North Coast Solar Stocks

May 28, 2009

Trina Solar Announces First Quarter 2009 Results

Filed under: TSL — Tags: , , , , , , — Jason @ 8:03 am

Thursday May 28, 2009, 8:03 am EDT

CHANGZHOU, China, May 28 /PRNewswire-Asia-FirstCall/ — Trina Solar Limited (TSL) (“Trina Solar” or the “Company”), a leading integrated manufacturer of solar photovoltaic (PV) products from the production of ingots, wafers and cells to the assembly of PV modules, today announced its financial results for the first quarter ended March 31, 2009.

First Quarter 2009 Financial and Operating Highlights

— Solar module shipments were 48.8 MW, compared to the Company’ s previous guidance of 50 MW to 55 MW, representing a decrease of 15.3% sequentially and an increase of 65.5% year-over-year

— Total net revenues were $132.1 million, a decrease of 38.9% sequentially and an increase of 9.5% year-over-year

— Gross margin was 17.2%, exceeding the Company’s previous guidance of between 15% and 17%, compared to 9.6% in the fourth quarter of 2008

— Operating income and operating margin were $6.8 million and 5.2% respectively, compared to $3.9 million and 1.8% respectively in the fourth quarter of 2008

— Net loss was $10.6 million, which includes:

— a $6.5 million tax liability accrued in the first quarter resulting from a reversal in the government’s approval for a past tax holiday

— a charge of $4.6 million for the estimated cost in connection with the cancellation of two polysilicon supply agreements

— Earnings per fully-diluted ADS was negative $0.42, which includes a negative impact of $0.44 per fully diluted ADS for the above reasons

“Our first quarter was adversely affected by unusually harsh weather in our key European markets, tightened credit conditions for our customers and the general slowdown in world economic activities,” said Mr. Jifan Gao, Chairman and CEO of Trina Solar. “Improved conditions beginning in April have contributed to increasing customer deliveries and higher levels of new contracts and projects.”

In conjunction with our recent visits involving over 30 meetings with our customers worldwide, we received positive feedback confirming satisfaction with our high quality products and greater recognition of our brand name. Our core strengths such as enhanced brand recognition, high quality products and industry leading low cost platform enable us to yield attractive margins in both new and existing PV markets, despite challenging market and macroeconomic conditions. In the first quarter, we continued to leverage our low cost platform by reducing our manufacturing cost to approximately $0.79 per watt for our multicrystalline product.

Moreover, we remain committed to ensuring that we have sufficient financial resources to maintain a strong balance sheet. In line with our focus on maintaining a strong cash position, we have increased our in-house production capacities for cells and modules to over 400 MW as of May 2009, as a result of improvements in production process enhancements and improved cell conversion efficiency, which required minimal capital investment.

Finally, we are encouraged by recent announcements by the Ministry of Finance, outlining China’s national solar investment subsidy program, which is expected to commence this year. We are also involved in the development of a local Jiangsu subsidy program, which is viewed as a model provincial incentive program to potentially compliment the national subsidies. We are confident that our Changzhou presence will give us access to project opportunities created by these programs. To-date we have submitted 8 initial proposals for the national subsidy program in our name and through project joint venture.

In addition to the above, due to the current economic environment, we are continuing to focus on improvements in several areas, including accelerating the reductions in our manufacturing costs, increasing our cell and module efficiencies, leveraging our silicon procurement flexibilities, and expanding our sales capabilities to capture growth opportunities in existing and emerging PV markets.

Recent Business Highlights

During the first quarter of 2009, the Company

— Continued to benefit from strong customer loyalty from its well- established PV partners throughout Europe and worldwide, whose businesses have greater visibility and access to commercial and project financing

— Increased market share in growing PV markets such as Benelux, reflecting a diversification strategy that includes 20 established and emerging PV markets, such as Greece, the Czech Republic, Australia, and the United States

— Increased sales to project system integrators, which currently represent more than half of our total sales

— Continued to receive strong support from its Spanish partners who are increasingly active in developing projects outside of Spain

In April of 2009, the Company

— Announced the completion of a 4.7 MW PV facility, one of the largest rooftop projects in Italy

— Announced three new sales agreements in Germany totaling approximately 42 MW of PV modules for delivery in 2009, which has given the Company greater visibility in its order book

— Expanded its European Sales and Marketing team with the appointments of two key management positions. Our new managers have over 33 years of combined solar PV and other renewable energy experience.

— Submitted proposals involving eight projects for China’s national subsidy program

First Quarter 2009 Results

Net Revenues

Trina Solar’s net revenues in the first quarter of 2009 were $132.1 million, a decrease of 38.9% sequentially and an increase of 9.5% year-over- year. Total shipments were 48.8 MW, compared to 57.6 MW in the fourth quarter of 2008 and 29.5 MW in the first quarter of 2008. The sequential decline in total shipments was primarily due to weakened demand given prolonged winter conditions in our major European markets, limited customer visibilities to PV system purchase financing, and market inventory adjustments relating to government incentive reduction legislation in Spain. Net revenue includes approximately $2.3 million of non-module income.

Gross Profit and Margin

Gross profit in the first quarter of 2009 was $22.7 million, compared to $20.8 million in the fourth quarter of 2008 and $31.1 million in the first quarter of 2008. Gross margin was 17.2% in the first quarter of 2009, representing an increase from 9.6% in the fourth quarter of 2008 and a decrease from 25.8% year-over-year. The sequential increase was due primarily to the benefits of lower average silicon purchase prices. The year-over-year decrease was primarily due to lower module average selling price resulting from demand factors, which included abnormal seasonality impacts, increased industry capacity and availabilities of silicon feedstock, and the recent global economic and financial climate. The Company continued to focus its efforts on reducing its manufacturing cost per watt through ongoing efficiency gains linked to improved supply chain management, higher cell and module efficiencies, and proprietary process enhancements in our ingot, wafer, cell and module value areas.

Operating Expense, Income and Margin

Operating expenses in the first quarter of 2009 were $15.9 million. The Company’s operating expenses accounted for 12.0% of its first quarter net revenues, an increase from 7.8% in the fourth quarter of 2008 and an increase from 9.0% in the first quarter of 2008. The sequential increase was a percentage of revenue as primarily due to the decline in total net revenues. Operating expenses in the first quarter of 2009 included $1.0 million in share-based compensation expenses, compared to $1.0 million in the fourth quarter of 2008 and $1.3 million in the first quarter of 2008.

Operating expenses include a charge of $4.6 million in connection with the estimated cancellation cost of two polysilicon supply agreements. Operating income in the first quarter of 2009 was $6.8 million, compared to $3.9 million in the fourth quarter of 2008 and $20.2 million in the first quarter of 2008. Operating margin was 5.2% in the first quarter of 2009, compared to 1.8% in the fourth quarter of 2008 and 16.7% in the first quarter of 2008.

Net Interest Expense

Net interest expense in the first quarter of 2009 was $5.4 million, compared to $6.5 million in the fourth quarter of 2008 and $2.2 million in the first quarter of 2008. The sequential decrease was the result of a lower average interest rate, while the year-over-year increase was primarily due to additional bank borrowings to support the growth of the Company’s operations.

Foreign Currency Exchange

Foreign currency exchange loss was $7.6 million in the first quarter of 2009, compared to a $3.2 million gain in the fourth quarter of 2008 and a $4.0 million loss in the first quarter of 2008. This loss was primarily due to the depreciation of the Euro against the US dollar in the first quarter, the effect of which was partially mitigated by the Company’s increased utilization of foreign currency forward contracts to hedge its exposure.

Income Tax Expense

In April 2009, we received a notice from the State Tax Bureau of Changzhou Hi-tech Development Zone notifying us that the exemption and 50% tax reduction for our taxable profit representing the proportion of increase in registered capital had expired on December 31, 2007. As a result, the Company recorded an additional one-time tax payment of $6.5 million arising from Changzhou Trina Solar Energy Co., Ltd.’s taxable profit in 2008. Please see the Company’s 2008 annual report on Form 20-F filed with the U.S. Securities and Exchange Commission.

Net Income and EPS

Net loss was $10.6 million in the first quarter of 2009, a decrease from a $0.7 million loss in the fourth quarter of 2008 and a $12.9 million profit in the first quarter of 2008. Net loss includes the impact of the $4.6 million in

supply agreement cancellation charges, the $6.5 million tax charge, and a foreign currency exchange loss of $7.6 million.

Earnings per fully diluted ADS were negative $0.42. The combined effects of the supply agreement cancellation charge, the additional tax payment, and the foreign currency exchange loss, net of tax effect, were approximately $0.75 per fully diluted ADS.

Financial Condition

As of March 31, 2009, the Company had $194.1 million in cash and cash equivalents, and restricted cash. The Company’s working capital balance was $81.8 million. Total bank borrowings stood at $320.2 million, of which $14.6 million were long-term borrowings. Shareholders’ equity was $423.4 million, compared to $433.1 million as of December 31, 2008.

As of April 30, 2009 the Company’s total short term credit lines increased to approximately $523 million, which includes approximately $183 million of unused available credit line. The Company increased its foreign currency hedging program during the first quarter of 2009 using foreign currency forward contracts between the Euro and the US dollar, with the goal of mitigating, to some extent, the effects of exchange rate volatility.

Second Quarter and Full Year Guidance

For the second quarter of 2009, the Company expects to ship between 60 MW to 65 MW of PV modules. The Company believes gross margin for the second quarter will likely be between 18% and 20%.

For the full year of 2009 the Company reiterates the guidance for total PV module shipments between 350 MW to 400 MW, representing an increase of 74% to 99% from 2008.

Operations and Business Outlook

Manufacturing Cost Reduction

For the full year 2009, the Company expects to reduce its manufacturing costs by at least 15% to 20% through a combination of technology and manufacturing process improvements together with supply chain and logistics management initiatives currently under testing or development.

Silicon Procurement

The Company maintains a diversified feedstock procurement strategy consisting of short, medium, and long-term supply contracts, which include agreements entered into in the first quarter of 2007. The Company will continue to maintain competitive silicon costs relative to the current market price. Several of our long-term contracts contain price adjustment clauses that offer a market-linked price formula that would apply if the market price is lower than the originally agreed price in any given year. The Company continues to renegotiate other medium-term and long-term contracts in efforts to achieve favorable price and payment terms relative to current market conditions.

Cell Technology and Product Development Update

Through its research and development and technology transfer, the Company continues to improve its cell manufacturing processes to meet its previously announced 2009 conversion efficiency targets of 18.5% and 17.5% for its monocrystalline and multicrystalline product lines, respectively.

Based on recent on-site laboratory test production, the Company has achieved monocrystalline cell efficiency of 18.0% by leveraging advanced passivation and metallization techniques involved in the PV manufacturing process.

In addition to improving its module output and low manufacturing cost platform efficiencies, the Company’s technology roadmap includes further enhancement of its Building Integrated PV (BIPV) module product lines, as well as targeted application products offering architecturally friendly design advantages and others for industry-specific use applications.

Existing Cell and Module Capacity

Through yield increases derived from increased cell efficiency rates and improved production efficiencies, the Company’s annualized in-house production capacities have been increased to over 400 MW for cells and modules in May 2009. These expanded capacities, located within the Company’s existing west campus facilities will support the Company’s previously announced target for 2009 PV module shipments of between 350 MW to 400 MW.

Conference Call

The Company will host a conference call at 8:00 a.m. ET on May 28, 2009, to discuss the results for the quarter ended March 31, 2008. Joining Jifan Gao, Chairman and CEO of Trina Solar, will be Terry Wang, Chief Financial Officer, Sean Tzou, Chief Operating Officer, Steven Zhu, Vice President, International Procurement and Business Development, Arturo Herrero, Vice President, Sales and Marketing, and Thomas Young, Director of Investor Relations.

To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1(800)884- 2382. International callers should dial +1(660)422-4933. The conference ID for the call is 9965-1486.

If you are unable to participate in the call at this time, a replay will be available on May 28 at 12:00 p.m. ET, through June 3 at 11:59 p.m. ET. To access the replay, dial 1(800)642-1687 or 1(706)645-9291, and enter the conference ID 9965-1486.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties on Trina Solar’s website at http://www.trinasolar.com. To listen to the live webcast, please go to Trina Solar’s website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on Trina Solar’s website for 90 days.

                             Trina Solar Limited
                Unaudited Consolidated Statement of Operations
             (US dollars in thousands, except ADS and share data)

                                For the Three Months Ended
                            March 31,  December 31,      March 31,
                              2009         2008            2008

    Net revenues            $132,109     $216,338        $120,671
    Cost of revenues         109,402      195,535          89,595
    Gross profit              22,707       20,803          31,076
    Operating expenses
      Selling expenses         4,309        5,348           2,958
      General and
       administrative
       expenses               10,660       11,308           7,165
      Research and
       development expenses      909          278             749
    Total operating
     expenses                 15,878       16,934          10,872
    Operating income           6,829        3,869          20,204
    Exchange gain or
     (loss)                   (7,646)       3,209          (4,001)
    Interest expense          (6,270)      (7,011)         (3,473)
    Interest income              859          544           1,240
    Derivative gain
     (loss)                      170       (1,067)              -
    Other income
     (expense)                  (105)           1             (25)
    Income (loss)
     before income
     taxes                    (6,163)        (455)         13,945
    Income tax
     (expense)                (4,459)        (213)         (1,072)
    Net income (loss)       $(10,622)       $(668)        $12,873

    Earnings (loss)
     per ADS
    Basic                     (0.423)      (0.027)          0.515
    Diluted                   (0.423)      (0.027)          0.512
    Weighted average
     ADS outstanding
    Basic                 25,091,336   25,072,076      24,972,588
    Diluted               25,091,336   25,072,076      25,128,969

                      Trina Solar Limited
              Unaudited Consolidated Balance Sheet
                    (US dollars in thousands)

                             March 31,  December 31,
                               2009        2008
    ASSETS
    Current assets:
    Cash and cash
     equivalents              $153,325   $132,224
    Restricted cash             40,788     44,991
    Inventories                 79,109     85,687
    Accounts receivable,
     net                       169,583    105,193
    Advances to suppliers       36,631     42,247
    Prepaid expenses and
     other current assets       10,395      9,541
    Total current assets       489,831    419,883
    Property, plant and
     equipment                 363,816    357,594
    Intangible assets, net      26,779     26,915
    Advances to suppliers
     - long-term               118,325    130,352
    Deferred tax assets          5,064      2,808
    Other noncurrent
     assets                      2,368      2,564
    TOTAL ASSETS            $1,006,183   $940,116

    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
    Short-term borrowings,
     including current
     portion of long-term
     debt                     $305,524   $248,558
    Accounts payable            70,339     62,504
    Income tax payable           8,444      3,649
    Accrued expenses and
     other current
     liabilities                23,762     21,003
    Total current
     liabilities               408,069    335,714
    Long-term bank
     borrowings                 14,629     14,631
    Long-term advances
     from customers
    Convertible bond
     payable                   133,721    133,248
    Accrued warranty costs      13,789     12,473
    Other noncurrent
     liabilities                12,546     10,993
    Total liabilities          582,754    507,059

    Ordinary shares                 30         30
    Additional paid-in
     capital                   309,894    308,898
    Retained earnings          102,090    112,713
    Other comprehensive
     income                     11,415     11,416
    Total shareholders'
     equity                    423,429    433,057
    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY   $1,006,183   $940,116

    For further information, please contact:

    Trina Solar Limited                        Brunswick Group
    Terry Wang, CFO                            Caroline Jinqing Cai
    Phone: + (86) 519-8548-2009 (Changzhou)    Phone: + (86) 10-6566-2256
    Thomas Young, Director of                  Michael Fuchs
     Investor Relations                        Phone: + (86) 10-6566-2256
    Phone: + (86) 519-8548-2009 (Changzhou)    Email: trina@brunswickgroup.com
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