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Canadian Solar reports third quarter 2012 financial results

Friday, Nov 16, 2012

ONTARIO, Nov. 15, 2012 /PRNewswire-FirstCall/ -- Canadian Solar Inc. ("Canadian Solar" or the "Company") (NASDAQ: CSIQ), one of the world's largest solar companies, today announced its financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights

Solar module shipments were 384 MW, compared to 412 MW in the second quarter of 2012.

Net revenue was $326.0 million, compared to $348.2 million in the second quarter of 2012.

Revenue derived from the Company's total solution business was 21.5% of total revenue, compared to 5.5% in the second quarter of 2012.

Gross margin was 2.2%, compared to 12.4% in the second quarter of 2012.

Diluted loss per share was $1.01, compared to $0.59 in the second quarter of 2012.

Cash, cash equivalents and restricted cash balances at the end of the quarter were $690.8 million, compared to $692.1 million at the end of the second quarter 2012.

Third Quarter 2012 Results

Net revenue for the third quarter of 2012 was $326.0 million, down 6.4% from $348.2 million in the second quarter of 2012 and down 34.8% from $499.6 million in the third quarter of 2011.  Total solar module shipments in the third quarter of 2012 were 384 MW, compared to 412 MW in the second quarter of 2012 and 355 MW in the third quarter of 2011.  Total solar module shipments in the third quarter of 2012 included 21.1 MW used in the Company's total solution business, up from 8.7MW in the second quarter of 2012, and up from 19.3 MW in the third quarter of 2011.

By geography, in the third quarter of 2012, sales to European markets represented 47.9% of net revenue, sales to North America represented 24.9% of net revenue, and sales to Asia and all other markets represented 27.2% of net revenue, compared to 69.4%, 15.7% and 14.9%, respectively, in the second quarter of 2012 and 61.7%, 16.1% and 22.2%, respectively, in the third quarter of 2011.

Gross profit in the third quarter of 2012 was $7.3 million, compared to $43.2 million in the second quarter of 2012 and $11.9 million in the third quarter of 2011.  The sequential quarterly decline in gross profit was primarily due to lower shipment volume and continued downward pressure on average selling prices, partially offset by lower manufacturing costs. In the second quarter of 2012 the Company's gross profit was impacted by an adjustment of $14 million primarily as result of the recognition of the benefit from the Company's purchase of warranty insurance.   The year-over-year decline in gross profit was primarily due to the decline in average selling prices, partially offset by lower manufacturing costs and higher shipment volume.  In the third quarter of 2012, the Company recorded an additional charge of $2.1 million, representing 0.65% of revenue, to reflect the higher countervailing duty on the Company's products imposed by the US Department of Commerce in its final trade investigation determination. Gross margin in the third quarter of 2012 was 2.2%, compared to 12.4% in the second quarter of 2012 and 2.4% in the third quarter of 2011.

Total operating expenses were $41.8 million in the third quarter of 2012, compared to $46.2 million in the second quarter of 2012 and $42.6 million in the third quarter of 2011.

Selling expenses were $21.4 million in the third quarter of 2012, down 12.4% from $24.4 million in the second quarter of 2012 and up 14.4% from $18.7 million in the third quarter of 2011.  The sequential quarterly decline in selling expenses was due to lower freight unit costs and lower shipment volume.  The year-over-year increase in selling expenses was due to increases in freight and other export-related expenses as a result of higher shipment volume, as well as increases in sales force headcount and related salary expenses.

General and administrative expenses were $17.0 million in the third quarter of 2012, down 7.4% from $18.4 million in the second quarter of 2012 and up 6.1% from $16.0 million in the third quarter of 2011.  The sequential quarterly decline in general and administrative expenses was due to a $1.3 million reversal of a bad debt expense and lower bank charges, partially off-set by higher salary expenses following the annual salary adjustment.  The year-over-year increase in general and administrative expenses was due to higher consulting fees, increases in headcount as well as the yearly salary adjustment.

Research and development expenses were $3.4 million in the third quarter of 2012, down 2.3% from $3.5 million in the second quarter of 2012 and down 57.1% from $7.9 million in the third quarter of 2011.  The year-over-year decline in research and development expenses was due to a reduced level of product development activities following the completion of several key projects at the end of 2011.

Operating margin was negative 10.6% in the third quarter of 2012, compared to negative 0.9% in the second quarter of 2012 and negative 6.1% in the third quarter of 2011.  The sequential quarterly and year-over-year decline in operating margin was due to lower gross profit, partially offset by lower operating expenses.

Interest expense in the third quarter of 2012 was $15.2 million, compared to $15.1 million in the second quarter of 2012 and $10.8 million in the third quarter of 2011.  The sequential quarterly and year-over-year increase in interest expense was primarily due to higher bank borrowings in the third quarter of 2012.  Interest income in the third quarter of 2012 was $3.6 million, compared to $3.4 million in the second quarter of 2012 and $3.0 million in the third quarter of 2011. The sequential quarterly and year-over-year increase in interest income was due to higher restricted cash balances.

The Company recorded a loss on change in fair value of derivatives of $5.3 million in the third quarter of 2012, compared to a loss of $1.1 million in the second quarter of 2012 and a gain of $14.5 million in the third quarter of 2011.  Net foreign exchange gain in the third quarter of 2012 was $7.0 million compared to a net foreign exchange loss of $7.2 million in the second quarter of 2012 and a net foreign exchange loss of $23.9 million in the third quarter of 2011.

Income tax benefit in the third quarter of 2012 was $1.8 million, compared to income tax expense of $2.1 million in the second quarter of 2012 and income tax benefit of $3.4 million in the third quarter of 2011. In the third quarter of 2012 the Company considered that some portion of the deferred tax assets relating to the current year operating losses in its Chinese manufacturing operations would not be realized based on its current forecast. Therefore, it recorded approximately $4.4 million income tax charge as a result of including the valuation allowance loss in the annual estimated tax expenses.

Net loss attributable to Canadian Solar in the third quarter of 2012 was $43.7 million, or $1.01 per share, compared to net loss of $25.5 million, or $0.59 per share, in the second quarter 2012,and net loss of $43.9 million, or $1.02 per share, in the third quarter of 2011.

About Canadian Solar Inc. (NASDAQ: CSIQ)

Canadian Solar Inc. (NASDAQ: CSIQ) is one of the world's largest solar companies. As a leading vertically integrated provider of ingots, wafers, solar cells, solar modules and other solar applications, Canadian Solar designs, manufactures and delivers solar products and solar system solutions for on-grid and off-grid use to customers worldwide. With operations in North America, Europe, Australia and Asia, Canadian Solar provides premium quality, cost-effective and environmentally-friendly solar solutions to support global, sustainable development. For more information, please visit www.canadiansolar.com.

SOURCE Canadian Solar Inc.

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