JinkoSolar reports results from a ‘very challenging’ Q2

JinkoSolar Holding Co. said that it put more than 7 GW of new cell capacity into production during the second quarter even as quarterly shipments fell 2.8% compared to the first quarter to 3,976 MW for solar modules and 1,227 MW for cells and wafers.

The company reported a gross profit of $210.5 million, up 0.1% from the first quarter but down 10.2% from the same quarter of 2020. Net income fell nearly 80% year-over-year to $10.3 million. The company said the decline was largely due to the impact of convertible senior notes.

The Shangrao, China-based company released unaudited financial results for its second quarter that ended June 30.

‘Very challenging’

Xiande Li, JinkoSolar’s chairman and CEO praised the company’s performance despite “very challenging” market conditions. He said that as prices along the supply chain remain high but relatively stable, “we see overall acceptance of price increases continuing well into the second half of the year.” Li said that demand for modules is “gradually resuming” and that JinkoSolar’s module production volume has “increased remarkably” month-over-month in the third quarter.

The company said it has taken initiatives to increase the reliability of its services to the U.S market. It said it had formed a number of “strategic co-operations” including a joint investment with Tongwei Co. in a high-purity crystalline silicon project with annual capacity of 45,000 metric tons, an investment in Inner Mongolia Xinte Silicon Materials Co., and a five-year polysilicon supply agreement with Wacker Chemie AG. Under terms of the third deal, Wacker will supply polysilicon to JinkoSolar from its production sites in Germany and the United States.

The company said it also “further improved” its traceability system for procurement and production.

Stating the obvious?

In a emailed commentary on the earnings statement, analyst Gordon L. Johnson II said that JinkoSolar disclosed a roughly $25.124 million Chinese government subsidy along with a tax rate of -4% due to a non-recurring tax benefit.

By Johnson’s calculation, JinkoSolar lost roughly $0.44 a share versus a consensus estimate of around -$0.15 a share. And he noted that module sales fell from 4.562 GW in the first quarter to 3.976 GW the second quarter, the first such decline since early 2019. He said that shipments may worsen due to U.S. Custom and Border Patrol action that began in June.

In mid-August, reports emerged that solar module shipments to the U.S. were being detained by Customs and Border Protection agents as part of an enforcement action aimed at banning the import of solar equipment containing components provided by a Chinese company suspected of using forced labor. Reports said that JinkoSolar had around 100 MW of product detained by border agents. Analysts said that Jinko may not ship hundreds of megawatts of capacity to the U.S. as long as the customs inquiry is in process.

Johnson said of the company’s second quarter results,  “At risk of stating the obvious, these are not good numbers, and look set to actually get worse.”

Third quarter outlook

At the end of June, the company’s in-house annual mono wafer, solar cell, and solar module production capacity was 27 GW, 12 GW (940 MW for N type cells), and 31 GW, respectively.

For the third quarter, the company said it expects total shipments to be in the range of 5 GW to 5.5 GW (solar module shipments to be in the range of 4.5 GW to 5 GW). Total revenue for the third quarter is expected to be in the range of $1.24 billion to $1.37 billion. Gross margin for the third quarter is expected to be between 12% and 15%.

For full year 2021, the company estimated total shipments (including solar modules, cells and wafers) to be in the range of 25 GW to 30 GW.