High liability to asset ratios and low inventory turnover signal "solvency concerns" for PV companies

Share

Just over a week after Yingli Green Energy issued a SEC filing detailing the extent of its indebtedness, analysis shows the PV manufacturing giant to have a very high – 95% – liability to asset ratio and low inventory turnover – 6.85% (based on 2014 figures).

In her "Notes from the Solar Underground", Paula Mints of SPV Market Research analyzed 14 PV companies’ liability to asset ratios and inventory turnover. As she explains, a high ratio "indicates potential solvency concerns," while a low turnover points towards inefficient use of inventory. She further told pv magazine that a healthy ratio would be below 50%.

Although Yingli refuted liquidation reports and, in a separate statement released two days after the filing, said it had taken positive steps to assuage debt and doubt over its finances, there is no doubt the company is currently in a very shaky position. The news of its financial problems wiped one-third of its value from the stock market.

It seems unlikely, however, it will be left to fail. In an interview with Bloomberg, Hong Kong-based solar company United PV said it, along with other state-backed firms or solar companies, is mulling over the possibility of offering a lifeline to Yingli.

The Chinese PV module manufacturer is not the only company to be presenting a worrying picture. Based on Mints’ analysis, nine of the leading solar companies have liability to asset ratios above 50%, and low inventory turnovers. The healthiest company analyzed was thin film’s First Solar. See table below for an overview:

Liability/Asset 2014

Inventory Turnover 2014

First Solar

25%

29.34

Gintech

40%

10.82

Solartech

40%

12.31

SunEdison

41%

6.88

NeoSolar

42%

13.49

JA Solar

62%

5.99

SunPower

63%

14.51

Trina Solar

69%

6.51

SolarWorld

74%

3.85

Jinko Solar

74%

5.28

Motech

89%

8.09

Renesola

92%

4.37

Yingli Solar

95%

1.64

Canadian Solar

101%

6.85

This article was amended on May 31. It previously read: Based on Mints’ analysis, none of the leading solar companies have liability to asset ratios above 50%, and low inventory turnovers." This has been corrected to "…nine of the leading solar companies…"