Canadian Solar reports very strong Q2 results on record shipments

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Canadian Solar has reported a 39% year-over-year growth in revenues to US$626 million in the second quarter of 2014, on the back of record module shipments boosted by project sales. The company also achieved an 11% operating margin and profit of $55.8 million.

An increasing amount of Canadian Solar’s revenues are coming from the Americas, at 55% during the quarter. And while sales to Asia continue to slump, Canadian Solar still claims the position of the biggest foreign module maker in the Japanese market.

Canadian Solar has long emphasized profitable growth, not just sales volume. 1/3 of the company’s revenues during the quarter came from its solar project development and construction business, which offers higher margins. During the second half of the year the company expects a higher portion of revenues from its Total Solutions business, to reach 50% over the course of the year.

Canadian Solar estimates a 1.3 GW pipeline, nearly half of which is in Ontario. Including 309 MW of third-party developed projects for which the company is supply engineering, procurement and construction (EPC) services, Canadian Solar has a backlog of 535 MW of projects in Canada.

Japan is another important market for Canadian Solar, with a 405 MW project pipeline. However, Canadian Solar is at a much earlier stage with its Japanese projects. The company has started construction on its first utility-scale Japanese project at 1.2 MW, and has begun site work on another. Canadian Solar expects Japanese projects to begin contributing to revenue in late 2015.

By contrast, Canadian Solar has a late-stage project pipeline of only 106 MW in the United States, as well as a few projects in China. The company says that it has been building relationships in China, and expects more projects in the nation in the future.

Canadian Solar is also contemplating a yieldco vehicle, and says that it will be making a decision in early 2015. “If we decided to launch a yieldco, clearly we have a strong Japanese pipeline,” notes Canadian Solar CFO Michael Potter. “Therefore we will analyze the different strategies: a country-specific yieldco, or a global yieldco.”

The company also says that the trend towards yieldcos is creating stronger demand. “The price for projects is definitely going up,” says Potter. “You can see a certain breakthrough in the desire for people to invest in solar in many markets and that is helping our business today.”

As a PV maker with a module factory in Ontario, Canadian Solar is in a different position regarding recent U.S. tariffs than other PV makers who manufacture in China. The company is currently supplying the U.S. market with modules from its Ontario factory comprising cells from China, which means that these are subject to the lower 2012 tariff rates on Chinese cells.

Canadian Solar is contemplating building a factory in a third nation to supply its cells, but does not say where, referring to a feasibility study which it is conducting. However, Canadian Solar notes that while it is able to leverage its global footprint, CEO Dr. Shawn Qu emphasizes that “In no way is Canadian Solar dependent upon the US market”.

In the third quarter of 2014 Canadian Solar expects to again increase module shipments to 720 to 750 MW, and to realize $760-810 million in revnues. The company has maintained its full-year guidance of 2.5-2.7 GW of shipments, with $2.7-2.9 billion in revenues, even after holding up to 250 MW of projects on its balance sheet.