Historic shipment figures cannot mask huge profit hit for Jinko

While Chinese manufacturer JinkoSolar is understandably keen to trumpet the fact it has become the first company in the world to ship more than 100 GW of solar panels, its latest set of quarterly figures has laid bare just how much havoc China's recent anti-pandemic measures are causing for the industry.

Jinko Chairman Xiande Li pointed to a background of ongoing polysilicon and shipping cost expenses. “Epidemic prevention and containment policies in China since March have resulted in logistics congestion and sharp reductions in transport capacity, which further increased cost pressures,” he said.

The extent of those pressures was outlined in an operating-profit-margin figure which dwindled from 3% in the last three months of last year to just 0.3% in the January-March period. This means the amount of profit banked by the manufacturer for each yuan of sales fell 90% in three months.

That prompted a fall in income from operations from CNY 486 million ($74.1 million) in the fourth quarter of last year to just CNY 40.8 million in the latest three-month window. That leaves shareholders banking a quarterly profit of just CNY 28.9 million, compared to CNY 240 million in the October-December period, and CNY 221 million a year earlier.

That slump in net income was booked despite an 86% year on year rise in first-quarter revenue, to CNY 14.8 billion – albeit 9.9% down from the previous quarter – and a 57% annual rise in shipments to 8.4 GW, again slipping 13.4% from the end of last year.

“To overcome these difficulties, we took early action to ensure ample reserves of raw materials,” Li wrote. And that was reflected by the CNY 3.46 billion paid by the company to its suppliers by the end of March, up from CNY 1.84 billion at the end of 2021.

“We believe that the impact of the pandemic on production and operations is temporary,” said the Jinko chairman. He also claimed that the continuing price escalation in solar products has “convinced some customers to not wait any longer to start new projects,” even if the pandemic restrictions being applied across China at the moment have held up construction of some solar fields.

That positive outlook has persuaded the manufacturer to forge ahead with production capacity expansion plans, which will see the 16.9 GW of annual monosilicon n-type cell capacity brought online in the last quarter almost doubled to 32.9 GW by year end, as well as increases in mono wafer and module capacity, from the current 40 GW and 50 GW to 55 GW and 60 GW, respectively. That 32.9 GW of n-type cell capability will form part of 55 GW of total cell capacity this year, according to Jinko, up from 40 GW.

With the manufacturer claiming a new world record cell conversion efficiency of 25.7% for its n-type TOPCon product in the recent quarter, Jinko maintained its full-year shipment predictions at 35 GW to 40 GW, with 8.5 GW to 9.5 GW expected to be shifted in the current quarter.

In terms of the balance sheet, Jinko's investment in new production capacity has seen its long-term borrowings rise from CNY 9.9 billion, at the end of the year, to CNY 11.1 billion four weeks ago as total interest-bearing debts went up from CNY 25.6 billion to CNY 27.5 billion but its cash reserves also rose, almost doubling, from CNY 8.92 billion to CNY 16.9 billion.