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Hanwha Q CELLS Reports Second Quarter 2017 Financial Results

Published on 16 Aug 2017
Hanwha Q CELLS 
Hanwha Q CELLS Co., Ltd.reported its unaudited financial results for the second quarter ended June 30, 2017. 

Second Quarter 2017 Highlights

- Net revenues were $577.7 million, compared with $432.0 million in the first quarter of 2017 and $638.0 million in the second quarter of 2016.

- Gross margin was 11.6%, compared with 13.8% in the first quarter of 2017 and 23.7% in the second quarter of 2016.

- Operating income was $20.1 million, compared with operating income of $28.3 million in the first quarter of 2017 and operating income of $84.5 million in the second quarter of 2016.

- Net income attributable to the Company's ordinary shareholders was $18.7 million, compared with net income of $17.6 million in the first quarter of 2017 and net income of $76.8 million in the second quarter of 2016.

- Earnings per fully diluted American Depositary Share ("ADS" and each ADS represents 50 of the Company's ordinary shares) were $0.22, compared with earnings per fully diluted ADS of $0.21 in the first quarter of 2017 and earnings per fully diluted ADS of $0.92 in the second quarter of 2016.

"Our second quarter results were in-line with our guidance and we are pleased to report that we are continuing to realize profits despite uncertainties in some of the major solar markets around the world," said Mr. Seong-woo Nam, Chairman and CEO of Hanwha Q CELLS. Mr. Nam continued, "We focused on expanding our footprint in markets with favorable conditions in response to the constantly changing market dynamics."

"Our 60 cell mono-PERC module, Q.PEAK, with output up to 305 Wp, continues to be well received in the residential market worldwide and is continuing to strengthen our competitiveness throughout all market segments," Mr. Nam remarked. Mr. Nam also stated that the Company is expected to "launch 72-cell mono-PERC modules, with output up to 365 Wp, in the second half of the year."

Mr. Jay Seo, CFO of Hanwha Q CELLS, said "We are continuing to strengthen our balance sheet by continuing to pay off interest-bearing debt instruments. Our debt-to-equity ratio, as of second quarter end was 361%, down 80% points from year-end 2016." Mr. Seo continued, "Given our capacity to continuously generate positive operating results, we expect to be well positioned to improve our financial position."

Second Quarter 2017 Results of Operations

Net Revenues

- Total net revenues were $577.7 million, up 33.7% from $432.0 million in the first quarter of 2017 and down 9.5% from $638.0 million in the second quarter of 2016.

Gross Profit and Margin

- Gross profit in the second quarter of 2017 was $67.2 million, compared with $59.8 million in the first quarter of 2017 and $151.2 million in the second quarter of 2016.

- Gross margin in the second quarter of 2017 was 11.6%, compared with 13.8% in the first quarter of 2017 and 23.7% in the second quarter of 2016.

Income from Operations and Operating Margin

- Income from operations in the second quarter of 2017 was $20.1 million, compared with $28.3 million in the first quarter of 2017 and $84.5 million in the second quarter of 2016.

- Operating margin in the second quarter of 2017 was 3.5%, compared with 6.6% in the first quarter of 2017 and 13.2% in the second quarter of 2016.

- Total operating expenses were $47.1 million in the second quarter of 2017, up 49.5% from $31.5 million in the first quarter of 2017 and down 29.4% from $66.7 million in the second quarter of 2016.

- Selling and marketing expenses were $29.5 million in the second quarter of 2017, up 34.7% from $21.9 million in the first quarter of 2017 and down 10.9% from $33.1 million in the second quarter of 2016.

- General and administrative expenses were $13.5 million in the second quarter of 2017, down 25.8% from $18.2 million in the first quarter of 2017 and down 31.1% from $19.6 million in the second quarter of 2016.

- Research and development expenses were $4.1 million in the second quarter of 2017, down 53.4% from $8.8 million in the first quarter of 2017 and down 70.7% from $14.0 million in the second quarter of 2016.

Net Interest Expense

- Net interest expense was $9.2 million in the second quarter of 2017, compared with $9.5 million in the first quarter of 2017 and $9.3 million in the second quarter of 2016.

Foreign Currency Exchange Gain (Loss)

- Net foreign currency exchange gain was $7.1 million in the second quarter of 2017, compared with a gain of $2.5 million in the first quarter of 2017 and a gain of $1.8 million in the second quarter of 2016.

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

- The Company recorded a net loss of $3.0 million in the second quarter of 2017 from the change in fair value of derivatives in hedging activities, compared with a net loss of $0.4 million in the first quarter of 2017 and a net loss of $13.7 million in the second quarter of 2016.

Income Tax Expense (Benefit)

-Income tax benefit was $3.0 million in the second quarter of 2017, compared with an income tax expense of $5.4 million in the first quarter of 2017 and an income tax benefit of $8.8 million in the second quarter of 2016.

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

- Net income attributable to the Company's ordinary shareholders was $18.7 million in the second quarter of 2017, compared with net income of $17.6 million in the first quarter of 2017 and net income of $76.8 million in the second quarter of 2016.

- Earnings per fully diluted ADS on a GAAP basis were $0.22 in the second quarter of 2017, compared with $0.21 in the first quarter of 2017 and $0.92 in the second quarter of 2016.

Second Quarter 2017 Financial Position

As of June 30, 2017, the Company had cash and cash equivalents of $331.0 million, compared with $516.1 million as of March 31, 2017. The restricted cash as of June 30, 2017 was $95.0 million, compared with $110.7 million as of March 31, 2017.

As of June 30, 2017, accounts receivable was $358.4 million, compared with $295.3 million, as of March 31, 2017. Inventories were $337.2 million as of June 30, 2017, compared with $399.3 million as of March 31, 2017.

As of June 30, 2017, accounts payable was $407.8 million, compared with $464.6 million, as of March 31, 2017.

Total short-term bank borrowings (including the current portion of long-term bank borrowings) were $635.5 million, an increase of $203.0 million from the first quarter of 2017, due to a reclassification of long-term bank borrowings as short-term borrowings.

As of June 30, 2017, the Company had total long-term debt (net of current portion and long-term notes) of $336.1 million, a decrease of $306.9 million from the first quarter of 2017. The Company's long-term debt is comprised of bank and government borrowings, to be repaid in installments until their maturities, ranging from one to fourteen years.

Capital expenditures were $14.0 million in the second quarter of 2017.

Operations Updates

Production Capacity

As of June 30, 2017, the Company's in-house, annualized production capacities were 1,550MW for ingot, 1,000MW for wafer, 4,200MW for cell and 4,200 MW for module.

By the end of this year, we expect our annual nameplate capacities to reach 1,600MW for ingot, 1,100MW for wafer, 4,600MW for cell and 4,600MW for module mainly from conversion efficiency improvements and de-bottlenecking of our production operations.

Furthermore, the Company has additional module availability of up to 2,100MW (annualized) as of June 30, 2017 from Hanwha Q CELLS Korea Corporation, an affiliate of the Company. Hanwha Q CELLS Korea Corporation is currently ramping-up its capacity with expected capacity of approximately 2,200MW in the second half of 2017.

Business Outlook

Third Quarter and Full Year 2017 Guidance

For the third quarter of 2017, the Company estimates net revenues in the range of $540 to 560 million.

For the full year 2017, the Company reiterates its previous guidance of:

- 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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