Canadian Solar Drops Guidance Amidst Lackluster Second Quarter
Canadian Solar published its second-quarter earnings report this week and it was a mixture of good news and bad news for the world-leading solar power company, which reported guidance-beating shipments but guidance-missing revenue, resulting in downgraded company guidance for the full year, citing global challenges in the solar market.
It was something of a harsh crash-landing back to reality for Canadian Solar after two quarters in a row of guidance-beating financial and shipping results — first in the fourth quarter and full-year for 2017, and then again in the first quarter of 2018, which kicked the year off with a bang. Canadian Solar continued its impressive shipping record — with 1,700 megawatts (MW) worth of solar module shipments for the second quarter, including 246 MW to the company’s own downstream business, shattering the 1,374 MW recorded in the first quarter and even exceeding the company’s own second-quarter guidance in the range of 1,500 MW to 1,600 MW.
However, continuing a trend being seen across the solar industry, increased shipments no longer means increased revenue, as solar prices continue to decline, forcing companies to reevaluate their positions in a new and shifting landscape.
Net revenue for the second quarter fell back to $650.6 million, down from an impressive $1.42 billion in the first quarter, down on the $692.4 million in the second quarter recorded a year earlier, and even down on the company’s own guidance in the range of $690 million to $730 million due, according to Canadian Solar, to lower revenue from project sales and lower average selling prices for the company’s solar modules.
The company’s earnings per share amounted to $0.26, beating analyst expectations by $0.02, but still down on the $0.72 per share reported in the first quarter.
“Our second quarter revenue was affected by the deferral of several project sales as well as an industrywide lower average module selling price,” said Dr Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar. “The solar policy change in China effective on May 31, 2018, has caused a significant disruption in China, and the global solar industry. We also incurred a relatively large foreign exchange loss due to the depreciation of currencies in certain developing countries against US dollar during the quarter. However, we are confident we can navigate this challenging period given our proven track record even in prior periods of volatility.”
The impact of the same challenges that so deeply affected Canadian Solar’s second-quarter earnings are now expected to impact the whole of the company’s year. Canadian Solar now predicts it will make total solar module shipments in the range of 1.5 GW to 1.6 GW in the third quarter with total revenue in the range of $790 million to $840 million. Canadian Solar is also revising its full-year 2018 total module shipment guidance to be in the range of between 6.0 GW to 6.2 GW, compared to in the range of 6.6 GW to 7.1 GW it had previously forecast. Full-year revenue is now expected to be in the range of $4.0 billion to $4.2 billion, compared to being in the range of $4.4 billion to $4.6 billion previously guided.
“The revision of our annual guidance is in-line with the broader industry and mainly reflects the expected reduction of shipment volumes to the Chinese market in the second half of the year, as well as the expected lower solar module average selling price,” added Dr. Shawn Qu. “In the near-term, we will focus on maintaining our market share and protecting a reasonable profit margin. In the longer-term, we remain confident that global demand for solar power products will continue to increase in light of solar energy’s compelling lower cost of ownership and ability to accommodate locations underserved by other grid power options.”
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