JinkoSolar, the leading Tier-1 Chinese solar firm in terms of module shipments, has posted a set of strong third quarter (Q3) financials that serve to highlight the current challenges facing the solar industry.
Despite achieving strong shipments and revenue growth against Q3 2015, this year’s third quarter performance sunk slightly below the second quarter, and perhaps hints at a few tougher quarters to come for the firm, as well as other large Chinese module producers.
Revenue for Q3 hit $855.3 million, which represented a 39% increase year-on-year (YOY), but was down 4.4% on Q2. Falling module prices are only partly to blame for this contraction because shipments were also down sequentially – from 1,716 MW in Q2 to 1,606 MW in Q3 as the effects of China’s second half (H2) slowdown were felt.
Gross margin, however, improved, reaching 22.1% against 20.4% in Q2 (and 21.3% in Q3 2015), and JinkoSolar reported a strong 29.1% increase in the amount of revenue generated across its power projects business – which totaled $55.8 million.
Yesterday the company confirmed that it had finalized the sale of 55% of its shares in its downstream business, which has now been fully spun off into Jinko Power. Up to September 30, Jinko’s downstream portfolio amounted to 1,314 MW of solar PV.
Income from operations in Q3 was $90.1 million, which was approximately 20% higher than in Q2 and almost double that achieved in Q3 2015,while non-GAAP net income attributable to JinkoSolar’s shareholders fell slightly to $45.8 million, leaving shares in the company at $0.92, which was again approximately a 20% reduction on Q2.
JinkoSolar’s gross profit in the third quarter rose against Q2 to reach $188.6 million, which was a healthy return for the company. Operating margin was 11.5%, compared to 12.9% in Q2 and 11.9% in Q3.
JinkoSolar CEO Kangping Chen called the solar environment in Q3 "challenging", but added: "Based on our visibility into Q4, we are once again raising our full year 2016 shipment guidance to 6.6-6.7 GW from our previous guidance of 6-6.5 GW. We are well positioned to continue benefiting from the global adoption of solar energy, which is playing a more important role in the global energy landscape."
The $250 million cash sale of Jinko Power to Shangrao Kangsheng, completed this week, will serve to improve JinkoSolar’s balance sheet in Q4, lowering its debt and net gearing ratio. “We expect to report a gain on the sale in Q4,” said Chen. “This injection into our already substantial cash position will also provide us with the extra flexibility for our future operations.
Ahead to 2017
The CEO stressed that demand for solar modules in China in H2 remained robust as module prices there stabilized, and the company fully expects an uptick in demand in the first half of next year. Hinting at Donald Trump’s recent election victory, Chen diplomatically stated that "demand in the U.S. is stable despite recent market panic, which we believe is only temporary".
"We expect the U.S. market will heat up again during the second half of 2017," Chen said. Moving on to Europe, and following on from today’s confirmation that JinkoSolar is one of five Chinese firms to be removed from the EU’s minimum import price (MIP) undertaking, Chen said that JinkoSolar’s withdrawal will boost its outlook for European markets.
"We also reinforced our presence on the ground in India by opening a new office to offer local technical and logistical support to our customers there," said the CEO. "We expanded our emerging market presence to more than 40 countries, and strengthened our leading position in key markets such as Chile, Mexico and the UAE."
On the technology front, JinkoSolar’s mono wafer capacity using diamond-wire cutting is now fully operational, and will be scaled to support its PERC lines in 2017, Chen confirmed.
For Q4, JinkoSolar is forecasting module shipments in the range of 1.7 to 1.8 GW. The company ended Q3 with $547.3 million in cash.