ReneSola posts $20m loss in Q3 as revenue falls short of guidance

ReneSola, a Tier-1 Chinese solar company, has posted a net loss of $20.5 million in the third quarter (Q3) 2016 following four consecutive quarters of profit.

In a tale familiar to almost every large Chinese solar firm, Q3 delivered straitened revenues and reduced shipments for ReneSola as their domestic market tightened its PV belt, causing a global domino effect of module oversupply leading to record low average selling prices (ASPs).

Given this contraction, ReneSola was unable to reach guidance revenue of $200 million for the quarter, instead posting $187 million, which was a 25.2% sequential reduction and some 49.2% down year-on-year.

Gross margin slipped to 10.1% – albeit in line with guidance – which lowered gross profit to $18.9 million, a slump of 54.2% on Q2 and 68.2% on Q3 2015. Module shipments for Q3 were 191.2 MW, down from 282.4 MW in Q2 and 52.9% below Q3 2015’s shipments. Wafer shipments also slumped significantly.

However, there were a handful of positives to be extracted from ReneSola’s filing. The company raised $27.8 million from the sale of four large-scale solar farms in the U.K., and also successfully offloaded 2.5 MW of projects in Japan and 1.3 MW in China. A further six utility-scale U.K. solar farms are due to be sold, totaling 26 MW. Revenue from this transaction will be recognized in Q4.

ReneSola’s downstream project pipeline grew to more than 1 GW during Q3, of which 448 MW are "shovel-ready", according to the company. Of that figure, 187.3 MW of shovel-ready projects are located in China, 104.7 MW are in the U.S., and 116 MW are located in Turkey. ReneSola’s downstream strategy remains rooted in building in developed markets that offer the promise of stable returns.

"Q3 financial results fell short of expectations as weak demand led to reduced shipments and significant pricing pressure," said ReneSola CEO Xianshou Li. "While we tackled prevailing market challenges through expense control, we reported our first loss after four consecutive profitable quarters."

The CEO added that ReneSola was able to pay down short-term debt in Q3 as the firm takes seriously its commitment to improve its balance sheet. Further headwinds are expected in 2017, Li stressed, with ReneSola eager to remain "focused on project development with rapid monetization, expansion through technological improvements, and streamlined operations with prudent cost control".

For Q4, ReneSola expects an uptick in revenue, publishing guidance of between $220 million to $240 million, but with gross margin contracting further to the high-single digits as wafer prices continue to fall and polysilicon prices remain high.