Trina Solar Identifies Declining ASPs and Over-Supply as Responsible for Declining Revenues
Trina Solar Limited announced its financial results for the first quarter of 2013 which included net revenues of $260.2 million, a decrease of 14.0% sequentially and 25.6% year-over-year. Total shipments were 392.6 MW, compared to 414.5 MW in the fourth quarter of 2012 and 380.0 MW in the first quarter of 2012. The sequential decrease in shipments was caused primarily by a seasonal weakness in China, which, together with the continuous decline in average selling prices (ASPs) due to supply-demand imbalances, caused the decrease in revenues.
"While the average selling price of modules continued to decline in the first quarter due to the lingering supply-demand imbalance in the global PV industry, the rate of decline has slowed from previous quarters," said Mr. Jifan Gao, chairman and CEO of Trina Solar. "In this environment, we continue to focus on improving operational efficiency and exercising financial discipline. In the first quarter, the reductions in non-silicon costs we achieved outweighed the fall in ASP, and we also collected a sizeable amount of overdue accounts receivables. These efforts enable us to maintain strong liquidity and a robust balance sheet, making us better positioned to capture future growth opportunities.
"As previously announced, we completed several restructuring and streamlining initiatives in the second half of 2012 and we saw sustained improvements in our general and administrative expenses in the first quarter of 2013. We will continue to strictly control operating costs while maintaining our product quality and service capabilities. In terms of revenues, we achieved strong sequential shipment growth in Japan and India, two of the most important emerging markets for the PV industry. In Europe we worked to retain quality customers and were also able to diversify our customer base. Trina Solar remains committed to continuing to serve our customers and business partners in Europe as the EU's preliminary determination on antidumping and countervailing duty tariffs against Chinese solar products approaches.
"At the beginning of the year, we announced that the Company had been awarded the right to develop a 50 MW solar project in Gansu province, China. We began construction on the project during the end of the first quarter and expect to connect the project to the power grid and begin limited production by the end of the third quarter of 2013. For our downstream systems business, we remain committed to focusing on R&D and delivering innovative products and solutions to lower installation costs, while enhancing the efficiencies and ease-of-use of solar energy."
Gross profit in the first quarter of 2013 was $4.4 million, compared to a gross profit of $5.6 million in the fourth quarter of 2012 and $20.3 million in the first quarter of 2012. Gross margin was 1.7% in the first quarter of 2013, compared to 1.9% in the fourth quarter of 2012 and 5.8% in the first quarter of 2012. The year-on-year decrease in gross margin was due primarily to declines in the ASP of modules that exceeded decreases in costs during the past year.
Operating expenses in the first quarter of 2013 were $44.5 million, a decrease of 41.5% sequentially and a decrease of 26.0% year-over-year. The Company's operating expenses represented 17.1% of its first quarter net revenues, a decrease from 25.1% in the fourth quarter of 2012 and 17.2% in the first quarter of 2012. The sequential percentage decrease was primarily due to an accounts receivables provision reversal of $11.1 million during the first quarter of 2013 and expense control measures taken by the Company since the second half of 2012. Operating expenses in the first quarter of 2013 included $1.1 million in share-based compensation expenses, compared to $0.1 million in the fourth quarter of 2012 and $2.0 million in the first quarter of 2012.
As a result of the foregoing, operating loss in the first quarter of 2013 was $40.1 million, compared to operating losses of $70.4 million in the fourth quarter of 2012 and $39.9 million in the first quarter of 2012. Operating margin was negative 15.4% in the first quarter of 2013, compared to negative 23.3% in the fourth quarter of 2012 and negative 11.4% in the first quarter of 2012.