Published on June 4th, 2019 | by Joshua S Hill0
Canadian Solar Surges After Smaller Net Loss Than Expected
June 4th, 2019 by Joshua S Hill
Canadian Solar, one of the world’s largest solar manufacturers, published its first quarter earnings results last week, revealing a narrower-than-expected net loss and increased guidance for the second quarter, resulting in strong moves on the stock market.
Canadian Solar reported total solar module shipments for the first quarter of 2019 of 1,575 megawatts (MW), down 19% on the 1,951 MW shipped in the fourth quarter of 2018 and down 14% on the 1,831 MW shipped during the first quarter of 2018. However, shipments were well in excess of company guidance of shipments between 1.3 gigawatts (GW) and 1.4 GW.
Net revenue for the quarter was down significantly, dropping 46% on the previous quarter to $484.7 million, and down 56% on the same quarter a year earlier, while hitting slightly above the high end of the company’s guidance. The company reported a net loss of $17.2 million, or $0.29 per share, compared to a fourth-quarter 2018 net income of of $111.6 million, or $1.81 per share.
“After achieving close to 140% growth of net profit in 2018 from the 2017 level, we reasonably expected a healthy pause in the first quarter of 2019 due to the acceleration of some high-profit project sales from 2019 into 2018, the appreciation of the RMB, lost manufacturing days related to our ERP system upgrade and the impact of Chinese New Year on production and sales volumes,” said Yan Zhuang, acting Chief Executive Officer of Canadian Solar. “Despite these challenges, we remained focused and delivered Q1 2019 solar module shipments, revenue and gross margin at or above our expectations.
“We are encouraged by the healthy demand levels we are seeing in our key markets, stability in module ASPs and anticipated higher utilization of our capacity,” Yan Zhuang added. “Our late-stage, utility-scale solar power project pipeline, including those under construction, increased to approximately 3.4 GWp, as of April 30, 2019. The sale of the majority of these projects remains on track for 2020 or later. Our portfolio of solar power plants in operation, as of April 30, 2019, was 983.6 MWp, with an estimated total resale value of approximately $1.2 billion. In addition, we are pleased with the interest in our high efficiency products. These products continue to give us added competitive advantage as we deliver to customers higher efficiency and lower total cost of ownership energy solutions.”
However, the stock market was impressed, as Canadian Solar’s net loss came in $0.13 below the consensus, and beat the consensus on revenue by $16.47 million.
Further impressing the stock market was the company’s guidance for the second quarter, hitting above the market consensus on all counts. For the second quarter, Canadian Solar expects total solar module shipments be in the range of approximately 1.95 GW to 2.05 GW, including approximately 50 MW of shipments to its own downstream projects. Total revenue for the second quarter is expected to be in the range of $970 million to $1.01 billion, with a gross margin of between 13% and 15%.
“All key aspects of our fundamental business remain strong led by healthy demand and relatively stable pricing,” explained Yan Zhuang, acting Chief Executive Officer of Canadian Solar. “We view Q1 2019 as a one-time bump in our record of consistently delivering profitable results in both up and down markets. Our focus is on monetizing the 3.4 GWp of assets in our late-stage, utility scale solar power project pipeline and redeploying that capital into attractive project opportunities to ensure our future success. Separately, in our MSS business, we are currently running with about 50% to 60% of our long-term capacity booked. We have historically left some capacity to meet the needs of higher margin near-term sales. This has been a very successful strategy and remains an important element of our planning, execution and track record of success.”
The company’s surprisingly strong quarterly results were marred, somewhat, by the announcement that Dr Shawn Qu, Canadian Solar’s founder and Chairman, President, and Chief Executive Officer, is on a medical leave of absence, a result of an accident earlier in May which left Dr Qu recovering in hospital. The company Board appointed Yan Zhuang, the Company’s Senior Vice President and Chief Commercial Officer and President of Modules and System Solutions Business, as acting Chief Executive Officer in Dr Qu’s absence.
“During my absence, I will continue to be involved in all major decisions affecting the Company,” explained Dr Qu. “I am fortunate to have assembled a strong senior management team over the past 10 years. I have known Yan for 30 years. In 2006, he became a director of Canadian Solar. In 2009, he resigned as a director and joined the Company as Vice President of Global Sales and Marketing and was later promoted to Chief Commercial Officer and President of the MSS Business. Over the past 10 years, Yan has helped build a world-class global sales team for the Company. I am confident that he will provide the day-to-day leadership needed during my absence.”
“I have worked for Canadian Solar for over 13 years,” added Zhuang. “The Company has a clear business plan and strategy. I am confident that, with the support of the Board and my fellow senior officers, the business of the Company will continue to run smoothly in Dr. Qu’s absence.”