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Hanwha Q CELLS Reports Fourth Quarter and Full Year 2016 Results

Published on 27 Mar 2017
Hanwha Q CELLS 
Hanwha Q CELLS Co., Ltd. today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Highlights

- Net revenues were $565.9 million, compared with $707.8 million in the third quarter of 2016 and $702.1 million in the fourth quarter of 2015.

- Gross margin was 9.5%, compared with 19.9% in the third quarter of 2016 and 19.1% in the fourth quarter of 2015.

- Operating loss was $6.1 million, compared with operating income of $72.4 million in the third quarter of 2016 and operating income of $53.8 million in the fourth quarter of 2015.

- Net loss attributable to Company's ordinary shareholders was $25.5 million, compared with net income of $41.7 million in the third quarter of 2016 and net income of $26.0 million in the fourth quarter of 2015.

- Loss per fully diluted American Depositary Share ("ADS" and each ADS represents 50 of the Company's ordinary shares) was $0.31, compared with earnings per fully diluted ADS of $0.50 in the third quarter of 2016 and earnings per fully diluted ADS of $0.31 in the fourth quarter of 2015.

Full Year 2016 Highlights

- Total revenue-recognized module shipments in 2016 were 4,583MW for the full year 2016, an increase of 55.0% from 2,956MW for the full year 2015.

- Total net revenues were $2,426.6 million for the full year 2016, an increase of 34.8% from $1,800.8 million for the full year 2015.

- Gross margin rate was 18.7% for the full year 2016, compared with 18.5% for the full year 2015.

- Operating income was $207.5 million in the full year 2016, compared with $77.9 million in the full year 2015.

- Net income attributable to Company's ordinary shareholders was $120.5 million for the full year 2016, compared with $43.8 million for the full year 2015.

- Earnings per fully diluted ADS were $1.45 for the full year 2016, compared with $0.53 for the full year 2015.

Mr. Seong-woo Nam, Chairman and CEO of Hanwha Q CELLS, remarked "We achieved record high total module shipment and revenue in the full year 2016 while establishing solid market positioning in key strategic markets in both mature and emerging countries. In 2016, we have also successfully ramped up a world leading PERC cell in-house production capability, now having produced over 3GW of both mono and multi PERC cells since 2015, positioning Hanwha Q CELLS as a global leader in production of advanced cells."

"Despite the market's concern for global solar demands, we have started 2017 with a strong momentum," Mr. Nam continued. "Hanwha Q CELLS was awarded the tender to construct the region's largest 1GW solar power plant in Turkey, which will help us establish a stronger foothold in the region with great growth potentials, and we have also entered into several large module supply contracts strengthening our sales backlog for the year."

Mr. Jay Seo, CFO of Hanwha Q CELLS, said "Our fourth quarter results came in weaker than anticipated due to certain project schedule delays, which prevented us from recognizing certain revenues in the year 2016, and several other one-time accounting adjustments, such as measurement of inventory at the lower of cost or market and asset impairments." Mr. Seo added, "We will continue to execute on reducing manufacturing costs and augmenting operating expense controls, while diligently managing our balance sheet and cash management."

Fourth Quarter 2016 Financial Results

Net Revenues

- Total net revenues were $565.9 million, down 20.0% from $707.8 million in the third quarter of 2016 and down 19.4% from $702.1 million in the fourth quarter of 2015.

Gross Profit and Margin

- Gross profit in the fourth quarter of 2016 was $54.0 million, compared with $140.5 million in the third quarter of 2016 and $134.2 million in the fourth quarter of 2015.

- Gross margin in the fourth quarter of 2016 was 9.5%, compared with 19.9% in the third quarter of 2016 and 19.1% in the fourth quarter of 2015.

Operating Expense, Income and Margin

- Total operating expenses were $60.1 million in the fourth quarter of 2016, down 11.7% from $68.1 million in the third quarter of 2016 and down 25.2% from $80.4 million in the fourth quarter of 2015.

- Selling and marketing expenses were $27.9 million in the fourth quarter of 2016, down 23.4% from $36.4 million in the third quarter of 2016 and down 23.1% from $36.3 million in the fourth quarter of 2015.

- General and administrative expenses were $20.3 million in the fourth quarter of 2016, up 3.0% from $19.7 million in the third quarter of 2016 and down 32.8% from $30.2 million in the fourth quarter of 2015.

- Research and development expenses were $11.9 million in the fourth quarter of 2016, down 0.8% from $12.0 million in the third quarter of 2016 and down 14.4% from $13.9 million in the fourth quarter of 2015.

Net Interest Expense

- Net interest expense was $12.2 million in the fourth quarter of 2016, compared with $12.4 million in the third quarter of 2016 and $18.4 million in the fourth quarter of 2015.

Foreign Currency Exchange Gain (Loss)

- Net foreign currency exchange loss was $7.5 million in the fourth quarter of 2016, compared with a net loss of $2.3 million in the third quarter of 2016 and net loss of $6.6 million in the fourth quarter of 2015.

Gain (loss) on change in Fair Value of Derivative Contracts

- The Company recorded a net gain of $7.0 million in the fourth quarter of 2016 from the change in fair value of derivatives in hedging activities, compared with a net loss of $2.1 million in the third quarter of 2016 and a net loss of $0.7 million in the fourth quarter of 2015.

Income Tax Expense (Benefit)

- Income tax benefit was $5.4 million in the fourth quarter of 2016, compared with an income tax expense of $10.3 million in the third quarter of 2016 and an income tax expense of $4.6 million in the fourth quarter of 2015.

Net Income (Loss) and Earnings (Loss) per ADS

- Net loss attributable to Company's ordinary shareholders was $25.5 million in the fourth quarter of 2016, compared with net income of $41.7 million in the third quarter of 2016 and net income of $26.0 million in the fourth quarter of 2015.

- Loss per fully diluted ADS on a GAAP basis was $0.31 in the fourth quarter of 2016, compared with earnings per fully diluted ADS of $0.50 in the third quarter of 2016 and earnings per fully diluted ADS of $0.31 in the fourth quarter of 2015.

Financial Positions

As of December 31, 2016, the Company had cash and cash equivalents of $390.9 million, compared with $254.8 million as of September 30, 2016. The restricted cash as of December 31, 2016 was $108.1 million, compared with $147.2 million as of September 30, 2016.

As of December 31, 2016, accounts receivable was $415.1 million, compared with $453.1 million as of September 30, 2016. Inventories were $333.5 million as of December 31, 2016, compared with $451.7 million as of September 30, 2016.

Total short-term bank borrowings (including the current portion of long-term bank borrowings) were $527.9 million as of December 31, 2016, an increase of $113.0 million from the third quarter of 2016. As of December 31, 2016, the Company had total long-term debt (net of current portion and long-term notes) of $643.7 million, a decrease of $153.2 million from the third quarter of 2016. The Company's long-term bank and government borrowings are to be repaid in installments until their maturities, which range from one to fourteen years.

Net cash provided by operating activities was $94.8 million in the fourth quarter of 2016.

Capital expenditures were $25.1 million in the fourth quarter of 2016.

Full Year 2016 Financial Results

Net Revenues

- Total net revenues were $2,426.6 million, up 34.8% from $1,800.8 million for the full year 2015.

Gross Profit and Margin

- Gross profit was $454.7 million, compared with $334.0 million for the full year 2015.

- Gross margin was 18.7%, compared with 18.5% for the full year 2015.

Operating Expense, Income and Margin

- Total operating expenses were $247.2 million, down 3.5% from $256.1 million for the full year 2015.

- Selling and marketing expenses were $120.2 million, up 27.7% from $94.1 million for the full year 2015.

- General and administrative expenses were $77.6 million, down 15.4% from $91.7 million for the full year 2015.

- Research and development expenses were $49.4 million, up 2.3% from $48.3 million for the full year 2015.

Net Interest Expense

- Net interest expense was $46.7 million, compared with $56.0 million for the full year 2015.

Foreign Currency Exchange Gain (Loss)

- Net foreign currency exchange loss was $4.0 million, compared with a net loss of $23.6 million for the full year 2015.

Gain (loss) on change in Fair Value of Derivative Contracts

- The Company recorded a net loss of $24.1 million from the change in fair value of derivatives in hedging activities, compared with a net gain of $9.6 million for the full year 2015.

Income Tax Expense (Benefit)

- Income tax expense was $0.8 million, compared with an income tax expense of $10.1 million for the full year 2015.

Net Income (Loss) and Earnings (Loss) per ADS

- Net income attributable to Company's ordinary shareholders was $120.5 million, compared with net income of $43.8 million for the full year 2015.

- Earnings per fully diluted ADS on a GAAP basis was $1.45, compared with earnings per fully diluted ADS of $0.53 for the full year 2015.

Financial Positions

As of December 31, 2016, the Company had cash and cash equivalents of $390.9 million, compared with $200.0 million as of December 31, 2015. The restricted cash as of December 31, 2016 was $108.1 million, compared with $172.2 million in the previous year.

As of December 31, 2016, accounts receivable was $415.1 million, compared with $641.9 million as of December 31, 2015. Inventories were $333.5 million, compared with $406.1 million as of December 31, 2015.

Total short-term bank borrowings (including the current portion of long-term bank borrowings) were $527.9 million as of December 31, 2016, an increase of $111.2 million from the full year of 2015. As of December 31, 2016, the Company had total long-term debt (net of current portion and long-term notes) of $643.7 million, a decrease of $9.8 million from the full year of 2015. The Company's long-term bank and government borrowings are to be repaid in installments until their maturities, which range from one to fourteen years.

Net cash provided by operating activities was $125.5 million in the full year 2016.

Capital expenditures were $137.7 million in the full year 2016.

Operations Updates

Production Capacity

As of December 31, 2016, the Company's in-house, annualized production capacities were 1,550MW for ingot, 950MW for wafer, 4,150MW for cell and 4,150MW for module.

Additionally, the Company has an access of module supply of up to 1,550MW (annualized) as of December 31, 2016 from Hanwha Q CELLS Korea Corporation, an affiliate of the Company.

Business Outlook

First Quarter and Full Year 2017 Guidance

For the first quarter of 2017, the Company estimates net revenues in the range of $410 to 430 million.

For the full year 2017, the Company estimates:

- Total module shipments in the range of 5,500 to 5,700MW

- Revenue-recognized module shipments in the range of 5,300 to 5,500MW

- Capital expenditures of approximately $50 million for manufacturing technology upgrades and certain R&D related expenditures


ENF Profiles For Companies Mentioned in This Article

Hanwha Q CELLS (Solar Panels): https://www.enfsolar.com/hanwha-q-cells
Hanwha Q CELLS (Solar System Installers): https://www.enfsolar.com/hanwha-q-cells
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