Hanwha experiences strong 2011 losses; 2012 to "remain challenging"

15. March 2012 | Industry & Suppliers, Markets & Trends | By:  Becky Stuart

As with many of its peers, Hanwha SolarOne experienced a tough 2011, with significant losses recorded across the board. Chairman and CEO, Ki-Joon Hong attributes this to a period of "adjustment and consolidation". Going ahead, he says that capacity expansions have been put on hold and that conditions will "remain challenging".

Hanwha solar photovoltaic modules for shipment

Hanwha expects to ship around one GW of photovoltaic modules in 2012.

The Chinese module manufacturer expects to see photovoltaic module shipments of around one gigawatt (GW) in 2012, based on current market conditions, which is slightly up from the 844.4 megawatts (MW) shipped in 2011, and the 797.9 MW in 2010. Of this, approximately 10 to 15 percent encompass module processing services.

Production capacities in 2011 were 800 MW for ingot and wafer, 1.3 GW for cell and 1.5 GW for modules. "The company currently has no near-term plan to add additional capacities. Management will review expansion needs in the future in line with changes in overall market demand," said Hanwha in a statement released.

Meanwhile, capital expenditures of US$100 million are forecast this year, although Hong says this will ultimately depend on both demand and "other" market conditions.

Financial breakdown

Overall, Hanwha saw significant losses in 2011. Fourth quarter (Q4) 2011 revenues fell to RMB 978.3 million ($155.4 million), a decrease of 31.9 percent from Q3 2011. For the full year (FY), net revenues decreased 15 percent, from RMB 7.54 billion in 2010, to RMB 6.41 billion ($1.01 billion) in 2011.

As aforementioned, photovoltaic module shipments were slightly up for FY 2011 from 2010, however, Q4 2011 shipments, including module processing services, decreased sequentially, from 200.9 MW in Q3 2011, to 189.1 MW (Q4 2010: 218.8 MW). Meanwhile, module processing services accounted for 8.5 percent of total shipment revenues in 2011.

Looking at the company’s main shipment markets, the U.S., China, India and Italy all saw either stable or strong growth. However, a sharp decline in shipments was seen in Germany. For the FY 2011, module revenue attributable to shipments to Europe, Middle East and Africa (EMEA) comprised 53 percent of total module revenue, while Asia accounted for 20 percent, North America 19 percent and Australia eight percent.

In Q4 2011, average selling price (ASP), excluding module processing services, decreased to RMB 6.29 per watt (US$1.00) from RMB 7.86 per watt in Q3 2011, and RMB 11.82 per watt in Q4 2010.

In terms of Q4 2011 gross loss increased from RMB 155.2 million in Q3 2011, to RMB 604.6 million ($96.1 million). In comparison, Q4 2010 saw a profit of RMB 465 million. For the FY 2011, a massive gross loss of RMB 217.1 million ($34.5 million) was recorded, compared with a gross profit of RMB 1.67 billion in 2010.

As such, Q4 2011 gross margin decreased to negative 61.8 percent, compared with negative 10.8 percent  in Q3 2011, and a positive 21.9 percent in Q4 2010. A negative gross margin of 3.4 percent was also seen for the FY 2011 (2010: positive 22.2 percent).

A significant operating loss was additionally seen in Q4 2011 of RMB 1 billion ($159.7 million), from RMB 327.8 million in Q3 2011, and an operating profit of RMB 302.5 million in Q4 2010. In terms of the FY 2011, Hanwha recorded an operating loss of RMB 1.09 billion ($174.2 million), compared with an operating profit of RMB 1.18 billion in 2010. Consequently, operating margin decreased to negative 102.8 percent in Q4 2011, from negative 22.8 percent  in Q3 2011, and a positive 14.3 percent in Q4 2010; and negative 17.1 percent for the FY 2011, compared with positive 15.7 percent  in 2010.

Furthermore, Q4 2011 net loss attributable to shareholders on a GAAP basis was RMB 832.9 million ($132.3 million), as opposed to RMB 177.6 million in Q3 2011. On a non-GAAP basis, a FY 2011 loss of RMB1.06 billion ($169.8 million) was recorded, compared with RMB 914.3 million in 2010.

Net income attributable to shareholders on a GAAP basis in Q4 2010 was RMB 370.8 million, including a non-cash gain of RMB 255.6 million from the change in fair value of the convertible feature of the company's convertible bonds. Net loss attributable to shareholders on a GAAP basis in FY 2011 was RMB 930.1 million ($147.8 million), compared with net income attributable to shareholders of RMB 757.4 million in 2010.

Hanwha also recorded certain non-cash charges for FY 2011of RMB 835.1 million ($132.7 million). This included: RMB 358.1 million ($56.9 million) from inventory write-down;  RMB 342.2 million ($54.4 million) from provisions for advance payments associated with long-term supply contracts; and RMB 134.7 million ($21.4 million) from goodwill impairment.

Hong further commented, "Excess capacity throughout the solar value chain, combined with incentive reductions in key markets, drove selling prices down at a rate faster than input costs, resulting in pressure on profitability."

Despite this, he said, "Hanwha remains unwavering in its support for the solar market overall and for our company. The business environment will remain challenging for much, if not all, of 2012. Our balance sheet is strong and our access to additional capital remains in place. Looking forward, we believe that lower prices will drive additional demand, the industry will consolidate at an accelerated pace, and we will exit this downturn in a strong competitive position."


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