Canadian Solar Projects KK

News

2019-11-20news

CANADIAN SOLAR REPORTS THIRD QUARTER 2019 RESULTS

GUELPH, Ontario, Nov. 12, 2019 /PRNewswire/ — Canadian Solar Inc. (“Canadian Solar” or the “Company”) (NASDAQ: CSIQ), one of the world’s largest solar power companies, today announced financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights

  • Total solar module shipments were 2,387 MW, compared to 2,143 MW in the second quarter of 2019 and third quarter 2019 guidance of 2.2 GW to 2.3 GW.
  • Net revenue was $759.9 million, compared to $1.0 billion in the second quarter of 2019 and third quarter 2019 guidance of $780 million to $810 million.
  • Gross margin was 26.2%, compared to 17.6% in the second quarter of 2019 and third quarter 2019 guidance of 24% to 26%. Gross margin was 23.0% excluding a $24.3 million countervailing duty (“CVD”) true-up benefit.
  • Net income attributable to Canadian Solar on a GAAP basis was $58.3 million, or $0.96 per diluted share, compared to $62.7 million, or $1.04 per diluted share, in the second quarter of 2019.
  • Net income attributable to Canadian Solar on a non-GAAP basis was $40.1 million, or $0.66 per diluted share. This excludes a $24.3 million CVD true-up benefit, net of income tax effect. For a reconciliation of results under generally accepted accounting principles in the United States (“GAAP”) to non-GAAP results, see the accompanying table “About Non-GAAP Financial Measures”.
  • Net cash provided by operating activities was approximately $22.4 million, compared to $225.8 million in the second quarter of 2019.
  • As of September 30, 2019, the Company’s portfolio of utility-scale solar power plants in operation was 795.8 MWp with an estimated total resale value of approximately $900 million.

Third Quarter 2019 Results

Net revenue in the third quarter of 2019 was $759.9 million, compared to $1.0 billion in the second quarter of 2019, and $768.0 million in the third quarter of 2018. The sequential decline primarily reflects the lower revenue from the sale of solar power plants.

Total solar module shipments in the third quarter of 2019 were 2,387 MW, compared to 2,143 MW in the second quarter of 2019 and third quarter 2019 guidance of 2.2 GW to 2.3 GW. Total solar module shipments in the third quarter of 2019 included 61 MW shipped to the Company’s utility-scale solar power projects. Solar module shipments recognized in revenue in the third quarter of 2019 totaled 2,156 MW, compared to 2,376 MW in the second quarter of 2019 and 1,521 MW in the third quarter of 2018.

Gross profit in the third quarter of 2019 was $198.9 million, compared to $182.6 million in the second quarter of 2019 and $200.4 million in the third quarter of 2018. The benefit for the anti-dumping (“AD”) and CVD true-up was $24.3 million in the third quarter of 2019, $21.6 million in the second quarter of 2019, and $8.3 million, in the third quarter of 2018.Gross margin in the third quarter of 2019 was 26.2%, compared to 17.6% in the second quarter of 2019 and 26.1% in the third quarter of 2018. Non-GAAP gross margin, which excludes the impact of the quarterly AD/CVD true-up, was 23.0% in the third quarter of 2019, compared to 15.5% in the second quarter of 2019 and 25.0% in the third quarter of 2018.

The Company’s Module and System Solutions (“MSS”) business comprises primarily the design, development, manufacture and sale of solar modules, other solar power products and solar system kits. The MSS business also provides engineering, procurement and construction (“EPC”) and operating and maintenance (“O&M”) services. The Company’s Energy business comprises primarily the development and sale of solar projects, operating solar power projects and the sale of electricity. Module sales from the MSS business to the Energy business are on terms and conditions similar to sales to third parties.

The Company develops solar power projects worldwide. Where applicable, the Company may apply for and/or be entitled to receive a feed-in tariff (“FIT”) for its projects. Alternatively, the Company may participate in public or private energy auctions and bidding, which result in long-term power purchase agreements (“PPAs”). The Company may also sell all or a portion of the electricity generated from its solar power projects on the merchant power market. Due to the relatively long lead times (usually two to four years) required to develop solar power projects and bring them to a commercial operation date (“COD”), the actual gross margin of a project may deviate from the expected gross margin. The deviation may be caused by, among other things, changes in political and economic conditions in host countries, project specific conditions, fluctuations in the price of solar modules and other components, changes in the cost of EPC services and the capital return requirements of solar asset buyers. In recent years, the Company has sold some solar power projects before COD. We typically refer to these sales as “notice to proceed” or NTP sales. In NTP sales, the revenue is lower while the gross margin percentage is higher than in COD sales, even if the absolute margin is the same. Results from the Energy business may be lumpy from quarter to quarter, depending on whether projects are sold at NTP or COD, project sale transaction dates and the profit level of each project.

The following tables provide selected financial data for the Company’s MSS and Energy businesses:

Three Months Ended September 30, 2019
(In Thousands of U.S. Dollars)

MSS

Energy

Elimination

Total

Net revenue

674,921

97,550

(12,589)

759,882

Cost of revenue

493,505

77,589

(10,126)

560,968

Gross profit

181,416

19,961

(2,463)

198,914

Gross Margin

26.9%

20.5%

26.2%

Income (loss) from operations

86,686

(4,116)

(2,463)

80,107

Nine Months Ended September 30, 2019
(In Thousands of U.S. Dollars)

MSS

Energy

Elimination

Total

Net revenue

1,816,938

504,075

(40,137)

2,280,876

Cost of revenue

1,382,545

453,292

(43,956)

1,791,881

Gross profit

434,393

50,783

3,819

488,995

Gross Margin

23.9%

10.1%

21.4%

Income (loss) from operations

165,864

(22,229)

3,819

147,454

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

(In Thousands of U.S. Dollars)

MSS:

Solar modules and other solar power products

539,038

1,435,262

Solar system kits

28,100

85,020

EPC services

69,429

193,533

O&M services

5,535

13,442

Others (materials and components)

20,230

49,544

Subtotal

662,332

1,776,801

Energy:

Solar power projects

83,973

474,506

Electricity

1,090

4,066

Others (EPC and development services)

12,487

25,503

Subtotal

97,550

504,075

Total net revenue

759,882

2,280,876

Total operating expenses in the third quarter of 2019 were $118.8 million, compared to $121.9 million in the second quarter of 2019 and $104.5 million in the third quarter of 2018.

Selling expenses in the third quarter of 2019 were $46.9 million, compared to $45.4 million in the second quarter of 2019 and $38.4 million in the third quarter of 2018. The sequential increase was primarily due to an increase in shipping and handling costs, partially offset by lower project transaction fees.

General and administrative expenses in the third quarter of 2019 were $61.5 million, compared to $65.7 million in the second quarter of 2019 and $58.9 million in the third quarter of 2018. The sequential decrease was mainly due to a $7.3 million decrease in impairment in the third quarter of 2019, compared to the second quarter of 2019 and $1.6 million decrease in labor cost, partially offset by a $6.0 million customer settlement.

Research and development expenses in the third quarter of 2019 were $11.6 million, compared to $12.1 million in the second quarter of 2019 and $10.1 million in the third quarter of 2018.

Other operating income in the third quarter of 2019 was $1.2 million, compared to $1.3 million in the second quarter of 2019 and $2.9 million in the third quarter of 2018.

Income from operations in the third quarter of 2019 was $80.1 million, compared to $60.7 million in the second quarter of 2019, and $95.9 million in the third quarter of 2018. Operating margin was 10.5% in the third quarter of 2019, compared to 5.9% in the second quarter of 2019 and 12.5% in the third quarter of 2018.

Non-cash depreciation and amortization charges in the third quarter of 2019 were $37.0 million, compared to $39.7 million in the second quarter of 2019 and $32.5 million in the third quarter of 2018. Non-cash equity compensation expense in the third quarter of 2019 was $2.8 million, compared to $3.5 million in the second quarter of 2019 and $2.5 million in the third quarter of 2018.

Interest expense in the third quarter of 2019 was $19.2 million, compared to $20.7 million in the second quarter of 2019 and $26.8 million in the third quarter of 2018.

Interest income in the third quarter of 2019 was $2.6 million, compared to $4.5 million in the second quarter of 2019 and $2.6 million in the third quarter of 2018.

The Company recorded a loss on the change in fair value of derivatives in the third quarter of 2019 of $2.2 million, compared to $12.5 million in the second quarter of 2019 and $8.9 million in the third quarter of 2018. Foreign exchange gain in the third quarter of 2019 was $2.8 million, compared to $16.4 million in the second quarter of 2019, and $10.1 million in the third quarter of 2018.

Income tax expense in the third quarter of 2019 was $10.4 million, compared to $14.0 million in the second quarter of 2019 and $13.4 million in the third quarter of 2018.

Net income attributable to Canadian Solar in the third quarter of 2019 was $58.3 million or $0.96 per diluted share, compared to net income of $62.7 million or $1.04 per diluted share in the second quarter of 2019 and net income of $66.5 million or $1.09 per diluted share in the third quarter of 2018.

Financial Condition

The Company had $1,048.9 million of cash, cash equivalents and restricted cash as of September 30, 2019, compared to $981.0 million as of June 30, 2019.

Accounts receivable, net of allowance for doubtful accounts, at the end of the third quarter of 2019 were $449.3 million, compared to $454.6 million at the end of the second quarter of 2019. Accounts receivable turnover in the third quarter of 2019 was 64 days, compared to 41 days in the second quarter of 2019.

Inventories at the end of the third quarter of 2019 were $413.0 million, compared to $337.8 million at the end of the second quarter of 2019. Inventory turnover in the third quarter of 2019 was 63 days, compared to 40 days in the second quarter of 2019.

Accounts and notes payable at the end of the third quarter of 2019 were $1,006.0 million, compared to $926.2 million at the end of the second quarter of 2019.

Short-term borrowings and the current portion of long-term borrowings on project assets at the end of the third quarter of 2019 were $1.3 billion, compared to $1.3 billion at the end of the second quarter of 2019. Long-term borrowings at the end of the third quarter of 2019 were $525.9 million, compared to $462.9 million at the end of the second quarter of 2019.

Total borrowings directly related to the Company’s utility-scale solar power projects were $670.8 million at the end of the third quarter of 2019, compared to $640.5 million at the end of the second quarter of 2019. Total debt at the end of the third quarter of 2019 was $1.97 billion, compared to $1.86 billion at the end of the second quarter of 2019.

Dr. Shawn Qu, Chairman and Chief Executive Officer, commented: “Q3 was another strong, highly profitable quarter for Canadian Solar. Our results reflect robust global demand for our solar power products, the benefit of stable pricing trends and continued execution by our team. Strategic decisions we made in R&D and manufacturing efforts have positioned Canadian Solar at the forefront of solar cell and module manufacturing technology. For example, we recently set another world record of 22.8% conversion efficiency for P-type large area multi-crystalline silicon solar cells. We remain committed to developing and commercializing the solar technologies and system innovations that drive efficiency levels higher and total cost of ownership lower. This approach brings additional value to our customers and helps ensure the Company’s long-term success. We have significant room for growth ahead of us and remain positive in our outlook given further improvements in our backlog and visibility.”

Yan Zhuang, Acting Chief Executive Officer, commented: “Our solar module shipments and gross margin expansion underscore the solid execution of our strategies in both our MSS and Energy businesses. Higher module shipments were led by the success of Canadian Solar’s premium brand and the strength of the global sales channels we have built over many years. Our solid track record has also allowed us to grow our presence across the solar supply chain. During the third quarter, we signed an O&M agreement for third party projects totaling 300 MWp; and completed the sale of the 266 MWp Rambler project in the U.S. and the sale of an 80% interest in the 171.5 MWp Lavras project in Brazil. In addition, we won a total of 424 MWp of projects with attractive PPAs, energized a 100 MWp project in Argentina and secured additional project development financing at favorable rates. Globally, as of September 30, 2019, we had a 3.4 GWp pipeline of late-stage, utility-scale solar power projects. In addition, our 796 MWp portfolio of solar power plants under operation has an estimated resale value of approximately $900 million.”

Dr. Huifeng Chang, Senior Vice President and Chief Financial Officer, added: “We achieved GAAP net income of $58 million, or $0.96 per diluted share, for the third quarter even with lower than expected revenue which was primarily due to the delayed closing of solar power plant sales in Japan. This reflects an underlying improvement in our operating and financial performance as well as benefit from the CVD true-up adjustment of $24 million. Our focus on operating efficiency improvements helped us further reduce our blended module manufacturing costs. In October, we completed the sale of an 80% interest in 353 MWp of projects in Brazil, in addition to the 80% interest in the 171.5 MWp Lavras project which we sold in August. We will continue to monetize the remainder of our 3.4 GWp late-stage utility-scale solar project pipeline through 2020 and to maintain a balance between driving profitable growth and strengthening the Company’s balance sheet.”

Utility-Scale Solar Project Pipeline

The Company divides its utility-scale solar project pipeline into two categories: an early-to-mid-stage pipeline and a late-stage pipeline. The late-stage pipeline includes primarily those projects that have FITs or PPAs and are expected to be built within the next four years. The Company cautions that some late-stage projects may not reach completion due to such factors as failure to secure permits and grid connection, and changes of political and economic conditions in host countries, among others.

Late-Stage Utility-Scale Solar Project Pipeline

As of September 30, 2019, the Company’s late-stage, utility-scale solar project pipeline, including those in construction, totaled approximately 3.4 GWp, with 1,285 MWp in the U.S., 832 MWp in Brazil, 370 MWp in Mexico, 343.5 MWp in Japan, 145 MWp in China and an additional 422.1 MWp in Australia, Canada, Israel, Taiwan, the Philippines, Malaysia, Italy and South Korea.

In the United States, as of September 30, 2019, the Company’s late-stage, utility-scale solar project pipeline totaled 1,285 MWp* as detailed in the table below.

Project

MWp

Storage (MWh)

Location

Status

Expected COD

Gaskell West 2

147

N/A

California

Development

2022

Pflugerville

185

N/A

Texas

Development

2021

Texas Project

280

N/A

Texas

Development

2021

Maplewood

310

N/A

Texas

Development

2021

Maplewood 2

40

N/A

Texas

Development

2021

Slate

235

180

California

Development

2021

Stanford Solar Generating Station #2

88

N/A

California

Development

2021

Total

1,285

*This table does not include the 100 MWac Sunflower project located in Mississippi. In November 2018, the Company entered into a build-to-transfer agreement with Entergy Mississippi for the Sunflower project. As part of the agreement, Entergy Mississippi will serve as both project owner and electricity off-taker once the project is constructed and transferred to them. This build-to-transfer agreement is pending approval by the Mississippi Public Service Commission.

In Japan, as of September 30, 2019, the Company’s late-stage, utility-scale solar project pipeline for which interconnection agreements and FITs have been secured totaled approximately 343.5 MWp, including 104.3 MWp under construction and 239.2 MWp under development.

The table below sets forth the expected COD schedule of the Company’s late-stage utility-scale solar power projects in Japan, as of September 30, 2019:

Expected COD Schedule (MWp)

2019

2020

2021 and Thereafter

Total

62.5

72.5

208.5

343.5

In Brazil, as of September 30, 2019, the Company had an 832 MWp late-stage, utility-scale solar project pipeline as detailed in the table below.

Project

MWp

Location

Status

Expected COD

Francisco Sa

125.7*

Minas Gerais

Development

2021

Jaiba

112.4*

Minas Gerais

Development

2021

Jaiba Expansao

51.2

Minas Gerais

Development

2021

Lavras

34.3*

Ceara

Development

2021

Salgueiro

114.7*

Pernambuco

Development

2020

Ciranda

190.5

Pernambuco

Development

2022

Lavras Expansion

76.2

Ceara

Development

2022

Jaiba Expansao II

127

Minas Gerais

Development

2023

Total

832

*In April 2019, the Company signed an agreement to sell its 80% interest in the 482.6 MWp (has now expanded to 524.3 MWp) of solar power projects to Nebras Power Investment Management B.V., a Dutch affiliate of Nebras Q.P.S.C. Canadian Solar completed the sale of the 80% interest in the 171.5 MWp Lavras project in August 2019 and the sale of the 80% interest in the Francisco Sa, Jaiba and Salgueiro projects in October 2019.

In Mexico, as of September 30, 2019, the Company had a 370 MWp late-stage, utility-scale solar project pipeline as detailed in the table below.

Project

MWp

Location

Status

Expected COD

Horus

119

Aguascalientes

Under construction

2020

EL Mayo

126

Sonora

Development

2021

Tastiota

125

Sonora

Development

2021

Total

370

In China, as of September 30, 2019, the Company’s late-stage, utility-scale solar project pipeline was 145 MWp.

Solar Power Plants in Operation

In addition to its late-stage, utility-scale solar project pipeline, as of September 30, 2019, the Company had a portfolio of utility-scale, solar power plants in operation totaling 795.8 MWp. The Company records these power plants on the balance sheet as “project assets (build to sell)”, “assets held-for-sale” and “solar power systems, net (build to own)”. The proceeds of project sales recorded as “project assets (build to sell)” on the balance sheet will be recorded as revenue in the income statement once revenue recognition criteria are met. The gain or loss from the sale of projects recorded as “assets held-for-sale” and “solar power systems, net (build to own)” on the balance sheet will be recorded within “other operating income (expenses)” in the income statement.

The table below sets forth the Company’s total portfolio of utility-scale, solar power plants in operation, as of September 30, 2019 (MWp):

U.S.

Japan

China

India

Argentina

Others

Total

205.9

89.6

350.3

35.0

100.1

14.9

795.8

Manufacturing Capacity

The table below sets forth the Company’s manufacturing capacity expansion plan from December 31, 2019 to December 31, 2020.

Manufacturing Capacity (MW)

30-Sept-2019

Actual

31-Dec-2019

Planned

30-Jun-2020

Planned

31-Dec-2020

Planned

Ingot

1,850

1,850

1,850

2,350

Wafer

5,000

5,000

5,000

5,000

Cell

8,700

9,600

9,600

9,600

Module

11,150

13,040

13,420

15,170

SOURCE Canadian Solar Inc.

http://investors.canadiansolar.com/news-releases/news-release-details/canadian-solar-reports-third-quarter-2019-results

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