Interview: Fundamentals for Yingli good, must address debt


What do you make of the candid assessment from Yingli of the danger its debt poses to its business?

This filing raises a lot of concerns. Firstly because Yingli’s bad debt has been raising concern for a while. Additionally the industry has seen major firms go down in the past. So my first impression is that this wasn’t a surprise, every company has to write the risks to the company in its annual report, and so that the debt was listed wasn’t surprising.

Have you previously been hearing worrying reports over the last couple of weeks? Were alarm bells ringing?

It hasn’t come out of the blue. I’ve been tracking Yingli for a while and this has always been a weak point when looking at the company. It’s been more-and-more of a concern as other suppliers have really been able to turn around their balance sheets while Yingli has been taking quite a bit longer.

Other suppliers turning around their balance sheet has been on the back of project business, but a company needs to be able to raise debt finance to do that. Has Yingli been hamstrung because of its debts in turns of entering the project game?

Raising capital is a concern for Yingli and you can see that noted in its annual report. However when you’re thinking about creating the right environment for Yingli to survive, or for Yingli to thrive, there couldn’t be a better time.

In terms of financing that is a real risk but the solar market right now is a pretty balanced market between supply and demand. Module price are falling, but they are not falling at the rate we were seeing in past years – so that provides some stability for the company.

In terms of raising financing, that is a huge risk for the company and whether Yingli can do that will determine the fate of the company.

So then, would you say it’s pretty unclear as to what the next steps for Yingli is in terms of raising financing?

It is entirely up to the company’s own execution.

Going back to what you said about the solar market, how convinced are you that Yingli’s fundamentals, leaving its debts to one side, are good?

When looking at Yingli, while it’s not surprising that the debt is an issue that is constantly being raised. But Yingli is comparable to other top Chinese manufacturers.

When you look at Yingli in any other respect, especially in terms of its strategy execution in 2014, it was able to diversify its shipments, it was able to grow its gross margins, it was able to reduce its internal costs, so in those strategy respects Yingli is comparable to other top manufacturers. And while Yingli is no longer number one, it is still one of the top manufacturers in terms of shipments.

The debt is a weak point and going forward Yingli’s ability to stay in its place as a top producer is has to come with it addressing this debt issue.

I know for one thing that I am really interested to hear what Yingli will say on its Q1 earnings call and it will be interesting to hear the questions from the financial analysts. Yingli can’t hold off too long before holding a conference call because otherwise it will be bad news for its stock.

Yingli has yet to announce a time or date for its Q1 conference call.

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