Canadian Solar back into profit


Canadian Solar‘s latest figures paint a positive picture for the Chinese company with shipments and revenues on the rise but the trumpeted change in focus to the higher-margin ‘total solutions‘ downstream business seems to have lost its way in the final quarter of an otherwise successful 2013.

Net revenue from the plant development business fell from 41.1% of Canadian Solar’s total net revenue in the July-to-September period, to 23.4% in the final three months of last year, according to figures released by the company today.

CEO Shawn Qu rightly lauds the company’s return to profitability in 2013 and pointed to a global rationalization of module manufacturing capacity, stabilizing selling prices and robust demand as the reasons behind a resurgence in the traditional manufacturing side of Canadian Solar’s business but his prediction the downstream segment of the company is expected to account for half of this year’s net revenue hints at internal dissatisfaction with the retreat by total solutions, from October to December.

With module shipments rising from 478 MW to 621 MW on a quarterly basis, and net revenues up 5.8% quarter-on-quarter – and 76.2% compared to the final quarter of a torrid 2012 – to US$519.5 million for the three months, it is at least a pleasant problem for the board to wrestle with.

The geographical breakdown of module shipments and project pipelines also paints an interesting picture with the seasonal nature of the Chinese solar market illustrated by a rise from less than 1% of Canadian Solar’s Q3 revenues to a thumping 42.9% in the final three months as Qu highlighted the attraction of the company’s huge domestic market and improving payment terms and pricing.

Qu also highlighted the company’s focus on ‘high-visibility’ late stage projects with a pipeline of 290 MW in its home market as well as 477 MW in Canada, 329 MW in Japan and 164 MW in the U.S.

Japanese shipments fall

Japanese shipment figures, however, are one of few black marks in the figures, with just 17.9% of the company’s modules shipped to Japan, compared to 29.5% in the previous quarter.

And while a rise in the percentage of revenue garnered from the ‘Asia and other’ segment, to 62.4% in Q4, and a fall in the moribund European market (to 5.5%) are encouraging, a fall in the portion of revenue raised in the Americas – from 46.9% in Q3 to 32.1% – is disappointing, particularly with the clock ticking on the U.S. market now president Barack Obama has announced the eventual withdrawal of the solar investment tax credit (ITC).

The figures acknowledge the ongoing contract dispute with troubled wafer supplier LDK Solar may affect the final figures, if a decision is reached any time soon by the Suzhou Intermediate Court, and mention a $3.7 million write-down suffered by the company on its mono crystalline ingot furnaces but with module shipments of 1.89 GW last year up from 1.54 GW in 2012, and net revenue up from $1.3 billion to $1.65 billion, Qu is predicting more good news ahead.

The company is predicting 2014 module shipments of 2.5-2.7 GW and net revenue of $2.7-2.9 billion with 470-490 MW of modules and $415-430 million of revenue by the end of this month despite the impact of heavy snow on some Canadian projects and the recent cell plant factory fire in Suzhou.

The company expects China, Japan, Canada, the U.S. and India to continue to be healthy markets this year with further opportunities in South Africa, the Middle East and South America.