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JinkoSolar is ‘Encouraged’ by its Financial Results for Third Quarter ended September 30, 2012

November 19, 2012 by Jeff Shepard

"We are encouraged by our strong performance this past quarter as we continue to benefit from our strategic focus on cost reduction and geographical diversification with strong sales in China compensating for weakness in our more traditional markets. We believe we have turned a corner operationally and financially despite the global economic softening as we continue to focus on our core business and work to advance our industry leading position." stated Mr. Kangping Chen, JinkoSolar's Chief Executive Officer.

"This marks the third consecutive quarter where we effectively increased gross margin and reduced net loss as we make our way back to profitability. This was done in part, by working aggressively to maintain our industry-leading position in terms of cost structure by improving efficiency without sacrificing the quality and performance our modules are well known for."

"We continue to deepen our relationships with customers across the globe with total module shipments of 280 MW during the third quarter of 2012. The strong momentum we have picked up in China continued where shipments surged 117% quarter-over-quarter, a testament to being a market leader domestically as well as internationally. Despite the difficult circumstances in the United States, the final determination of injury by the United States International Trade Commission concerning the anti-dumping duty and countervailing duty investigation of imports of crystalline silicon photovoltaic cells and modules from the People's Republic of China was partially favorable to us and we remain fully committed to our customers in the United States. With potential European Union tariffs on the horizon, we continue to adapt our strategy there and diversify the geographic mix of our customers. We are focused on emerging markets such as China, South Africa, South America and Eastern Europe."

"Our downstream business remains on track and looks to be increasingly lucrative for us as module prices and construction expenses continue to drop along with the assurances that stable feed-in-tariffs provide. Our project development and EPC business pipeline is showing increasing strength with three projects in Northwest China about to begin construction. We have already begun to see benefits from one of our EPC projects during the quarter and expect our downstream business to increase in scale and profitability as we move forward. Likewise, we have begun to adapt our strategy and deploy resources to leverage the opportunities that will emerge following the announcements by the Chinese Energy Administration and Chinese Finance Ministry to support distributed PV systems."

"As we look forward, solar demand over the long term remains promising and we believe we are particularly well positioned to lead the industry in recovery given our strong balance sheet, competitive cost structure, efficient assets, and wide-reaching global presence. Our strong client relationships and reputation have enabled us to increase repeat business opportunities for us. We plan on continuing to manage our business prudently, adapt our strategy in line with market developments, and leverage our industry leading technology and cost structure to seize market opportunities and drive future growth," concluded Mr. Kangping Chen.

Total revenues in the third quarter of 2012 were RMB1.4 billion (US$221.1 million), representing an increase of 12.2% from RMB1.2 billion in the second quarter of 2012 and a decrease of 22.0% from RMB1.8 billion in the third quarter of 2011. The sequential increase was primarily due to the increase in the sales volume of the Company's solar modules, which was partially offset by the decline in the ASPs of the Company's solar modules.

Gross profit in the third quarter of 2012 was RMB137.4 million (US$21.9 million), compared with gross profit of RMB103.6 million in the second quarter of 2012 and gross profit of RMB66.0 million in the third quarter of 2011. Gross margin was 9.9% in the third quarter of 2012, compared with 8.4% in the second quarter of 2012 and 3.7% in the third quarter of 2011. In-house gross margin relating to the Company's in-house silicon wafer, solar cell and solar module production was 12.6% in the third quarter of 2012, compared with 11.2% in the second quarter of 2012 and 18.4% in the third quarter of 2011.

Loss from operations in the third quarter of 2012 was RMB51.5 million (US$8.2 million), compared with a loss from operations of RMB82.5 million in the second quarter of 2012 and a loss from operations of RMB197.3 million in the third quarter of 2011. Operating margin in the third quarter of 2012 was negative 3.7%, compared with negative 6.7% in the second quarter of 2012 and negative 11.1% in the third quarter of 2011.

Total operating expenses in the third quarter of 2012 were RMB188.9 million (US$30.1 million), representing an increase of 1.5% from RMB186.1 million in the second quarter of 2012. The Company's operating expenses represented 13.6% of its total revenues in the third quarter of 2012, representing a decrease from 15.0% in the second quarter of 2012, and a decrease from 14.8% in the third quarter of 2011. Net interest expense in the third quarter of 2012 was RMB51.8 million (US$8.2 million), representing a decrease of 5.6% from RMB54.8 million in the second quarter of 2012, and an increase of 4.5% from RMB49.5 million in the third quarter of 2011.

Due to the appreciation of the Euro against the RMB during the third quarter of 2012, the Company recorded a foreign currency exchange gain of RMB44.2 million (US$7.0 million) in the third quarter of 2012, which was primarily due to exchange gain of RMB49.1 million (US$7.8 million) and loss in fair value of forward contracts of RMB4.9 million (US$0.8 million). The Company recognized a loss from change in fair value of convertible senior notes and capped call options of RMB6.8 million (US$1.1 million) in the third quarter of 2012.

The Company recognized an income tax expense of RMB1.3 million (US$0.2 million) in the third quarter of 2012 due to the true-up recorded for income tax expenses applicable to the Company in 2011. The Company recognized an income tax benefit of RMB10.3 million in the second quarter of 2012 and an income tax expense of RMB1.0 million in the third quarter of 2011.

Net loss in the third quarter of 2012 was RMB54.8 million (US$8.7 million), compared with a net loss of RMB310.5 million in the second quarter of 2012 and a net income of RMB68.1 million in the third quarter of 2011. Basic and diluted loss per share was RMB0.62 (US$0.10) in the third quarter of 2012. Basic and diluted loss per ADS was RMB2.48 (US$0.39) in the third quarter of 2012. Non-GAAP net loss in the third quarter of 2012 was RMB27.8 million (US$4.4 million), compared with non-GAAP net loss of RMB297.6 million in the second quarter of 2012 and non-GAAP net loss of RMB247.9 million in the third quarter of 2011. Non-GAAP basic and diluted loss per share in the third quarter of 2012 was RMB0.31 (US$0.05). Non-GAAP basic and diluted loss per ADS was RMB1.24 (US$0.20) in the third quarter of 2012.

As of September 30, 2012, the Company had RMB345.0 million (US$54.9 million) in cash and cash equivalents and restricted cash, compared with RMB617.6 million of cash and cash equivalents and restricted cash as of June 30, 2012. Capital expenditures in the third quarter of 2012 were RMB27.6 million (US$4.4million). As of September 30, 2012, total short-term borrowings, including the current portion of long-term bank borrowings, were RMB2.1 billion (US$341.4 million), compared with RMB2.3 billion as of June 30, 2012. Total long-term borrowings were RMB275.0 million (US$43.8 million) as of September 30, 2012, compared with RMB275.0 million as of June 30, 2012. As of September 30, 2012, the Company's working capital deficit was RMB1.04 billion (US$165.4 million), compared with a deficit of RMB1.11 billion as of June 30, 2012.Third Quarter 2012 Operational Highlights

Total solar product shipments in the third quarter of 2012 were 335.2 MW, including 28.6MW of silicon wafers, 26.6MW of solar cells and 280.0MW of solar modules. By comparison, total shipments for the second quarter of 2012 were 302.1 MW, consisting of 63.3 MW of silicon wafers, 15.8 MW of solar cells and 223.0 MW of solar modules.

As of September 30, 2012, the Company's in-house annual silicon wafer, solar cell and solar module production capacity each remained at approximately 1,200 MW.