China Tier-1 solar company Canadian Solar has today published strong second quarter (Q2) financial results that point to recent successes in supplying the markets of the Americas, as well as increased downstream activity.
Module shipments in Q2 2016 reached 1,290 MW, which was above guidance of between 1,200 – 1,250 MW, and also represented a sequential increase on the 1,172 MW shipped in Q1. This upturn drove net revenue to $805.9 million, which also exceeded guidance figures ($710 – $760 million) and Q1’s performance ($721.4 million).
Compared year-over-year, shipments for Q2 far exceeded the 809 MW shipped in Q2 2015, with Q2 revenue also some $160 million higher y-o-y – a 26.6% increase.
It was the solar markets of the Americas that spurred Canadian Solar’s upturn, accounting for 47.6% of net revenue, or $383.9 million in actual figures. This meant that the Asian market only came to represent 39.5% of net revenue ($318.4 million) for the quarter, dropping from 44.4% in Q1 and 45.5% in Q2 2015. Europe, meanwhile, represented 12.9% of net revenue for Q2.
Downstream and production activity
The company’s growing downstream activities proved a welcome boost to its coffers in Q2, accounting for $39.6 million in income. Canadian Solar ended the quarter with a solar power plant portfolio in operation of 472 MWp, worth an estimated $850 million in resale value. Profit margins on its solar portfolio remain in the mid-teens, the company confirmed.
At the end of Q2, Canadian Solar had $1 billion in cash and cash equivalents – the same figure it reported at the end of Q1. During the second quarter, the firm upped its R&D expenses ($5.1 million) and incurred high general and administrative expenses largely due to a handful of one-off service fees, including the write-off of $10.8 million in deferred expenses related to a terminated YieldCo launch. Tornado damage to its cell factory in Funing County, Jiangsu Province, also caused an estimated $7.6 million.
Company CEO and chairman Shawn Qu remarked that Canadian Solar’s core solar module and project business remained strong, adding that the decision to no longer pursue a YieldCo was evidence of the current market environment and Canadian Solar’s primary focus on core markets.
“Our energy business now has approximately 472 MWp of solar power plants in operation, and approximately 900 MWp of additional solar power plants, after adjusting our effective ownership, that will reach commercial operation in the second half of 2016,” Qu said. “Once completed, we will own approximately 1-37 GWp of operating solar power plants, with a resale value of $2.1 billion.”
Qu confirmed that Canadian Solar will seek to monetize several of these assets in H2 2016 and the beginning of next year.
Huifeng Chang, the firm’s CFO and SVP, added that solar project construction schedules remain on course in Japan (576 MW), the U.K (19 MW)., the U.S. (1,263 MW) and China (121 MW), and that a total of 20.4 GWp of utility-scale solar projects are in the pipeline of the company. Of that figure, 18 GW is at early- to mid-stage development.
In terms of manufacturing capacity, Canadian Solar revealed that it expects to increase its wafer capacity using new diamond wire-saw technology to 900 MW.
By the end of 2016, the company’s total wafer manufacturing capacity is expected to hit 1.3 GW. Cell capacity is poised to top 3.05 GW by year end – thanks to the expected completion of the firm’s 850 MW cell fab in South Eastern Asia – but offset by the temporary reduction in capacity at the 1 GW, tornado-damaged Funing fab.
However, module capacity expansion plans have been put on ice, Canadian Solar confirmed, with internal capacity expected to stand at 5.8 GW by the end of the year, including the already-commissioned 650 MW fab in South Eastern Asia and the soon-to-be-commissioned 360 MW fab in Brazil. This overall figure is, though, below the 6.4 GW target previously disclosed; a contraction based on the firm’s latest market assessment.
Looking to Q3, Canadian Solar expects shipments to reach between 1.2 – 1.3 GW, revenue to be in the range of $660 million to $710 million, and gross margin of between 14-16%. For the full year 2016, the company is confident of topping 5.4 GW in shipments and annual revenue of more than $3 billion.