Shunfeng records 66% 1H profit decline

In line with its profit warning issued on August 4, China’s Shunfeng has recorded a massive 65.8% 1H 2015 drop in net revenues, from RMB 503.9 million (around $79 million) to RMB 172.5 million (around $27 million). Gross profit, meanwhile, spiraled down from RMB 750 million, to RMB 461.6 million. These figures are a far cry from the annual results it announced this March.

A 19.9% drop in average selling prices (ASPs) of solar modules, from RMB 3.97/W to RMB 3.18/W was cited as a main factor, as were "significant" increases in operating expenses. However, also to blame were an increase in financial costs from convertible bonds issued in December 2014 and January 2015 connected to business expansion; and an inability to capitalize certain interest expenses relating to the development of solar plants.

The ASPs offset an increase in solar module shipments, which increased from 372.7 MW in 1H 2014, to 548.7 MW. At 1.2 GW, overall solar shipments – modules, cells and wafers – grew from the 997.5 MW shipped last year. Revenues in this segment rose from RMB 2.8 billion to RMB 3 billion.

Representing growth of 216.9%, revenues from its solar power generation business reached RMB 453.8 million, while revenues from solar power plant operations recorded RMB 48.1 million, up from nothing the previous year. Total revenues hit RMB 3.5 billion, up 19.5% on 2014’s RMB 2.9 billion.

Growth of 176% to 512,751 MWh was recorded in Shunfeng’s solar power generation business, due to an increase in operational grid-connected solar projects, from 890 MW as of June 30, 2014, to 1.6 GW as of June 30, 2015.

Overall, the company says it has 2.3 GW of solar projects in China, of which 1.9 GW are under construction. The majority are utility-scale plants. Via its S.A.G. Solarstrom acquisition, Shunfeng provided EPC services for 36 MW of solar plants in 1H 2015, while S.A.G.’s wholly owned subsidiary, meteocontrol GmbH, started providing monitoring services for an additional 800MW of solar plants.

Shunfeng noted in its financials that also as of June 30, 2015, its current liabilities exceeded its current assets by RMB 2.8 billion, and capital expenditures amounted to RMB 3.4 billion. Overall, the company has access to banking credit and facilities totaling RMB 40 billion, to be provided by Industrial Commercial Bank of China and China Minsheng Banking Corporation Limited.

Primarily impacted by increased interest on bank and other loans, finance costs rocketed from RMB93.3 million in 1H 2014 to RMB194.6 million. This was partially offset by an increase in the capitalized amount of finance costs from RMB111.2 million, to RMB169.7 million.

Ignoring the bad news, Shunfeng chairman, Zhang Yi said he was excited about the future opportunities to "bring cost-competitive clean energy solutions to an even broader, global customer base." Through its various joint ventures and acquisitions in the areas of heat pumps and the LED and solar businesses, Shunfeng is aiming to help customers "reduce energy consumption by 50% to 70%."

Shunfeng did not issue any guidance for the rest of 2015.