North Coast Solar Stocks

November 18, 2009

Solarfun Reports Third Quarter 2009 Results

Filed under: SOLF — Tags: , , , , , , , — Jason @ 6:57 am

6:57 am EST, Wednesday November 18, 2009

SHANGHAI, Nov. 18 /PRNewswire-FirstCall/ — Solarfun Power Holdings Co., Ltd. ( “Solarfun” or the “Company”) (SOLF), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the quarter ended September 30, 2009.

THIRD QUARTER 2009 RESULTS

* Total net revenues were RMB 986.8 million (US$144.6 million) in the third quarter of 2009, representing a decrease of 22.6% from RMB 1,274.8 million in the third quarter of 2008 and an increase of 15.5% from RMB 854.6 million in the second quarter of 2009. The sequential increase was primarily related to higher shipment volumes reflecting improved industry demand.
* PV module shipments reached 102.6 MW in the third quarter of 2009, an increase from 41.8 MW in the third quarter of 2008 and from 64.3 MW in the second quarter of 2009. The increase from the second quarter of 2009 was due to increases in both PV module shipments and PV module processing services. PV module processing services represented approximately 40% of the total PV module shipments in the third quarter of 2009. In the third quarter of 2009, excluding module processing, the Company recorded greater geographic diversity in its sales, with Germany accounting for 60% of the Company’s total PV module shipments, down from 83% in the previous quarter. The Czech Republic, a relatively new market for the Company, continued to grow to 9% of total shipments, and a rebound was seen in Portugal and Spain, representing 11% and 6% of total shipments, respectively. Australia, Italy and Korea combined for another 14% of total shipments.
* Average selling price, excluding module processing services, declined, as expected, to US$2.03 per watt in the third quarter of 2009 from US$2.66 per watt in the second quarter of 2009, primarily due to the decrease in the market prices of PV products.
* Gross profit was RMB 204.4 million (US$29.9 million) in the third quarter of 2009, compared to a gross profit of RMB 46.1 million in the third quarter of 2008 and a gross loss of RMB 53.0 million in the second quarter of 2009. Gross margin was 20.7% in the third quarter of 2009, compared to negative 6.2% in the second quarter 2009. No provision for pre-payments on supply agreements were made in the third quarter of 2009, compared to a provision of RMB 236.5 million in the second quarter of 2009. Gross margin in the third quarter of 2009 reflected lower raw material costs primarily as a result of renegotiated supply agreements and increased spot market purchases. Vertical integration to the ingot and wafer level also led to reduced costs from higher utilization and continued process improvements.
* Operating profit was RMB 129.4 million (US$19.0 million) in the third quarter of 2009, compared to an operating loss of RMB 25.9 million in the third quarter of 2008 and an operating loss of RMB 121.9 million in the second quarter of 2009. The operating margin for the third quarter 2009 was 13.1%. The Company continued to maintain tight discipline on operating expenses, which as a percent of revenues should trend lower as revenues grow.
* Interest expense was RMB 40.8 million (US$6.0 million) in the third quarter of 2009, an increase from RMB 21.6 million in the third quarter of 2008, and an increase from RMB 36.1 million in the second quarter of 2009.
* Fair value of the conversion feature of the Company’s convertible bonds increased by RMB 82.4 million (US$12.1 million) in the third quarter of 2009, due to a number of factors including changes in the Company’s ADS prices during the third quarter of 2009. This line item has fluctuated, and is expected to continue to fluctuate quarter-to-quarter in line with standardized accounting practices, of which the Company has no control.
* Net income attributable to shareholders was RMB 136.6 million (US$ 20.0 million) in the third quarter of 2009, compared to a net loss of RMB 44.3 million in the third quarter of 2008 and a net loss of 319.9 million in the second quarter of 2009. Net income per basic ADS was RMB 2.53 (US$0.37) in the third quarter of 2009, compared to a net loss per basic ADS of RMB 0.86 in the third quarter of 2008 and a net loss per basic ADS of RMB 5.95 in the second quarter of 2009.

Peter Xie, President of Solarfun, commented, “We are extremely pleased with the continued progress achieved in the third quarter of 2009. Of particular note were quarterly shipment volumes exceeding 100 MW for the first time in the Company’s history, gross margins reaching 20%, and a return to profitability. We also improved our capital structure by reducing short-term bank borrowings and raising additional equity capital.”

FINANCIAL POSITION

As of September 30, 2009, the Company had cash and cash equivalents of RMB 793.2 million (US$116.2 million) and working capital of RMB 1,738.0 million (US$254.6 million). Total short-term bank borrowings as of September 30, 2009 were RMB 1,013.7 million (US$148.5 million), a decrease from RMB 1,394.0 million as of June 30, 2009. The Company believes that cash on hand and additional undrawn bank credit lines provide adequate funds for near-term future growth.

Accounts receivable increased to RMB 707.2 million (US$103.6 million) as of September 30, 2009 from RMB 514.3 million as of June 30, 2009. This increase was primarily due to an increase in shipments as well as a large percentage of shipments occurring in the latter part of the third quarter of 2009. Days sales outstanding increased from 38 days in the second quarter of 2009 to 56 days in the third quarter of 2009, primarily reflecting the prevailing credit terms for the current market environment.

Inventories increased to RMB 808.4 million (US$118.4 million) as of September 30, 2009 from RMB 695.7 million as of June 30, 2009, primarily because the Company anticipated a growth in PV module sales in the fourth quarter of 2009 and the first quarter of 2010.

Capital expenditures were RMB 28.7 million (US$4.2 million) in the third quarter of 2009. The Company expanded its module capacity by 50 MW during the third quarter of 2009 to over 500 MW, and remains on track to further increase its module capacity to 700 MW in 2010.

EQUITY DISTRIBUTION AGREEMENT

Under the equity distribution agreement entered into with Morgan Stanley & Co. Incorporated on September 17, 2009, at the end of the third quarter of 2009, the Company sold 1,955,310 ADSs, raising US$12.5 million in gross proceeds, of which US$0.3 million was paid to Morgan Stanley & Co. Incorporated as manager for the sale. As of November 18, 2009, the Company has raised a total of US$23.1 million in gross proceeds from the sale of 3,888,399 ADSs, of which US$0.6 million was paid to Morgan Stanley & Co. Incorporated as manager for the sale. The Company has the option to recommence sales, subject to market conditions, after this earnings release under this existing agreement.

BUSINESS OUTLOOK

The Company provides the following guidance based on current operating trends and market conditions.

The Company expects for the fourth quarter of 2009:

* Shipments to be approximately 110 MW, with module processing services accounting for about 20% of the total shipments.
* Average selling prices to decline by approximately 5% from the previous quarter, in constant currency.

For the first quarter of 2010, the Company expects to see continuing good demand, with prices declining slightly from levels in the fourth quarter of 2009.

Peter Xie concluded by noting, “We expect to see a healthy demand environment in 2010. The preliminary shipment target for 2010 is 500 MW. We expect strong demand from Germany as project development is accelerated in response to expected feed-in-tariff reductions, from new markets like China and the United States, and as the general availability of funding for solar projects improves. We have made some important additions to our senior management team this past quarter and will continue to recruit critical talent in the near future. We will continue to drive product and process innovation, and reduce processing costs through increased scale, manufacturing efficiencies and technological advancements.”

CONFERENCE CALL

Management will discuss the results and take questions following the prepared remarks.

The dial-in details for the live conference call are as follows:

US Toll Free 1.866.700.6067
International Toll Free 1.617.213.8834
South China Toll Free 10 800 130 0399
10 800 852 1490
North China Toll Free 10 800 152 1490
Participant Code SOLF

A live webcast of the conference call will be available on the investor relations section of the Company’s website at: http://www.solarfun.com.cn. A replay of the webcast will be available for one month.

A telephone replay of the call will be available until November 26, 2009. The dial-in details for the replay are as follows:

US Toll Free 1.888.286.8010
International Toll 1.617.801.6888
Passcode 35962587

                         SOLARFUN POWER HOLDINGS CO., LTD.
                            CONSOLIDATED BALANCE SHEETS
        (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
                   except for number of shares and per share data)

                                           June 30   September 30 September 30
                                             2009        2009         2009
                                         (Unaudited) (Unaudited)  (Unaudited)
                                              RMB        RMB          US$
    ASSETS
    Current assets
    Cash and cash equivalents               494,740     793,186     116,197
    Restricted cash                         260,749     131,537      19,269
    Financial assets                          5,062           -           -
    Accounts receivable, net                514,328     707,235     103,606
    Inventories, net                        695,743     808,415     118,428
    Advance to suppliers, net               877,909     827,880     121,281
    Other current assets                    376,277     283,043      41,464
    Deferred tax assets                      65,453      67,860       9,941
    Amount due from related parties          24,435      42,590       6,239

        Total current assets              3,314,696   3,661,746     536,425

    Non-current assets
    Fixed assets - net                    1,616,596   1,604,885     235,107
    Intangible assets - net                 210,512     210,003      30,764
    Goodwill                                134,735     134,735      19,738
    Deferred tax assets                       6,920       7,660       1,122
    Long-term deferred expenses              37,908      33,718       4,939

        Total non-current assets          2,006,671   1,991,001     291,670

    TOTAL ASSETS                          5,321,367   5,652,747     828,095

    LIABILITIES
    Current liabilities
    Financial liabilities                    18,584      41,489       6,078
    Short-term bank borrowings            1,394,014   1,013,738     148,507
    Long-term bank borrowings,
     current portion                         60,000      75,000      10,987
    Accounts payable                        268,971     392,625      57,517
    Notes payable                           107,610     159,195      23,321
    Accrued expenses and
     other liabilities                      136,131     178,340      26,126
    Customer deposits                         3,346      21,346       3,127
    Deferred tax liability                      709           -           -
    Unrecognized tax benefit                 28,199      28,467       4,170
    Amount due to related parties             8,103      13,564       1,987

        Total current liabilities         2,025,667   1,923,764     281,820

    Non-current liabilities
    Long-term bank borrowings,
     non-current portion                    125,000     402,500      58,964
    Convertible notes payable               642,925     573,441      84,006
    Deferred tax liability                   26,861      26,713       3,913

        Total non-current liabilities       794,786   1,002,654     146,883

    TOTAL LIABILITIES                     2,820,453   2,926,418     428,703

    Redeemable ordinary shares                   32          32           5

    EQUITY
    Shareholders' equity
    Ordinary shares                             214         220          32
    Additional paid-in capital            2,164,186   2,252,642     329,999
    Statutory reserves                       49,589      57,163       8,374
    Retained earnings                       282,797     411,845      60,333

        Total shareholders' equity        2,496,786   2,721,870     398,738
    Noncontrolling interest                   4,096       4,427         649

    TOTAL EQUITY                          2,500,882   2,726,297     399,387

    TOTAL LIABILITIES, MEZZAINNE EQUITY
     AND SHAREHOLDERS' EQUITY             5,321,367   5,625,747     828,095
                         SOLARFUN POWER HOLDINGS CO., LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
                  except for number of shares and per share data)

                                       For the three months ended
                            September 30   June 30   September 30 September 30
                                2008         2009        2009         2009
                            (Unaudited)  (Unaudited) (Unaudited)  (Unaudited)
                                RMB          RMB         RMB          US$
    Net revenue
    Photovoltaic modules     1,146,900     742,004     802,314     117,534
    Photovoltaic cells          90,923       5,538      14,248       2,087
    Others                      37,025     107,068     170,236      24,939

    Total net revenue        1,274,848     854,610     986,798     144,560

    Cost of revenue
    Photovoltaic modules    (1,015,456)   (741,664)   (579,927)    (84,956)
    Photovoltaic cells         (83,053)    (18,529)    (12,386)     (1,814)
    Others                     (42,077)    (83,038)   (118,115)    (17,303)
    Write down of
     inventories               (88,156)    (64,414)    (71,971)    (10,543)

    Total cost of revenue   (1,228,742)   (907,645)   (782,399)   (114,616)

    Gross profit / (losses)     46,106     (53,035)    204,399      29,944

    Operating expenses
    Selling expenses           (20,174)    (18,206)    (24,806)     (3,633)
    G&A expenses               (46,057)    (47,002)    (42,888)     (6,283)
    R&D expenses                (5,765)     (3,673)     (7,324)     (1,073)

        Total operating
         expenses              (71,996)    (68,881)    (75,018)    (10,989)

    Operating profit /
     (losses)                  (25,890)   (121,916)    129,381      18,955

    Interest expenses          (21,559)    (36,091)    (40,757)     (5,971)
    Interest income              4,280       1,060       2,150         315
    Exchange gain / (losses)   (30,001)     15,590       8,139       1,192
    Gain / (losses) on
     change in fair value
     of derivative              32,782     (49,423)    (27,466)     (4,024)
    Gain / (losses) on change
     in conversion
     feature fair value of
     convertible bond                     (113,423)     82,357      12,065
    Other income                 3,996         276       1,212         178
    Other expenses              (3,896)     (4,302)     (1,903)       (279)
    Government grant               221       1,797       1,957         287

    Net income / (losses)
     before income tax         (40,067)   (306,432)    155,070      22,718

    Income tax benefit /
     (expenses)                  1,224     (13,475)    (18,117)     (2,654)

    Net income / (losses)      (38,843)   (319,907)    136,953      20,064

    Net income / (losses)
     attributable to
     noncontrolling interest     5,463          (2)        331          48

    Net income / (losses)
     attributable
     to shareholders           (44,306)   (319,905)    136,622      20,016

    Net income / (losses)
     per share
    Basic                        (0.17)      (1.19)       0.51        0.07
    Diluted                      (0.17)      (1.19)       0.51        0.07

    Shares used in
     computation
    Basic                  258,503,644 268,981,409 270,304,495 270,304,495
    Diluted                258,503,644 268,981,409 270,503,158 270,503,158

    Net income / (losses)
     per ADS
    Basic                        (0.86)      (5.95)       2.53        0.37
    Diluted                      (0.86)      (5.95)       2.53        0.37

    ADSs used in
     computation
    Basic                   51,700,729  53,796,282  54,060,899  54,060,899
    Diluted                 51,700,729  53,796,282  54,100,632  54,100,632

This report on Form 6-K is hereby incorporated by reference into the Company’s Registration Statement on From F-3 (Registration No. 333-152005) filed on July 14, 2008.

FOREIGN CURRENCY CONVERSION

The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the exchange rates as set forth in the H.10 statistical release of the Federal Reserve Board as of September 30, 2009, which was RMB 6.8262 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on September 30, 2009, or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts.

    For further information, contact:
    Solarfun Power Holdings Co., Ltd.
    Paul Combs
    V.P. Strategic Planning
    26F BM Tower
    218 Wusong Road
    Shanghai, 200080
    P. R. China
    Tel:  86-21-26022833 / Mobile:  86 138 1612 2768
    E-mail: IR@solarfun.com.cn

    Christensen
    Kathy Li
    Tel:  480 614 3036
    E-mail:  kli@ChristensenIR.com

    Roger Hu
    Tel:  852 2117 0861
    E-mail:  rhu@ChristensenIR.com
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