SHANGHAI, China--(BUSINESS WIRE)--
Solarfun Power Holdings Co., Ltd. ("Solarfun" or "the Company" )
(NASDAQ:SOLF), a vertically integrated manufacturer of silicon ingots,
wafers and photovoltaic (PV) cells and modules in China, today reported
its unaudited financial results for the first quarter ended March 31,
2009.
FIRST QUARTER 2009 RESULTS
-- Net revenue was RMB 684.2 million (US$100.1 million), a decrease of 43%
from the first quarter of 2008, and a decline of 39% from the fourth
quarter of 2008.
-- PV module shipments reached 35.7 MW, representing a decrease of 11.4%
from the first quarter of 2008, and a 25% decline from 47.6 MW in the
fourth quarter of 2008. First quarter volumes were impacted by module
production overcapacity, excess module inventories in the channel,
continuing restrictive funding availability for solar projects, and
winter weather, particularly in Germany. We believe these conditions
were not unique to the Company, but prevalent throughout the PV industry
globally.
-- Average selling price ("ASP") declined further, as expected, to US$2.78
from US$3.37 in the fourth quarter of 2008 due to the competitive
environment. Business continued to be centered in Europe, with Germany
and Portugal accounting for 76.5% and 9.7% of net revenue during the
quarter, respectively. Newer markets such as Australia, Korea and the
United States each accounted for between 3-5% of shipments.
-- Gross profit was RMB 49.4 million (US$ 7.2 million), down 74.0 % from
RMB 190 million (US$ 27.8 million) in the first quarter of 2008, but up
substantially from the RMB 377.8 million (US$ 55.3 million) loss in the
fourth quarter of 2008.
-- Gross margin improved to 7.2% from negative 33.7% in the fourth quarter
of 2008. This was primarily due to the Company's ability to reduce raw
material costs by nearly 25% from fourth quarter of 2008. This occurred
because existing supply contracts were revised and/or renegotiated, and
because the Company took advantage of its greater flexibility and access
to lower-cost raw materials on the spot market.
-- Operating loss was RMB 19.5 million (US$ 2.9 million). For the first
quarter of 2009, operating expenses as a percentage of revenues reached
10.1%, well above the Company's historical range of 5-7%. This is
primarily a reflection of lower shipment volumes combined with lower
pricing, leading to a reduced revenue base on which to spread operating
costs.
-- Interest expense was RMB 39.5 million (US$ 5.8 million), a slight
increase from the fourth quarter of 2008 due to a rise in short term
borrowing and implementation of new convertible debt accounting.
-- The net exchange rate gain was RMB 38.3 million (US$ 5.6 million). The
Company recorded a RMB 32.8 million (US$ 4.8 million) currency loss
largely as a result of fluctuations in exchange rates between the Euro
and the U.S. dollar, but was able to more than offset this through its
foreign exchange hedging program, which resulted in a RMB 71.1 million
(US$ 10.4 million) gain.
-- The net loss attributable to shareholders was RMB 7.0 million (US$ 1.0
million). The loss per basic ADS was RMB 0.13 (US$0.02). This was a
decline from net income of RMB 107.9 million (US$ 15.8 million) and
earnings per basic ADS of RMB 2.17 in the first quarter of 2008, but a
substantial improvement from the prior quarter net loss of RMB 418.8
million (US$ 61.3 million) and loss per basic ADS of RMB7.79.
Peter Xie, President of Solarfun, commented, "The first quarter of this
year saw mixed results from our perspective. On the one hand, shipments
and sales continue to be pressured by excess channel inventories,
industry-wide module production overcapacity, declining prices, and the
continued tight lending environment for solar projects. However, we do
believe that the first quarter will prove to be the low point for
industry demand and for our company during this cycle. We are cautiously
optimistic for a more meaningful rebound, particularly during the second
half of this year and heading into 2010. That being said, the timing and
magnitude of this turn is quite unpredictable and as a result, we will
continue to refrain from making specific quarterly and full year
projections.
On a more positive note, we achieved a gross profit in the first quarter
and we expect this trend to improve throughout the year. Our average
wafer cost per watt declined almost 25% as a result of greater
purchasing flexibility and as our vertical integration at the wafer
level grows in scale. We see continued and further progress ahead. We
are still aggressively negotiating with our suppliers regarding our
existing multi-year contracts to bring raw material costs and
pre-payment terms more in line with current market conditions. This is a
process and is not always successful. We are working closely with our
partners to achieve a mutually beneficial outcome on a case-by-case
basis.
FINANCIAL POSITION
As of March 31, 2009, the Company had cash and cash equivalents of RMB
466.3 million (US$ 68.2 million) and working capital of RMB 1.5 billion
(US$ 213.5 million). Total bank borrowings as of March 31, 2009 were RMB
1.6 billion (US$ 238.2 million), which was up RMB 328.7 million (US$
48.1 million) from the previous quarter. This is reflective of the
supportive lending environment in China as well as Solarfun's
long-standing and strong relationships with lenders.
Working Capital
The Company continued to focus on working capital management and reduced
accounts receivable by RMB 117.4 million (US$17.2 million) from the
prior quarter. Days sales outstanding increased from 27 days in the
fourth quarter of 2008 to 35 days and were well below levels for the
same period last year and many industry peers.
Inventories remained relatively constant at RMB 747.6 million (US$ 109.4
million), but importantly, raw materials with rapidly declining market
prices were cut in half.
Capital Expenditures
The Company spent RMB 217.3 million (US$ 31.8 million) in capital
expenditures, including the final payment for Linyang Yangguang (LYG),
the Company's ingot manufacturing subsidiary. No large capital projects
are scheduled for the remainder of the year.
ORGANIZATIONAL CHANGES
The Board of Directors has accepted the resignation of Harold Hoskens,
Chief Executive Officer, effective June 30, 2009. The Company's
Management Committee, including John Breckenridge, Managing Director of
Good Energies, and Peter Xie, Solarfun President, will actively oversee
all day-to-day business activities and the Company's strategic
direction. Solarfun would like to extend its gratitude to Harold for his
many contributions, particularly in the face of such a difficult
operating environment. The Company hopes to build on the foundation he
helped establish and believe it now has the necessary leadership in
place to accomplish its goals.
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 second quarter of 2009, management expects:
-- Shipment volumes to improve compared to the first quarter of 2009. The
expected rise in shipments excludes the start of the Company's
value-added services agreement with Q-Cells AG, which should account for
more than 25 MW of incremental module shipments in the second quarter.
-- Average selling prices to decline further.
-- Gross margins to show some gradual improvement as supply costs decline
faster than ASPs. With leverage from the Company's vertical integration,
the impact will become more visible as the year progresses.
Additionally, the Company's value-added services agreement with Q-Cells
AG has become fully operational in the second quarter and should
contribute incrementally to gross margins.
For the full year of 2009:
The Company previously announced signed contracts with key customers
totaling 200 MW and is actively negotiating others. Excluding the
aforementioned manufacturing services agreement with Q-Cells, Solarfun
has an ongoing dialogue with other customers to ensure that both
partners find a sustainable way forward on these contracts. We note,
however, that this is a very fluid business environment and our ability
to predict is less certain. The Company continues to expect full-year
demand to exceed these levels as markets rebound and begin to build
momentum, particularly in the latter half of 2009.
Management expects:
-- The anticipated 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 approach or reach low double digits for the full
year.
-- The Company to be well positioned to take advantage of rapidly declining
polysilicon prices. For more than 70% of the Company's polysilicon and
wafer requirements, price levels will be determined based on prevailing
market conditions. Polysilicon prices on the spot market are currently
below $70 per kilogram.
-- Capacity expansion to remain on hold until the demand picture becomes
more clear. Current capacity is adequate to support sales volumes of 280
MW, and Solarfun has an additional 100 MW of module capacity that is
dedicated to support the Company's contract with Q-Cells.
-- Funding to be adequate to meet 2009 anticipated spending requirements
through a combination of cash on hand and access to commercial bank
lines of credit.
Peter Xie outlined the primary goals for the Company for the remainder
of 2009. "Our top priority, as always, is to meet the needs of our
customers. We intend to strengthen our brand and expand our geographic
footprint in an increasingly competitive environment. We are prudently
managing our organizational costs and production flow in order to
maintain liquidity, maintaining and growing our commercial lending
partnerships in order to fund future growth, actively pursuing all
angles to further reduce our raw material costs for both existing and
new contracts, reducing inventories, and executing our vertical
integration strategy."
"We continue to remain optimistic for the remainder of 2009 and beyond.
With both module and raw material prices declining, we think volume
growth is imminent. Incentives already in place, and new ones from the
United States and China in particular, bode well for a resumption of
healthy growth in the long term."
CONFERENCE CALL
Management will discuss the results and take questions following the
prepared remarks.
The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: +1 866 713 8562
- International dial-in number: +1 617 597 5310
- China Toll Free Number (North): +10 800 152 1490
- China Toll Free Number (South): +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 seven days 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: 24572746
CONVERTIBLE SECURITIES
In the first quarter the Company adopted Emerging Issues Task Force
("EITF") No. 07-5, which requires the Company to re-assess whether the
conversion feature embedded in the convertible bonds that the Company
has issued is indexed to its own stock from 2009. The Company concludes
that the embedded conversion feature is no longer indexed to its own
stock and thus should be bifurcated from the host contract and with the
change in fair value to be recognized at each period end from 2009
onwards. As a result, the embedded conversion feature has been accounted
for as an embedded derivative and measured at fair value. The cumulative
effect as a result of the adoption of EITF 07-5 will be recognized as an
adjustment to the opening balance of retained earnings as of January 1,
2009.
From time to time the Company may seek to retire, repurchase, or
exchange its convertible securities in open market purchases or
privately negotiated transactions depending on market conditions,
liquidity, and contractual obligations and other factors.
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 as of March 31,
2009, which was RMB6.8329 to US$1.00. No representation is intended to
imply that the Renminbi amounts could have been, or could be, converted,
realized or settled into U.S. dollars at that rate on March 31, 2009, or
at any other date. The percentages stated in this press release are
calculated based on Renminbi amounts.
SAFE HARBOR STATEMENT
This news release contains forward-looking statements, as defined under
the Private Securities Litigation Reform Act of 1995, such as the
Company's business outlook for 2009, including second quarter and full
year 2009 estimates for net revenue, PV product shipments, raw materials
and product prices, PV cell production capacity and gross margins.
Forward-looking statements involve inherent risks and uncertainties and
actual results may differ materially from such estimates depending on
future events and other changes in business climate and market
conditions. Solarfun disclaims any obligation to update or correct this
information.
ABOUT SOLARFUN
Solarfun Power Holdings Co, Ltd. manufactures both PV cells and PV
modules, provides PV cell processing services to convert silicon wafers
into PV cells, and supplies solar system integration services in China.
Solarfun produces both monocrystalline and multicrystalline silicon
cells and modules, and manufactures 100% of its modules with in-house
produced PV cells. Solarfun sells its products both through third-party
distributors, OEM manufacturers and directly to system integrators.
Solarfun was founded in 2004 and its products have been certified to TUV
and UL safety and quality standards. SOLF-G
http://www.solarfun.com.cn
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
December 31 March 31 March 31
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
RMB RMB USD
ASSETS
Current assets
Cash and cash equivalents 410,901 466,276 68,240
Restricted cash 88,137 270,398 39,573
Financial assets 39,665 63,079 9,232
Accounts receivable, net 319,537 202,096 29,576
Inventories, net 731,708 747,587 109,410
Advance to suppliers, net 1,355,597 1,382,648 202,352
Other current assets 256,108 196,735 28,792
Deferred tax assets 51,035 49,790 7,287
Amount due from related parties 19 19 3
Total current assets 3,252,707 3,378,628 494,465
Non-current assets
Fixed assets - net 1,492,575 1,629,544 238,485
Intangible assets - net 212,736 211,559 30,962
Goodwill 134,735 134,735 19,719
Deferred tax assets 10,029 11,025 1,614
Long-term deferred expenses 37,444 37,075 5,426
Long-term investment - - -
Total non-current assets 1,887,519 2,023,938 296,206
TOTAL ASSETS 5,140,226 5,402,566 790,671
LIABILITIES
Current liabilities
Financial liabilities 5,792 5,273 772
Short-term bank borrowings 1,098,832 1,435,000 210,013
Long-term bank borrowings, current 30,000 45,000 6,586
portion
Accounts payable 217,025 225,023 32,932
Notes payable 39,341 39,341 5,758
Accrued expenses and other liabilities 173,370 129,392 18,937
Customer deposits 9,494 2,956 433
Deferred tax liability - - -
Unrecognized tax benefit 27,385 27,385 4,008
Amount due to related parties 39,766 10,109 1,479
Total current liabilities 1,641,005 1,919,479 280,918
Non-current liabilities
Long-term bank borrowings, non-current 170,000 147,500 21,587
portion
Convertible notes payable 1,178,969 787,399 115,236
Long term payable - - -
Deferred tax liability 27,155 27,008 3,953
Total non-current liabilities 1,376,124 961,907 140,776
TOTAL LIABILITIES 3,017,129 2,881,386 421,694
Redeemable ordinary shares 32 32 5
EQUITY
Shareholders' equity
Ordinary shares 214 214 31
Additional paid-in capital 2,138,624 2,155,241 315,421
Statutory reserves 47,638 47,638 6,972
Retained earnings (deficit) (67,594 ) 313,956 45,948
Total shareholders' equity 2,118,882 2,517,049 368,372
Noncontrolling interest 4,183 4,099 600
TOTAL EQUITY 2,123,065 2,521,148 368,972
TOTAL LIABILITIES, MEZZAINNE EQUITY AND 5,140,226 5,402,566 790,671
SHAREHOLDERS' EQUITY
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)
March 31 December 31 March 31 March 31
2008 2008 2009 2009
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMB RMB RMB USD
Net revenue
Photovoltaic modules 1,151,507 1,094,498 678,136 99,246
Photovoltaic cells 29,734 28,199 6,043 884
PV cells processing -
PV modules 0 - 0 0
processing
Raw materials 18,088 - 18 3
Total net revenue 1,199,329 1,122,697 684,197 100,133
Cost of revenue
Photovoltaic modules (965,589 ) (1,466,831 ) (627,186 ) (91,789 )
Photovoltaic cells (27,918 ) (33,666 ) (7,284 ) (1,066 )
PV cells processing -
PV modules 0 - 0 0
processing
Raw materials (15,762 ) - (281 ) (41 )
Total cost of (1,009,269 ) (1,500,497 ) (634,751 ) (92,896 )
revenue
Gross profit / 190,060 (377,800 ) 49,446 7,237
(losses)
Operating expenses
Selling expenses (21,055 ) (20,202 ) (16,328 ) (2,390 )
G&A expenses (22,518 ) (39,811 ) (44,449 ) (6,505 )
R&D expenses (4,784 ) (1,433 ) (8,185 ) (1,198 )
Total operating (48,357 ) (61,446 ) (68,962 ) (10,093 )
expenses
Operating profit / 141,703 (439,246 ) (19,516 ) (2,856 )
(losses)
Interest expenses (26,669 ) (26,769 ) (39,508 ) (5,782 )
Interest income 2,381 1,974 494 72
Exchange gain / 19,430 (28,794 ) (32,849 ) (4,807 )
(losses)
Investment income (384 )
Gain on change in
fair value of 0 50,307 85,906 12,572
derivative
Other income 2,011 4,629 3,533 517
Other expenses (12,323 ) (2,860 ) (3,584 ) (524 )
Government grant 124 3,020 1,907 279
Net income /
(losses) before 126,657 (438,123 ) (3,617 ) (529 )
income tax
Income tax benefit / (18,730 ) 19,270 (3,445 ) (504 )
(expenses)
Net income / 107,927 (418,853 ) (7,062 ) (1,033 )
(losses)
Net income /
(losses)
attributable to 3,363 (16 ) (85 ) (12 )
noncontrolling
interest
Net income /
(losses)
attributable
to shareholders 104,564 (418,837 ) (6,977 ) (1,021 )
Net income /
(losses) per share
Basic 0.43 (1.56 ) (0.03 ) (0.00 )
Diluted 0.41 (1.56 ) (0.03 ) (0.00 )
Shares used in
computation
Basic 241,181,882 268,717,524 268,848,771 268,848,771
Diluted 271,563,142 268,717,524 268,848,771 268,848,771
Net income /
(losses) per ADS
Basic 2.17 (7.79 ) (0.13 ) (0.02 )
Diluted 2.06 (7.79 ) (0.13 ) (0.02 )
ADSs used in
computation
Basic 48,236,376 53,743,505 53,769,754 53,769,754
Diluted 54,312,628 53,743,505 53,769,754 53,769,754
Source: Solarfun Power Holdings Co., Ltd.