bond payable (128,265) (137,375)
Long-term borrowings (17,797) (44,321)
Other long-term liabilities (1,246) (1,837)
Total liabilities (305,684) (450,027)
Minority interest: (9,696) (707)
Shareholders' equity
Common shares (36,266) (330,666)
Additional paid-in capital (14,827) (16,609)
Retained earnings (66,200) (107,184)
Accumulated other comprehensive
income (8,415) (21,327)
Total shareholders' equity (125,708) (475,786)
Total liabilities and shareholders'
equity (441,088) (926,520)
CONSOLIDATED CASH FLOW STATEMENT
Three Three Three
months months months
ended ended ended
June 30, March 31, June 30,
2007 2008 2008
US$000 US$000 US$000
Cash flows from operating
activities:
Net income 5,907 17,675 23,309
Adjustments for:
Minority interest -- 58 1,064
Depreciation 705 2,459 3,653
Amortization of deferred convertible
bond issue costs and premium 686 757 775
Allowances for doubtful receivables 32 35 249
Prepaid land rent expensed 28 -- 82
Share-based compensation 95 670 1,175
Derivatives -- -- (573)
Deferred taxes (191) 1,730 3,650
Changes in operating assets and
liabilities:
Accounts receivable 405 (7,914) 13,440
Inventories (14,623) (40,353) (44,017)
Advances to suppliers (22,916) (32,194) (11,447)
Amounts due from related parties (3,195) (17,746) 18,649
Value added tax recoverable (936) (2,667) 2,672
Prepaid expenses and other current
assets (5,144) 2,151 (5,867)
Prepaid land rent (2,941) (1,579) --
Accounts payable 730 8,505 (1,029)
Advances from customers (6,437) 9,869 20,925
Other liabilities 239 (3,728) 7,727
Net cash provided by (used in)
operating activities (47,556) (62,272) 34,437
Cash flows from investing
activities:
Purchases of property, plant and
equipment (22,384) (22,330) (50,668)
Advances for purchases of property,
plant and equipment (11,082) (45,339) (11,915)
Cash decreased due to
deconsolidation -- -- (4,416)
Net cash used in investing
activities (33,466) (67,669) (66,999)
Cash flows from financing
activities:
Net proceeds from short-term
borrowings 16,729 29,221 51,369
Proceeds from issuance of common
shares -- 119,762 196,017
Share issuance costs -- (10,737) (10,787)
Cash received from related parties 389 15 --
Cash paid to related parties (388) -- --
Net cash provided by financing
activities 16,730 138,261 236,599
Effect of exchange rate changes 1,165 5,984 2,675
Net increase in cash and cash
equivalents (63,127) 14,304 206,712
Cash and cash equivalents, beginning
of year 131,031 53,137 67,441
Cash and cash equivalents, end of
year 67,904 67,441 274,153
PROFORMA INCOME STATEMENT ENDED MARCH 31, 2008
Consolidation Equity
method method
Three reconciliation Three
months months
ended ended
March 31, 2008 March 31, 2008
US$000 US$000 US$000
Net revenue 122,982 (146) 122,836
Total cost of revenues (95,748) 48 (95,700)
Gross profit 27,234 (98) 27,136
Operating expenses:
Sales and marketing (267) (1) (268)
General and administrative (3,389) 234 (3,155)
Research and development (442) -- (442)
Other general expense (income) 51 -- 51
Total operating expenses (4,047) 233 (3,814)
Income from operations 23,187 135 23,322
Non-operating (expenses) income:
Interest income 306 (4) 302
Interest expenses (2,144) -- (2,144)
Foreign exchange (loss) gain (56) 29 (27)
Investment Income -- (115) (115)
Total non-operating (expenses)
income (1,894) (90) (1,984)
Income before income tax 21,293 45 21,338
Income tax benefit (3,560) 74 (3,486)
Minority interest (58) (119) (177)
Net income 17,675 -- 17,675
PROFORMA INCOME STATEMENT ENDED JUNE 30, 2008
Consolidation Equity
method method
Three reconciliation Three
months months
ended ended
June 30, 2008 June 30, 2008
US$000 US$000 US$000
Net revenue 173,007 (1,118) 171,889
Total cost of revenues (130,221) (3,242) (133,463)
Gross profit 42,786 (4,360) 38,426
Operating expenses:
Sales and marketing (231) 78 (153)
General and administrative (4,869) 266 (4,603)
Research and development (3,504) -- (3,504)
Other general expense (income) 353 16 369
Total operating expenses (8,251) 360 (7,891)
Income from operations 34,535 (4,000) 30,535
Non-operating (expenses) income:
Interest income 234 (3) 231
Interest expenses (2,755) -- (2,755)
Foreign exchange (loss) gain (797) -- (797)
Investment Income -- 958 958
Total non-operating (expenses)
Income (3,318) 955 (2,363)
Income before income tax 31,217 (3,045) 28,172
Income tax benefit (6,844) 2,048 (4,796)
Minority interest (1,064) 997 (67)
Net income 23,309 -- 23,309
SOURCE ReneSola Ltd
END
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