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JinkoSolar Returns to Profitability in Second Quarter of 2013

August 13, 2013 by Jeff Shepard

JinkoSolar Holdings Co. Ltd. announced that total revenues in the second quarter of 2013 were RMB1.76 billion (US$287.6 million), representing an increase of 51.7% from RMB1.16 billion in the first quarter of 2013 and an increase of 42.6% from RMB1.24 billion in the second quarter of 2012. The sequential increase in revenues was primarily attributable to the significant increase in the shipment of solar modules. The year-over-year increase in total revenues was mainly due to an increase in the shipment of solar modules which was offset by the decline in average selling prices (ASPs) of solar modules.

Income from operations in the second quarter of 2013 was RMB155.8 million (US$25.4 million), compared with a loss from operations of RMB16.8 million in the first quarter of 2013 and a loss from operations of RMB82.5 million in the second quarter of 2012. Operating margin in the second quarter of 2013 was positive 8.8%, compared with negative 1.4% in the first quarter of 2013 and negative 6.7% in the second quarter of 2012.

"I am pleased to report JinkoSolar's first quarter of profitability since the third quarter of 2011," commented Mr. Kangping Chen, JinkoSolar's Chief Executive Officer. "During the second quarter of 2013, increasing demand from regions where we have made strategic investments and our ability to efficiently execute our strategy further solidified our leading position in the global PV market. We increased shipment volumes and expanded our gross margin to 17.7%, making JinkoSolar among the first Chinese module producers to return to net profitability since the downturn.”

Gross profit in the second quarter of 2013 was RMB311.6 million (US$50.8 million), compared with a gross profit of RMB147.3 million in the first quarter of 2013and a gross profit of RMB103.6 million in the second quarter of 2012. Gross margin was 17.7% in the second quarter of 2013 compared with 12.7% in the first quarter of 2013 and 8.4% in the second quarter of 2012. The sequential increase in our gross margin was primarily attributable to improvements in operating efficiency, increased solar module ASPs and continued cost reductions for our polysilicon and auxiliary materials. The year-over-year increase in our gross margin was mainly due to improvements in operating efficiency and continued cost reductions for our polysilicon and auxiliary materials which were partially offset by declines in solar module ASPs.

“We recently increased our integrated production capacity from 1.2 GW to 1.5 GW as a result of technological improvements and the upgrading of production lines. By persevering through our strategy, we have successfully navigated the rapidly changing solar power environment to emerge a stronger, profitable, more nimble company. Most importantly, we expect to realize net profitability for the entire year as we are confident that this quarter's strong operational and financial performance is indicative of our future performance. Module shipments for 2013 have been revised upwards and are expected to be in the range of 1.5 GW to 1.7 GW, compared to our previous outlook of 1.2 GW to 1.5 GW,” Mr. Chen continued.

"Over the past few quarters, JinkoSolar has rapidly adapted to a number of fundamental shifts in the market and we now believe we are fully prepared to take advantage of the more favorable industry conditions. While ASPs continue to stabilize, the solar industry has begun to consolidate with demand gradually aligning with supply. These fundamental industry shifts are further supported by a series of positive developments domestically and internationally. The EU and China have reached a settlement agreement for the export of solar panels that has improved our visibility on the European market. The guidelines recently issued by China's State Council emphasized the strategic importance of the PV industry and set a clear target of 35 GW by 2015.

"We believe we are ready to demonstrate and further improve upon the state-of-the-art technology, reliability and quality of our solar products. In just the past quarter, JinkoSolar received Dynamic Mechanical Load test certification - a first in the PV industry - and Dust and Sand verification from TUV Nord, as well as Fire Resistance certification from Italy's Istituto Giordano. We have increased our ability to customize our modules for real world conditions and other customer demands. With increasing demands and a solid portfolio of products, we are poised to leverage our leading brand, strong relationships and technological leadership as the market recovers.

"As a direct result of our decision to increase our exposure globally, we have reduced our reliance on Europe, and expanded our presence in emerging markets, such as China, Japan, the United States, South Africa and India. Having seen China's potential early on, we made a significant push to capture a first mover advantage, further securing our leading position with our strong brand name ahead of our home market's rapid growth. Following the establishment of our sales office in Tokyo earlier this year, Japan continues to show promise as we push deeper into the market, making it a more significant part of our shipment portfolio. We have developed multiple meaningful relationships with customers there and look forward to future opportunities. We remain dedicated to serving our customers in the US, which has already become a strategically important market for us following the recently announced 39 MW contract to supply three utility-scale projects in the Midwestern United States. Orders from South Africa and India also continue to grow as we build our brand there. Meanwhile, we have continued our effort to penetrate new emerging markets in the Middle East and Latin America.

"We continue our transformation from a traditional manufacturer to a one-stop energy solution provider. By the end of this year, we expect to complete solar power projects with total capacity in the range of 200-300 MW and our project pipeline is now rapidly approaching 700 MW. Our financing, project development, EPC, and system operations and maintenance teams are well-positioned to take full advantage of these new opportunities. The State Council's development guidelines established a clear 35 GW target by 2015 and guaranteed subsidies for the next 20 years, which will be settled monthly. With the largest project development pipeline and scale domestically among US-listed Chinese solar manufacturers, we expect our downstream business to benefit greatly as we continue our strategic transformation,” Chen concluded.”