Shunfeng's H1 net profit slumps 68% YOY due to curtailment and delayed tariffs

Diversified solar energy company Shunfeng International Clean Energy (SFCE) has published first half (H1) 2016 financials that reveal a 68.4% fall in net profit year-on-year, dropping from RMB 172.5 million in 2015 ($23.8 million) to RMB 54.5 million ($8.1 million) for the six months ended June 2016.

This slump, which is less than the 80% profit loss warning issued a few weeks ago, is being attributed by SFCE to ongoing curtailment issues with the firm’s commissioned solar farms in China. Allied to delayed tariff payments on its connected downstream farms, this served to impinge SFCE’s net profit margin despite strong performances in all other sectors of its business.

"The new energy industry remained in a challenging business environment," said SFCE executive director and CEO Eric Luo. "Facing intense competition and various challenges, the company adapted to development trends and continued with its strategic transition. In the international market, the company gradually transformed ourselves from a developer of solar products and solar power plants into a diversified service provider of comprehensive clean energy solutions."

Revenue for SFCE rose 30.9% year-on-year, reaching RMB 4,607 million ($690 million), while a gross profit of RMB 990.9 million ($148 million) represented a 114% increase on H1 2015. Gross profit margin was also up significantly to 21.5% – an increase of 64% in the space of a year.

This revenue increase was attributed to increased sales of solar products to independent third parties globally, Luo said, with shipment growth of 33.2% over last year resulting in more than 1,580 MW of shipments of SFCE’s solar power manufacturing operations. Of that figure, the group’s five largest customers accounted for 19.1% of total revenue, which is a reduction on last year’s 26.6% and a reflection of the fragmentation of its customer base.

Solar module shipments reached 780 MW – a 42% increase – with solar cell shipments of 734.1 MW representing a huge 84% increase in the space of a year. Wafer shipments were also up significantly, but at 74.3 MW were still a small fraction of overall revenue.

SFCE’s downstream operations reached 681,930 MW of installed solar PV capacity by the end of the first half of the year, representing 33% growth on H1 2015. To date for the year, the company has connected 1,780 MW of solar to the grid – mostly in China – and has 212 MW of projects under construction.

Suniva, the U.S. solar module manufacturer of which SCFE holds a majority stake, is close to completing the expansion of its 430 MW Norcross cell factory – a project that will significantly reduce the financial burden on SFCE.

Another interest, Meteocontrol, has signed agreements with 19 new business partners and has monitoring solution contracts with around 900 MW of PV plants ready to be constructed, SFCE confirmed.

Zhang Yi, Chairman of Shunfeng, said: "As countries around the globe have signed the historic L’Appel de Paris, governments were more resolute in tackling climate changes and took more concrete steps to promote clean energy, energy conservation and emission reduction. In addition to the 257 GW of PV installed capacity accumulated globally in 2015, countries around the world invested more in PV projects in the first half of this year. It is expected that new installed capacity for the full year will continue to rise and may reach 68 GW, with Europe, the U.S., Japan and China seeing the fastest growth.

"However, it is no doubt that the world’s economy met difficulties in the first half of this year," Zhang stressed.