Solarfun Power Holdings Co., Ltd. (�Solarfun� or �the Company�)
(NASDAQ:SOLF), a vertically integrated manufacturer of silicon
ingots and photovoltaic (PV) cells and modules in China, today
reported its unaudited financial results for the third quarter
ended September 30, 2008. 2008 THIRD QUARTER RESULTS Net revenue
was RMB 1,275 million (US$187.8 million), an increase of 69.1% from
the third quarter of 2007, but down 5.7% from the second quarter of
2008. Results were influenced by a total non-cash provision of
US$16.5 million for inventory revaluation (US$12.9 million) and
expected losses on pre-payments. Provisions were necessary as a
result of mark-to-market inventory valuations in a period of
rapidly declining raw material costs and some low-quality materials
determined to be unusable, as well as supply pre-payments that were
determined to be �at risk� and likely to not be recoverable. PV
module shipments reached 41.8 MW, representing an increase of 53%
from the third quarter of 2007, and a slight decline from 43.1 MW
in the second quarter of 2008. The Company�s ability to meet
customer demand was curtailed by lack of polysilicon material
delivery. Average selling price (�ASP�) continued to be robust at
US$4.04, but declined, as expected, from US$4.17 in the second
quarter of 2008. This was primarily due to the weakening Euro
against the U.S. Dollar. Business continued to be centered in
Europe, with Germany and Spain accounting for 53% and 24% of net
revenue in this quarter, respectively. Gross profit was RMB 46.1
million (US$6.8 million), down 61.6% from RMB17.7 million in the
third quarter of 2007, and also down from US$27.3 million in the
second quarter of 2008. Gross margin was 3.6% and was negatively
impacted by the aforementioned provisions, as well as
polysilicon-related material costs that continued to remain high
during the quarter. Without the provisions, gross margins from
normal operations would have reached 12.4%, which would have been
in-line with previously expressed expectations. The operating loss
was RMB 25.9 million (US$3.8 million). Before provisions, operating
income was RMB 86.3 million (US$12.7 million), or 6.8% of total
revenues. Selling expenses were RMB 20.2 million (US$3.0 million),
which was below the second quarter of 2008 due to an adjustment in
accrued commission expenses. Interest expense declined nearly US$1
million from the second quarter of 2008 to RMB 21.6 million (US$3.2
million) due to a reduction in outstanding bank debts and lower
interest rates from refinancing. The total exchange rate gain was
US$0.4 million. The Company recorded a RMB 30 million (US$4.4
million) currency loss largely as a result of the impact of the
declining Euro against the U.S. dollar, but was able to more than
offset this through its foreign exchange hedging program, which
resulted in a RMB 32.8 million (US$4.8 million) gain. The net loss
was RMB 44.3 million (US$6.5 million). The loss per basic ADS was
RMB 0.86 or US$0.13. Before provision adjustments, net income and
earnings per basic ADS would have been US$8.3 million and US$0.16,
respectively. Harold Hoskens, CEO of Solarfun, commented, �The
third quarter was quite challenging in some respects. The
unexpected shortfall in polysilicon material supply was certainly
disappointing. This constrained our short-term ability to grow
volume and fulfill customer demand. Our financial results were also
impacted by the inventory and pre-payment-related provisions. We
felt it necessary in view of the rapidly declining costs for
polysilicon-related raw materials to adjust our inventory
valuations, as well as account for any �at risk� pre-payments.
Although current global economic and financial conditions remain
uncertain, and we are not immune to these factors, we are
maintaining a high degree of optimism in our ability to compete and
grow in what we believe is undeniably a burgeoning market in the
long-term as renewable energy continues to grow in acceptance.
These macro conditions have impacted, and will continue to impact,
the demand and pricing for photovoltaic-based solar products.
However, we believe that the rapidly declining costs for
polysilicon, combined with our low-cost manufacturing base,
increasingly vertically integrated production process, customer
loyalty and financial stability, will allow us to weather this
environment and emerge as a stronger and viable long term player.
FINANCIAL POSITION As of September 30, 2008, the Company had cash
and cash equivalents of RMB 511.4 million (US$75.3 million) and
working capital of RMB 2.1 billion (US$310.2 million). Total bank
borrowings were RMB 1.2 billion (US$177.3 million), which was down
from the previous quarter. During the quarter, the Company raised
US$71.9 million in net proceeds from the sale of 5,421,093 ADSs via
a sales agency agreement with Morgan Stanley & Co. The Company
continued to focus on working capital management and achieved
another quarter-to-quarter reduction in days sales outstanding and
inventory turnover days from 37 days and 63 days to 28 days and 58
days, respectively. The Company spent US$16 million in capital
expenditures, US$13 million for supply prepayments, and US$26
million in acquisition costs for the remaining 48% interest in
Jiangsu Yangguang Solar, a silicon ingot producer. THIRD QUARTER
2008 AND RECENT BUSINESS HIGHLIGHTS The Company made a number of
significant achievements, including: Reached an agreement with
Q-Cells AG, pending confirmation of both Boards and based on a
previously signed letter of intent, for a three-year manufacturing
services agreement for purchase by Q-Cells of 100 MW of PV modules
per annum for three years beginning in early 2009. The agreement
also provides for PV module technology cooperation. Completed and
successfully started operations of 120 MW of additional cell and
module capacity. The Company�s total nameplate capacity is now 360
MW. Entered into an eight-year, 1.2 gigawatt contract for virgin
polysilicon with GCL Silicon Technology. Made significant progress
towards vertical-integration, with continued expansion and
increased operating volumes at its ingot and wafer slicing
operations. The Company expects to end 2008 with 100 MW of wafer
capacity (ingot and wire saw), and reach 250 MW by mid-2009. Signed
significant binding agreements with key customers, including a 47
MW contract to supply PV modules to Schuco International KG with
installations targeted for the Middle East and southeast Europe,
and a 30 MW contract to supply PV modules to Martifer Solar
Sistemas Solares, a Portugal-based leading solar project developer,
installer and producer in Europe. BUSINESS OUTLOOK The Company
recognizes that the current operating environment is evolving
rapidly and is less predictable than in previous periods. In light
of these uncertainties and based on current operating trends and
market conditions, the Company provides the following outlook: For
the fourth quarter of 2008, management expects: Total 2008
shipments to be at or slightly below the low end of its previously
stated guidance of 175 to 190 MW. ASPs in constant Euro terms will
decline from the third quarter of 2008 by less than 5%. Gross
margin to improve from the third quarter of 2008, reflecting the
positive impact of vertical integration, somewhat offset by the
strengthening U.S. dollar. Capital expenditures, supply
pre-payments and further acquisition payments to be approximately
US$100 million. For the full year of 2009, management expects:
Shipment gains of 50%, although this will not be reflected in first
quarter volumes. The Company currently has signed binding contracts
with key customers totaling 150 MW. These contracts all include a
commitment from the customer to provide cash or other monetary
guarantees to Solarfun before the end of 2008. ASP to decline 5 to
10% in constant Euro terms from the fourth quarter of 2008. The
relative rate of decline in ASPs to be more than offset by lower
polysilicon pricing. With an increasing percentage of total wafer
volume coming from the Company�s in-house facilities, management
believes that gross margins could reach 10 to 15%. Raw material
availability to be more than sufficient to meet expected demand.
The Company is well positioned to take advantage of rapidly
declining polysilicon prices. For 60% of the Company�s polysilicon
and wafer requirements, price levels will be determined based on
prevailing market conditions. A larger part of the Company�s total
wafer volume to come from in-house facilities, which should create
greater opportunities for cost optimization and technical
innovation. Capacity expansion to be placed on hold until the
demand picture becomes more clear. Funding is expected to be
adequate to meet 2009 anticipated spending requirements through a
combination of cash on hand and access to commercial bank lines of
credit. Management anticipates a return to cash flow positive
during the second half of 2009. Harold Hoskens concluded by
stating, �Solarfun faces all the same near-term challenges as our
competitors and our ability to predict our results with certainty
is also reduced. However, we are confident that our longer-term
competitive position as a low-cost converter of polysilicon will be
enhanced during this period of dynamic market changes. Over the
past year, we deliberately avoided signing long term polysilicon
supply contracts with the belief that pricing was excessive. While
the strategy was painful in the short term, we believe we are much
better positioned now in this rapidly evolving environment of
greater raw material supply and lower prices. Our customer traction
is solid and growing, our quality is respected in the marketplace
and improving, and we are prepared to profitably operate within the
new industry dynamic. In the end, 2009 will prove to be a critical
juncture for our industry; module supply/demand will be
rationalized as players retrench from aggressive expansion plans,
small or less-capitalized competitors face increasing challenges,
and growth in demand in newer solar markets starts to overtake the
large traditional markets in Europe. Ultimately, lower module
prices will drive additional demand worldwide. We are optimistic
that our low cost structure, flexible raw material purchasing
program and vertical integration strategy will allow us to improve
profitability and meet the near-term challenges confronting us.�
Conference Call: Management will host a conference call to discuss
the results at 8:00 am U.S. Eastern Time (8:00 pm Shanghai time) on
December 2, 2008. The dial-in details for the live conference call
are as follows: - U.S. Toll Free Number: +1 866 831 6162 -
International dial-in number: +1 617 213 8852 - China Toll Free
Number: +10 800 130 0399 Passcode: SOLF A live webcast of the
conference call will be available on the investor relations section
of the Company�s website at: http://www.solarfun.com.cn. A replay
of the webcast will be available for one month. A telephone replay
of the call will be available for twenty-four hours after the
conclusion of the conference call. The dial-in details for the
replay are as follows: - U.S. Toll Free Number: +1 888 286 8010 -
International dial-in number: +1 617 801 6888 Passcode: 73086529
Foreign Currency Conversion The conversion in this release of
Renminbi into U.S. dollars is made solely for the convenience of
the reader, and is based on the noon buying rate in The City of New
York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York as of September
30, 2008, which was RMB6.7899 to US$1.00. No representation is
intended to imply that the Renminbi amounts could have been, or
could be, converted, realized or settled into U.S. dollars at that
rate on Sep 30, 2008, or at any other date. The percentages stated
in this press release are calculated based on Renminbi amounts. Use
of Non-GAAP Financial Measures The Company has included in this
press release certain non-GAAP financial measures, including
certain line items presented on the basis that the one-time
provisions recorded in the third quarter of 2008 had not been so
recorded. The Company believes that both management and investors
benefit from referring to these non-GAAP financial measures in
assessing the performance of the Company and when planning and
forecasting future periods. Readers are cautioned not to view
non-GAAP financial measures on a stand-alone basis or as a
substitute for GAAP measures, or as being comparable to results
reported or forecasted by other companies, and should refer to the
reconciliation of GAAP measures with non-GAAP measures also
included herein. Safe Harbor Statement This news release contains
forward-looking statements, as defined under the Private Securities
Litigation Reform Act of 1995, such as the Company�s business
outlook for 2008, including third quarter and full year 2008
estimates for net revenue, PV product shipments, raw materials and
product prices, PV cell production capacity and gross margins.
Forward-looking statements involve inherent risks and uncertainties
and actual results may differ materially from such estimates
depending on future events and other changes in business climate
and market conditions. Solarfun disclaims any obligation to update
or correct this information. About Solarfun Solarfun Power Holdings
Co, Ltd. manufactures both PV cells and PV modules, provides PV
cell processing services to convert silicon wafers into PV cells,
and supplies solar system integration services in China. Solarfun
produces both monocrystalline and multicrystalline silicon cells
and modules, and manufactures 100% of its modules with in-house
produced PV cells. Solarfun sells its products both through
third-party distributors, OEM manufacturers and directly to system
integrators. Solarfun was founded in 2004 and its products have
been certified to TUV and UL safety and quality standards. SOLF-G
http://www.solarfun.com.cn SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of
Renminbi ("RMB") and U.S. dollars ("US$"), except for number of
shares and per share data) � � � � For the three months ended
September 30 June 30 September 30 September 30 2007 2008 2008 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited) RMB RMB RMB USD Net
revenue Photovoltaic modules 752,593 1,233,527 1,146,900 168,913
Photovoltaic cells 1,227 104,217 90,923 13,391 PV modules
processing 0 3,229 0 0 Raw materials 0 11,220 37,025 5,453 � � � �
� � � � Total net revenue 753,820 1,352,193 1,274,848 187,757 � � �
� � � � � Cost of revenue Photovoltaic modules (632,629 )
(1,056,912 ) (1,103,612 ) (162,537 ) Photovoltaic cells (1,072 )
(97,244 ) (83,053 ) (12,232 ) PV modules processing 0 (1,208 ) 0 0
Raw materials 0 (11,273 ) (42,077 ) (6,197 ) � � � � � � � � Total
cost of revenue (633,701 ) (1,166,637 ) (1,228,742 ) (180,966 ) � �
� � � � � � Gross profit 120,119 185,556 46,106 6,791 � � � � � � �
� Operating expenses Selling expenses (20,158 ) (26,482 ) (20,174 )
(2,971 ) G&A expenses (28,971 ) (34,956 ) (46,057 ) (6,783 )
R&D expenses (3,277 ) (7,697 ) (5,765 ) (849 ) � � � � � � � �
Total operating expenses (52,406 ) (69,135 ) (71,996 ) (10,603 ) �
� � � � � � � Operating profit / (losses) 67,713 116,421 (25,890 )
(3,812 ) � Interest expenses (6,683 ) (28,148 ) (21,559 ) (3,175 )
Interest income 4,333 1,368 4,280 630 Exchange gain / (losses) (698
) 4,136 (30,001 ) (4,418 ) Gain on change in fair value of
derivative 0 0 32,782 4,828 Other income 5,806 4,383 3,996 589
Other expenses (6,957 ) (6,140 ) (3,896 ) (574 ) Government grant
700 114 221 33 � � � � � � � � Net income / (losses) before income
tax and minority interest 64,214 92,134 (40,066 ) (5,899 ) � � � �
� � � � � Income tax benefit / (expenses) (1,331 ) (8,282 ) 1,224
180 Minority interest 686 (5,763 ) (5,463 ) (805 ) � � � � � � � �
Net income / (losses) 63,569 78,089 (44,306 ) (6,524 ) � � � � � �
� � Net income / (losses) attributable to ordinary shareholders
63,569 78,089 (44,306 ) (6,524 ) � � � � � � � � � Net income /
(losses) per share Basic 0.26 0.32 (0.17 ) (0.03 ) Diluted 0.26
0.31 (0.11 ) (0.02 ) � Shares used in computation Basic 240,024,754
241,340,409 258,503,644 258,503,644 Diluted 240,024,754 287,007,417
303,635,018 303,635,018 � � Net income / (losses) per ADS Basic
1.32 1.62 (0.86 ) (0.13 ) Diluted 1.32 1.54 (0.56 ) (0.08 ) � ADSs
used in computation Basic 48,004,951 48,268,082 51,700,729
51,700,729 Diluted 48,004,951 57,401,483 60,727,004 60,727,004
SOLARFUN POWER HOLDINGS CO., LTD. CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data) � � � � June 30
September 30 September 30 2008 2008 2008 (Unaudited) (Unaudited)
(Unaudited) RMB RMB USD ASSETS Current assets Cash and cash
equivalents 557,748 511,393 75,317 Restricted cash 486,220 390,660
57,535 Financial assets - 35,877 5,284 Accounts receivable, net
442,190 347,955 51,248 Inventories, net 823,379 751,739 110,714
Advance to suppliers, net 1,205,767 1,355,451 199,628 Other current
assets 164,224 249,136 36,692 Deferred tax assets 14,423 18,881
2,781 Amount due from related parties 19,548 9,344 1,376 � � �
Total current assets 3,713,499 3,670,436 540,575 � � � Non-current
assets Fixed assets � net 1,134,301 1,298,874 191,295 Intangible
assets � net 93,317 169,333 24,939 Goodwill - 134,735 19,843
Deferred tax assets 5,061 9,195 1,354 Long-term deferred expenses
195,124 218,070 32,117 � � � � Total non-current assets 1,427,803
1,830,207 269,548 � � � TOTAL ASSETS 5,141,302 5,500,643 810,123 �
� � LIABILITIES AND SHAREHOLDERS� EQUITY Current liabilities
Financial liabilities 6,254 921 Short-term bank borrowings
1,074,152 996,974 146,832 Long-term bank borrowings, current
portion 22,000 29,500 4,345 Accounts payable 170,791 176,975 26,064
Notes payable 4,726 3,104 457 Accrued expenses and other
liabilities 140,413 306,230 45,101 Customer deposits 76,415 32,612
4,803 Deferred tax liability 1,160 - - Amount due to related
parties 10,493 12,587 1,854 � � � Total current liabilities
1,500,150 1,564,236 230,377 � � � Non-current liabilities Long-term
bank borrowings, non-current portion 185,000 177,500 26,142
Convertible notes payable 1,183,195 1,176,157 173,222 Long term
payable 17,000 13,500 1,988 Deferred tax liability 8,942 28,019
4,127 � � � Total non-current liabilities 1,394,137 1,395,176
205,479 � Minority interests 175,106 12,975 1,911 � � � Redeemable
ordinary shares 32 32 5 � � � Shareholders� equity � Ordinary
shares 195 214 32 Additional paid-in capital 1,628,495 2,129,128
313,572 Statutory reserves 57,231 59,546 8,770 Retained earnings
385,956 339,336 49,977 � � � Total shareholders� equity 2,071,877
2,528,224 372,351 � � � TOTAL LIABILITIES AND SHAREHOLDERS� EQUITY
5,141,302 5,500,643 810,123 � � � Reconciliation of Non-GAAP
measures to GAAP measures � � � � September 30, 2008 � RMB US$ �
Non-GAAP net income 56,471,948 8,317,052 Inventory and
prepayment-related provisions (100,777,942 ) (14,842,331 ) Net
income (44,305,994 ) (6,525,279 ) � Non-GAAP basic earnings per ADS
1.09 0.16 Inventory and prepayment-related provisions per ADS (1.95
) (0.29 ) Basic earnings per ADS (0.86 ) (0.13 ) � Non-GAAP diluted
earnings per ADS 1.10 0.16 Inventory and prepayment-related
provisions per ADS (1.66 ) (0.24 ) Diluted earnings per ADS (0.56 )
(0.08 )
Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) (NASDAQ:SOLF)
Historical Stock Chart
From Jun 2024 to Jul 2024
Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) (NASDAQ:SOLF)
Historical Stock Chart
From Jul 2023 to Jul 2024