Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) (NASDAQ:SOLF)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) Charts. Click Here for more Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) Charts.](/p.php?pid=staticchart&s=N%5ESOLF&p=8&t=15)
Solarfun Power Holdings Co., Ltd. (“Solarfun” or “the Company”)
(NASDAQ:SOLF), a vertically integrated manufacturer of silicon ingots
and photovoltaic (PV) cells and modules in China, today reported its
unaudited financial results for the third quarter ended September 30,
2008.
2008 THIRD QUARTER RESULTS
Net revenue was RMB 1,275 million (US$187.8 million), an increase of
69.1% from the third quarter of 2007, but down 5.7% from the second
quarter of 2008.
Results were influenced by a total non-cash provision of US$16.5
million for inventory revaluation (US$12.9 million) and expected
losses on pre-payments. Provisions were necessary as a result of
mark-to-market inventory valuations in a period of rapidly declining
raw material costs and some low-quality materials determined to be
unusable, as well as supply pre-payments that were determined to be
“at risk” and likely to not be recoverable.
PV module shipments reached 41.8 MW, representing an increase of 53%
from the third quarter of 2007, and a slight decline from 43.1 MW in
the second quarter of 2008. The Company’s ability to meet customer
demand was curtailed by lack of polysilicon material delivery.
Average selling price (“ASP”) continued to be robust at US$4.04, but
declined, as expected, from US$4.17 in the second quarter of 2008.
This was primarily due to the weakening Euro against the U.S. Dollar.
Business continued to be centered in Europe, with Germany and Spain
accounting for 53% and 24% of net revenue in this quarter,
respectively.
Gross profit was RMB 46.1 million (US$6.8 million), down 61.6% from
RMB17.7 million in the third quarter of 2007, and also down from
US$27.3 million in the second quarter of 2008.
Gross margin was 3.6% and was negatively impacted by the
aforementioned provisions, as well as polysilicon-related material
costs that continued to remain high during the quarter. Without the
provisions, gross margins from normal operations would have reached
12.4%, which would have been in-line with previously expressed
expectations.
The operating loss was RMB 25.9 million (US$3.8 million). Before
provisions, operating income was RMB 86.3 million (US$12.7 million),
or 6.8% of total revenues. Selling expenses were RMB 20.2 million
(US$3.0 million), which was below the second quarter of 2008 due to an
adjustment in accrued commission expenses.
Interest expense declined nearly US$1 million from the second quarter
of 2008 to RMB 21.6 million (US$3.2 million) due to a reduction in
outstanding bank debts and lower interest rates from refinancing.
The total exchange rate gain was US$0.4 million. The Company recorded
a RMB 30 million (US$4.4 million) currency loss largely as a result of
the impact of the declining Euro against the U.S. dollar, but was able
to more than offset this through its foreign exchange hedging program,
which resulted in a RMB 32.8 million (US$4.8 million) gain.
The net loss was RMB 44.3 million (US$6.5 million). The loss per basic
ADS was RMB 0.86 or US$0.13. Before provision adjustments, net income
and earnings per basic ADS would have been US$8.3 million and US$0.16,
respectively.
Harold Hoskens, CEO of Solarfun, commented, “The third quarter was quite
challenging in some respects. The unexpected shortfall in polysilicon
material supply was certainly disappointing. This constrained our
short-term ability to grow volume and fulfill customer demand. Our
financial results were also impacted by the inventory and
pre-payment-related provisions. We felt it necessary in view of the
rapidly declining costs for polysilicon-related raw materials to adjust
our inventory valuations, as well as account for any “at risk”
pre-payments. Although current global economic and financial conditions
remain uncertain, and we are not immune to these factors, we are
maintaining a high degree of optimism in our ability to compete and grow
in what we believe is undeniably a burgeoning market in the long-term as
renewable energy continues to grow in acceptance. These macro conditions
have impacted, and will continue to impact, the demand and pricing for
photovoltaic-based solar products. However, we believe that the rapidly
declining costs for polysilicon, combined with our low-cost
manufacturing base, increasingly vertically integrated production
process, customer loyalty and financial stability, will allow us to
weather this environment and emerge as a stronger and viable long term
player.
FINANCIAL POSITION
As of September 30, 2008, the Company had cash and cash equivalents of
RMB 511.4 million (US$75.3 million) and working capital of RMB 2.1
billion (US$310.2 million). Total bank borrowings were RMB 1.2 billion
(US$177.3 million), which was down from the previous quarter. During the
quarter, the Company raised US$71.9 million in net proceeds from the
sale of 5,421,093 ADSs via a sales agency agreement with Morgan Stanley
& Co.
The Company continued to focus on working capital management and
achieved another quarter-to-quarter reduction in days sales outstanding
and inventory turnover days from 37 days and 63 days to 28 days and 58
days, respectively.
The Company spent US$16 million in capital expenditures, US$13 million
for supply prepayments, and US$26 million in acquisition costs for the
remaining 48% interest in Jiangsu Yangguang Solar, a silicon ingot
producer.
THIRD QUARTER 2008 AND RECENT BUSINESS HIGHLIGHTS
The Company made a number of significant achievements, including:
Reached an agreement with Q-Cells AG, pending confirmation of both
Boards and based on a previously signed letter of intent, for a
three-year manufacturing services agreement for purchase by Q-Cells of
100 MW of PV modules per annum for three years beginning in early
2009. The agreement also provides for PV module technology cooperation.
Completed and successfully started operations of 120 MW of additional
cell and module capacity. The Company’s total nameplate capacity is
now 360 MW.
Entered into an eight-year, 1.2 gigawatt contract for virgin
polysilicon with GCL Silicon Technology.
Made significant progress towards vertical-integration, with continued
expansion and increased operating volumes at its ingot and wafer
slicing operations. The Company expects to end 2008 with 100 MW of
wafer capacity (ingot and wire saw), and reach 250 MW by mid-2009.
Signed significant binding agreements with key customers, including a
47 MW contract to supply PV modules to Schuco International KG with
installations targeted for the Middle East and southeast Europe, and a
30 MW contract to supply PV modules to Martifer Solar Sistemas
Solares, a Portugal-based leading solar project developer, installer
and producer in Europe.
BUSINESS OUTLOOK
The Company recognizes that the current operating environment is
evolving rapidly and is less predictable than in previous periods. In
light of these uncertainties and based on current operating trends and
market conditions, the Company provides the following outlook:
For the fourth quarter of 2008, management expects:
Total 2008 shipments to be at or slightly below the low end of its
previously stated guidance of 175 to 190 MW. ASPs in constant Euro
terms will decline from the third quarter of 2008 by less than 5%.
Gross margin to improve from the third quarter of 2008, reflecting the
positive impact of vertical integration, somewhat offset by the
strengthening U.S. dollar.
Capital expenditures, supply pre-payments and further acquisition
payments to be approximately US$100 million.
For the full year of 2009, management expects:
Shipment gains of 50%, although this will not be reflected in first
quarter volumes. The Company currently has signed binding contracts
with key customers totaling 150 MW. These contracts all include a
commitment from the customer to provide cash or other monetary
guarantees to Solarfun before the end of 2008.
ASP to decline 5 to 10% in constant Euro terms from the fourth quarter
of 2008.
The relative rate of decline in ASPs to be more than offset by lower
polysilicon pricing. With an increasing percentage of total wafer
volume coming from the Company’s in-house facilities, management
believes that gross margins could reach 10 to 15%.
Raw material availability to be more than sufficient to meet expected
demand. The Company is well positioned to take advantage of rapidly
declining polysilicon prices. For 60% of the Company’s polysilicon and
wafer requirements, price levels will be determined based on
prevailing market conditions.
A larger part of the Company’s total wafer volume to come from
in-house facilities, which should create greater opportunities for
cost optimization and technical innovation.
Capacity expansion to be placed on hold until the demand picture
becomes more clear.
Funding is expected to be adequate to meet 2009 anticipated spending
requirements through a combination of cash on hand and access to
commercial bank lines of credit. Management anticipates a return to
cash flow positive during the second half of 2009.
Harold Hoskens concluded by stating, “Solarfun faces all the same
near-term challenges as our competitors and our ability to predict our
results with certainty is also reduced. However, we are confident that
our longer-term competitive position as a low-cost converter of
polysilicon will be enhanced during this period of dynamic market
changes. Over the past year, we deliberately avoided signing long term
polysilicon supply contracts with the belief that pricing was excessive.
While the strategy was painful in the short term, we believe we are much
better positioned now in this rapidly evolving environment of greater
raw material supply and lower prices. Our customer traction is solid and
growing, our quality is respected in the marketplace and improving, and
we are prepared to profitably operate within the new industry dynamic.
In the end, 2009 will prove to be a critical juncture for our industry;
module supply/demand will be rationalized as players retrench from
aggressive expansion plans, small or less-capitalized competitors face
increasing challenges, and growth in demand in newer solar markets
starts to overtake the large traditional markets in Europe. Ultimately,
lower module prices will drive additional demand worldwide. We are
optimistic that our low cost structure, flexible raw material purchasing
program and vertical integration strategy will allow us to improve
profitability and meet the near-term challenges confronting us.”
Conference Call:
Management will host a conference call to discuss the results at 8:00 am
U.S. Eastern Time (8:00 pm Shanghai time) on December 2, 2008.
The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: +1 866 831 6162
- International dial-in number: +1 617 213 8852
- China Toll Free Number: +10 800 130 0399
Passcode: SOLF
A live webcast of the conference call will be available on the investor
relations section of the Company’s website at: http://www.solarfun.com.cn.
A replay of the webcast will be available for one month.
A telephone replay of the call will be available for twenty-four hours
after the conclusion of the conference call. The dial-in details for the
replay are as follows:
- U.S. Toll Free Number: +1 888 286 8010
- International dial-in number: +1 617 801 6888
Passcode: 73086529
Foreign Currency Conversion
The conversion in this release of Renminbi into U.S. dollars is made
solely for the convenience of the reader, and is based on the noon
buying rate in The City of New York for cable transfers of Renminbi as
certified for customs purposes by the Federal Reserve Bank of New York
as of September 30, 2008, which was RMB6.7899 to US$1.00. No
representation is intended to imply that the Renminbi amounts could have
been, or could be, converted, realized or settled into U.S. dollars at
that rate on Sep 30, 2008, or at any other date. The percentages stated
in this press release are calculated based on Renminbi amounts.
Use of Non-GAAP Financial Measures
The Company has included in this press release certain non-GAAP
financial measures, including certain line items presented on the basis
that the one-time provisions recorded in the third quarter of 2008 had
not been so recorded. The Company believes that both management and
investors benefit from referring to these non-GAAP financial measures in
assessing the performance of the Company and when planning and
forecasting future periods. Readers are cautioned not to view non-GAAP
financial measures on a stand-alone basis or as a substitute for GAAP
measures, or as being comparable to results reported or forecasted by
other companies, and should refer to the reconciliation of GAAP measures
with non-GAAP measures also included herein.
Safe Harbor Statement
This news release contains forward-looking statements, as defined under
the Private Securities Litigation Reform Act of 1995, such as the
Company’s business outlook for 2008, including third quarter and full
year 2008 estimates for net revenue, PV product shipments, raw materials
and product prices, PV cell production capacity and gross margins.
Forward-looking statements involve inherent risks and uncertainties and
actual results may differ materially from such estimates depending on
future events and other changes in business climate and market
conditions. Solarfun disclaims any obligation to update or correct this
information.
About Solarfun
Solarfun Power Holdings Co, Ltd. manufactures both PV cells and PV
modules, provides PV cell processing services to convert silicon wafers
into PV cells, and supplies solar system integration services in China.
Solarfun produces both monocrystalline and multicrystalline silicon
cells and modules, and manufactures 100% of its modules with in-house
produced PV cells. Solarfun sells its products both through third-party
distributors, OEM manufacturers and directly to system integrators.
Solarfun was founded in 2004 and its products have been certified to TUV
and UL safety and quality standards. SOLF-G
http://www.solarfun.com.cn
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
For the three months ended
September 30
June 30
September 30
September 30
2007
2008
2008
2008
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
RMB
RMB
RMB
USD
Net revenue
Photovoltaic modules
752,593
1,233,527
1,146,900
168,913
Photovoltaic cells
1,227
104,217
90,923
13,391
PV modules processing
0
3,229
0
0
Raw materials
0
11,220
37,025
5,453
Total net revenue
753,820
1,352,193
1,274,848
187,757
Cost of revenue
Photovoltaic modules
(632,629
)
(1,056,912
)
(1,103,612
)
(162,537
)
Photovoltaic cells
(1,072
)
(97,244
)
(83,053
)
(12,232
)
PV modules processing
0
(1,208
)
0
0
Raw materials
0
(11,273
)
(42,077
)
(6,197
)
Total cost of revenue
(633,701
)
(1,166,637
)
(1,228,742
)
(180,966
)
Gross profit
120,119
185,556
46,106
6,791
Operating expenses
Selling expenses
(20,158
)
(26,482
)
(20,174
)
(2,971
)
G&A expenses
(28,971
)
(34,956
)
(46,057
)
(6,783
)
R&D expenses
(3,277
)
(7,697
)
(5,765
)
(849
)
Total operating expenses
(52,406
)
(69,135
)
(71,996
)
(10,603
)
Operating profit / (losses)
67,713
116,421
(25,890
)
(3,812
)
Interest expenses
(6,683
)
(28,148
)
(21,559
)
(3,175
)
Interest income
4,333
1,368
4,280
630
Exchange gain / (losses)
(698
)
4,136
(30,001
)
(4,418
)
Gain on change in fair value of derivative
0
0
32,782
4,828
Other income
5,806
4,383
3,996
589
Other expenses
(6,957
)
(6,140
)
(3,896
)
(574
)
Government grant
700
114
221
33
Net income / (losses)
before income tax and minority interest
64,214
92,134
(40,066
)
(5,899
)
Income tax benefit / (expenses)
(1,331
)
(8,282
)
1,224
180
Minority interest
686
(5,763
)
(5,463
)
(805
)
Net income / (losses)
63,569
78,089
(44,306
)
(6,524
)
Net income / (losses) attributable
to ordinary shareholders
63,569
78,089
(44,306
)
(6,524
)
Net income / (losses) per share
Basic
0.26
0.32
(0.17
)
(0.03
)
Diluted
0.26
0.31
(0.11
)
(0.02
)
Shares used in computation
Basic
240,024,754
241,340,409
258,503,644
258,503,644
Diluted
240,024,754
287,007,417
303,635,018
303,635,018
Net income / (losses) per ADS
Basic
1.32
1.62
(0.86
)
(0.13
)
Diluted
1.32
1.54
(0.56
)
(0.08
)
ADSs used in computation
Basic
48,004,951
48,268,082
51,700,729
51,700,729
Diluted
48,004,951
57,401,483
60,727,004
60,727,004
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
June 30
September 30
September 30
2008
2008
2008
(Unaudited)
(Unaudited)
(Unaudited)
RMB
RMB
USD
ASSETS
Current assets
Cash and cash equivalents
557,748
511,393
75,317
Restricted cash
486,220
390,660
57,535
Financial assets
-
35,877
5,284
Accounts receivable, net
442,190
347,955
51,248
Inventories, net
823,379
751,739
110,714
Advance to suppliers, net
1,205,767
1,355,451
199,628
Other current assets
164,224
249,136
36,692
Deferred tax assets
14,423
18,881
2,781
Amount due from related parties
19,548
9,344
1,376
Total current assets
3,713,499
3,670,436
540,575
Non-current assets
Fixed assets – net
1,134,301
1,298,874
191,295
Intangible assets – net
93,317
169,333
24,939
Goodwill
-
134,735
19,843
Deferred tax assets
5,061
9,195
1,354
Long-term deferred expenses
195,124
218,070
32,117
Total non-current assets
1,427,803
1,830,207
269,548
TOTAL ASSETS
5,141,302
5,500,643
810,123
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Financial liabilities
6,254
921
Short-term bank borrowings
1,074,152
996,974
146,832
Long-term bank borrowings, current portion
22,000
29,500
4,345
Accounts payable
170,791
176,975
26,064
Notes payable
4,726
3,104
457
Accrued expenses and other liabilities
140,413
306,230
45,101
Customer deposits
76,415
32,612
4,803
Deferred tax liability
1,160
-
-
Amount due to related parties
10,493
12,587
1,854
Total current liabilities
1,500,150
1,564,236
230,377
Non-current liabilities
Long-term bank borrowings, non-current portion
185,000
177,500
26,142
Convertible notes payable
1,183,195
1,176,157
173,222
Long term payable
17,000
13,500
1,988
Deferred tax liability
8,942
28,019
4,127
Total non-current liabilities
1,394,137
1,395,176
205,479
Minority interests
175,106
12,975
1,911
Redeemable ordinary shares
32
32
5
Shareholders’ equity
Ordinary shares
195
214
32
Additional paid-in capital
1,628,495
2,129,128
313,572
Statutory reserves
57,231
59,546
8,770
Retained earnings
385,956
339,336
49,977
Total shareholders’ equity
2,071,877
2,528,224
372,351
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
5,141,302
5,500,643
810,123
Reconciliation of Non-GAAP measures to GAAP measures
September 30, 2008
RMB
US$
Non-GAAP net income
56,471,948
8,317,052
Inventory and prepayment-related provisions
(100,777,942
)
(14,842,331
)
Net income
(44,305,994
)
(6,525,279
)
Non-GAAP basic earnings per ADS
1.09
0.16
Inventory and prepayment-related provisions per ADS
(1.95
)
(0.29
)
Basic earnings per ADS
(0.86
)
(0.13
)
Non-GAAP diluted earnings per ADS
1.10
0.16
Inventory and prepayment-related provisions per ADS
(1.66
)
(0.24
)
Diluted earnings per ADS
(0.56
)
(0.08
)