JinkoSolar Announces Third Quarter 2012 Results

JinkoSolar Holding Co., Ltd. (“JinkoSolar” or the “Company”) (NYSE: JKS), a leading global solar power product manufacturer, today announced its unaudited financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights

  • Total solar product shipments were 335.2 megawatts (“MW”), of which 280.0MW were solar modules, 28.6MW were silicon wafers, and 26.6MW were solar cells. This represents an increase of 11.0% from 302.1 MW in the second quarter of 2012, and an increase of 30.1% from 257.7 MW in the third quarter of 2011.
  • Total revenues were RMB1.4 billion (US$221.1 million), representing an increase of 12.2% from the second quarter of 2012, and a decrease of 22.0% from the third quarter of 2011.
  • Gross margin was 9.9%, compared with 8.4% in the second quarter of 2012 and 3.7% in the third quarter of 2011.
  • In-house gross margin[1] was 12.6%, compared with 11.2% in the second quarter of 2012 and 18.4% in the third quarter of 2011.
  • Loss from operations was RMB51.5 million (US$8.2 million), compared with a loss from operations ofRMB82.5 million in the second quarter of 2012, and a loss from operations of RMB197.3 million in the third quarter of 2011.
  • Net loss was RMB54.8 million (US$8.7 million), compared with a net loss of RMB310.5 million in the second quarter of 2012, and net income of RMB68.1 million in the third quarter of 2011.
  • Diluted loss per share was RMB0.62 (US$0.10), compared with diluted loss per share of RMB3.50 in the second quarter of 2012, and diluted loss per share of RMB2.97 in the third quarter of 2011.
  • Diluted loss per American Depositary Share (“ADS”) was RMB2.48 (US$0.39), compared with diluted loss per ADS of RMB14.00 in the second quarter of 2012, and diluted loss per ADS of RMB11.88 in the third quarter of 2011. Each ADS represents four ordinary shares.
  • Non-GAAP net loss[2] 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.
(1) JinkoSolar defines “in-house gross margin” as the gross margin of PV modules produced using the Company’s in-house produced silicon wafers and solar cells.
(2) JinkoSolar adjusts net loss to exclude 1) the expenses related to the issuance of the Company’s convertible senior notes, 2) changes in the fair value of the convertible senior notes and capped call options, 3) interest expenses on the convertible senior notes, and 4) the exchange gains on the convertible senior notes and capped call options.

“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 Chinawas 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 Chinaabout 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.

Third Quarter 2012 Financial Results

 

Total Revenues

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 and Gross Margin

Gross profit in the third quarter of 2012 was RMB137.4 million (US$21.9 million), compared with gross profit ofRMB103.6 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.

Income / (Loss) from Operations and Operating Margin

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.

Interest Expense, Net

 

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.

 

Foreign Currency Exchange Gain / (Loss)

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 ofRMB4.9 million (US$0.8 million).

Change in Fair Value of Convertible Senior Notes and Capped Call Options

 

The Company recognized a loss from change in fair value of convertible senior notes and capped call options ofRMB6.8 million (US$1.1 million) in the third quarter of 2012.

Income Tax (Expense)/ Benefit

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 ofRMB1.0 million in the third quarter of 2011.

Net Income / (Loss) and Earnings / (Loss) per Share and per ADS

Net loss in the third quarter of 2012 was RMB54.8 million (US$8.7 million), compared with a net loss ofRMB310.5 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.

Financial Position

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 ofJune 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 withRMB275.0 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

 

Solar Product Shipments

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.

Capacity Expansion of Solar Products

 

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.

Recent Business Developments

  • In August 2012, JinkoSolar won a bid from China Guangdong Nuclear Solar Energy Development Co., Ltd. to supply 30 MW of PV modules for a PV power plant project planned in Hami City, Xinjiang Province, China.
  • In August 2012, JinkoSolar’s testing facility received certification from China National Accreditation Service for its industry leading quality controls.
  • In August 2012, JinkoSolar was selected to deliver a chrome mine located in Limpopo Province, South Africawith the first ever off-grid utility scale PV system in South Africa. The 1 MW plant will produce approximately 1.8 GWh of electricity per year and will effectively reduce the mine’s daytime diesel dependency for the next 20 to 30 years.
  • In September 2012, JinkoSolar won a bid from China Power International New Energy Holding Ltd. to supply 40 MW of PV modules for two PV power plant projects in Baiyin and Wuwei cities in Gansu Province, China. JinkoSolar will deliver 163,200 high-efficiency solar panels to the two projects.
  • In September 2012, JinkoSolar signed a cooperative agreement with China Jiangxi Corporation for International Economic & Technical Co, Ltd. to provide technical support for its 50MW solar power project development in Kenya. According to the agreement, JinkoSolar has also been appointed as the preferred module supplier for the project. The project is planned to occupy 81 hectare and is expected to be one of the largest grid connected solar power plants in Africa.
  • In October 2012, JinkoSolar won a bid from China Three Gorges New Energy Corp., a wholly-owned subsidiary of China Three Gorges Corporation, to supply 50 MW of solar modules for a PV power plant in Gansu Province, China.

Operations and Business Outlook

 

Fourth Quarter 2012 Guidance

Based on current operating and market conditions, JinkoSolar’s total solar module shipments for the fourth quarter of 2012 are expected to be approximately 250 MW to 300 MW, as compared to the 280.0 MW of module shipments made during the third quarter of 2012. JinkoSolar’s in-house annual silicon wafer, solar cell and solar module production capacity are each expected to be approximately 1,200 MW by the end of 2012.

 

Conference Call Information

JinkoSolar’s management will host an earnings conference call on Tuesday, November 20, 2012 at 8:00 a.m. U.S. Eastern Standard Time (9:00 p.m. Beijing / Hong Kong the same day).

Dial-in details for the earnings conference call are as follows:

Hong Kong / International: +852-2475-0994
U.S. Toll Free: +1-866-519-4004
Passcode: JinkoSolar

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A telephone replay of the call will be available after the conclusion of the conference call through 12:00 a.m. U.S. Eastern Standard Time, November 28, 2012. The dial-in details for the replay are as follows:

International: +61-2-8199-0299
Passcode: 64800368

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of JinkoSolar’s website at http://www.jinkosolar.com.

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