Trina Solar Q3 revenue contracts 22.9% sequentially as shipments fall short of guidance


Solar’s severe headwinds stunted Trina Solar’s recent sequential revenue surge in the third quarter (Q3), with the Chinese Tier-1 firm posting less-than-stellar revenue, gross profit and shipments.

Net revenue for Q3 came in at $741.1 million, which was a 22.9% decline on Q2, and slightly down year-on-year (YoY) too, falling from $792.6 million generated in Q3 2015.

This shortfall can largely be explained by a narrowing of demand for Trina Solar modules in its domestic Chinese market, which peaked in the middle of the second quarter. Shipments for Q3 came to 1,361.2 MW compared to 1,658.3 MW in Q2 and 1,703.2 MW during Q3 2015. As a result, gross profit reached just $125.6 million, which was down sequentially (from $176.3 million) and YoY (from $138.2 million), and gross margin also fell to 16.9% (compared to 18.3% and 17.4% sequentially and YoY respectively).

Although Trina Solar was able to cut its overheads in Q3, module average selling prices (ASPs) fell further than expected, thus stunting gross margin and profit. The firm’s operating expenses were trimmed by more than $20 million to $70.6 million, accounting for just 9.5% of net revenue as compared to 9.6% in Q2 and 16.7% in Q3 2015.

Operating income was largely centered on Trina Solar’s downstream projects, which accounted for 350 MW of the company’s module shipments. In Q3, some 26 MW of solar projects were connected in China, boosting Trina Solar’s installed portfolio to 1,302.8 MW, of which the bulk are located domestically.

"Largely as expected, we had a slowdown in the third quarter as a result of an oversupply and increasing inventory levels of modules in the market, as well as weak demand in China following a strong first half of the year as developers rushed to place orders prior to a subsidy policy adjustment," said Trina Solar CEO and chairman Jifan Gao. "As a result, our total shipments came in lower than the bottom end of our guidance."

Gao added that, despite these headwinds, Trina Solar was able to maintain a leading position in the U.S. and post record shipments to Europe. Last year the firm was one of the first Chinese solar suppliers to voluntarily withdraw from the EU’s minimum import price (MIP) undertaking.

"Moreover, shipments to India grew substantially and accounted for nearly 30% of our total shipments," said Gao. "We remain committed to pushing the technological boundary and commercializing high efficiency cells. Recently our R&D team set a world record of 19.86% aperture efficiency for our Honey Plus multicrystalline silicon modules."

As of the end of Q3, Trina Solar had module manufacturing capacity of 6 GW, cell capacity of 5 GW, wafer capacity of 1.8 GW and ingot capacity of 2.3 GW, and had $625.2 million in cash.

In the summer it was reported that Trina Solar would be going private in a $1.1 billion deal that analysts believe may allow the company to price its modules more aggressively and adopt a more long-term business approach.

Further details of Trina Solar’s privatization are expected to be discussed in an extraordinary general meeting of shareholders scheduled for December 2016. Hence, the company did not report any year-end revenue or shipment guidance.

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