Solar Trade Platform and Directory of Solar Companies

Canadian Solar Reports Second Quarter 2018 Results

Published on 17 Aug 2018
CSI Solar 
Canadian Solar Inc. announced its financial results for the second quarter of 2018 ended June 30, 2018.

Second Quarter 2018 Highlights

- Solar module shipments were 1,700MW, including 246MW shipped to the Company's own solar projects not recognized into revenue in the quarter. This compares to the module shipment of 1,374MW in the first quarter of 2018, and second quarter 2018 module shipment guidance in the range of 1,500MW to 1,600MW.

- Net revenue was $650.6 million, compared to $1.42 billion in the first quarter of 2018, and second quarter 2018 guidance in the range of $690 million to $730 million. The sequential decrease in net revenue is the result of lower revenue from project sales ($879.9 million in Q1 and $85.6 million in Q2) and lower average selling prices for our solar modules.The lower revenue compared to the guidance is due to the deferral of several planned project sales to later quarters.

- Net revenue from the total solutions business as a percentage of total net revenue was 20.1% compared to 64.2% in the first quarter of 2018.

- Gross margin was 24.5%, including the benefits of two AD/CVD reversals of $13.1 million and $12.6 million, based on the final rates of Solar 2 AD AR2 and Solar 1 CVD AR4, respectively. Excluding these AD/CVD reversal benefits, gross margin was 20.5%, compared to 10.1% in the first quarter of 2018, and second quarter 2018 guidance of a range of 20.0% to 22.0%.

- Net income attributable to Canadian Solar was $15.6 million, or $0.26 per diluted share, compared to net income of $43.4 million, or $0.72 per diluted share, in the first quarter of 2018.

- Cash, cash equivalents and restricted cash balances at the end of the quarter totaled $991.1 million, compared to $1.19 billion at the end of the first quarter of 2018.

- Net cash used in operating activities was approximately $174million, compared to net cash provided by operating activities of $253 million in the first quarter of 2018.

- The Company's portfolio of utility-scale solar power plants in operation as of July 31, 2018 was approximately 1.4GWp with an estimated total resale value of approximately $1.6 billion. Only the value of class B shares which the Company holds in its tax equity solar power plants in the U.S. is included in this resale value.

Second Quarter 2018 Results

Net revenue in the second quarter of 2018 was $650.6 million, down 54.3% from $1.42 billion in the first quarter of 2018 and down 6.0% from $692.4 million in the second quarter of 2017. The sequential decrease in net revenue is as a result of lower revenue from project sales ($879.9 million in Q1 and $85.6 million in Q2), lower average selling prices for our solar modules and the deferral of several planned project sales to later quarters.

Solar module shipments in the second quarter of 2018 were 1,700MW, including 246MW shipped to the Company's own solar projects not recognized into revenue in the quarter, compared to 1,374MW in the first quarter of 2018, and second quarter 2018 guidance in the range of 1,500MW to 1,600MW.

Gross profit in the second quarter of 2018 was $159.4 million, compared $143.9 million in the first quarter of 2018 and $167.8 million in the second quarter of 2017. Gross margin in the second quarter of 2018 was 24.5%, compared to 10.1% in the first quarter of 2018 and 24.2% in the second quarter of 2017, and second quarter 2018 guidance of 20.0% to 22.0%. Gross profit in the second quarter of 2018 includes the benefits of two AD/CVD reversals of $13.1 million and $12.6 million, based on the final rates of Solar 2 AD AR2 and Solar 1 CVD AR4, respectively. Excluding these AD/CVD reversal benefits, gross margin was 20.5% in the second quarter of 2018.

Total operating expenses in the second quarter of 2018 were $105.5million, up 60.6% from $65.7 million in the first quarter of 2018 and up 25.5% from $84.1 million in the second quarter of 2017.

Selling expenses in the second quarter of 2018 were $40.3 million, down 4.9% from $42.3 million in the first quarter of 2018 and up 2.4% from $39.3 million in the second quarter of 2017.

General and administrative expenses in the second quarter of 2018 were $56.4 million, up 15.7% from $48.8million in the first quarter of 2018 and up 6.6% from $53.0 million in the second quarter of 2017. The relatively low G&A in Q1 was partially due to a reversal of $4.5 million in other payables accrual in Q1. The sequential increase in Q2 was also due to a $2.6 million increase in labor cost.

Research and development expenses in the second quarter of 2018 were $9.1 million, compared to $9.5 million in the first quarter of 2018 and $7.3 million in the second quarter of 2017.

Other operating income in the second quarter of 2018 was $0.3 million, compared to $34.9 million in the first quarter of 2018 and $15.5 million in the second quarter of 2017.

Income from operations in the second quarter of 2018 was $53.9 million, compared to $78.2 million in the first quarter of 2018, and $83.7 million in the second quarter of 2017. Operating margin was 8.3% in the second quarter of 2018, compared to 5.5% in the first quarter of 2018 and 12.1% in the second quarter of 2017.

Non-cash depreciation and amortization charges in the second quarter of 2018 were approximately $30.2 million, compared to $34.5 million in the first quarter of 2018 and $21.2 million in the second quarter of 2017. Non-cash equity compensation expense in the second quarter of 2018 was $3.3 million, compared to $2.1 million in the first quarter of 2018 and $4.2 million in the second quarter of 2017.

Interest expense in the second quarter of 2018 was $26.6 million, compared to $29.6million in the first quarter of 2018 and $26.7 million in the second quarter of 2017.

Interest income in the second quarter of 2018 was $2.9 million, compared to $3.6 million in the first quarter of 2018 and $1.4 million in the second quarter of 2017.

The Company recorded a loss on the change in fair value of derivatives in the second quarter of 2018 of $7.6 million, compared to a gain of $4.5 million in the first quarter of 2018 and a loss of $1.8 million in the second quarter of 2017. Foreign exchange loss in the second quarter of 2018 was $2.5 million, compared to $8.5 million in the first quarter of 2018, and $11.6 million in the second quarter of 2017.

Income tax expense in the second quarter of 2018 was $7.8 million, compared to $4.1 million in the first quarter of 2018 and $9.0 million in the second quarter of 2017.

Net income attributable to Canadian Solar in the second quarter of 2018 was $15.6 million or $0.26 per diluted share, compared to $43.4 million or $0.72 per diluted share in the first quarter of 2018 and $38.2 million or $0.63 per diluted share in the second quarter of 2017.

Financial Condition

The Company had a cash, cash equivalents and restricted cash balance of $991.1 million as of June 30, 2018, compared to $1.19 billion as of March 31, 2018.

Accounts receivable, net of allowance for doubtful accounts, at the end of the second quarter of 2018 were $370.1 million, compared to $354.3 million at the end of the first quarter of 2018. Accounts receivable turnover in the second quarter of 2018 was 58 days, compared to 26 days in the first quarter of 2018.

Inventories at the end of the second quarter of 2018 were $336.5 million, compared to $414.1 million at the end of the first quarter of 2018. Inventory turnover in the second quarter of 2018 was 72 days, compared to 28 days in the first quarter of 2018.

Accounts and notes payable at the end of the second quarter of 2018 were $815.4 million, compared to $914.0 million at the end of the first quarter of 2018.

Short-term borrowings at the end of the second quarter of 2018 were $2.0 billion, compared to $1.86 billion at the end of the first quarter of 2018. Long-term borrowings at the end of the second quarter of 2018 were $221.3 million, compared to $328.1 million at the end of the first quarter of 2018. 

Senior convertible notes totaled $126.9 million at the end of the second quarter of 2018, compared to $126.7 million at the end of the first quarter of 2018.

Total borrowings directly related to utility-scale solar power projects were $1.22 billion at the end of the second quarter of 2018, compared to $1.12 billion at the end of the first quarter of 2018. Total debt at the end of the second quarter of 2018 was approximately $2.47 billion.

Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar, commented, "Our second quarter revenue was affected by the deferral of several project sales as well as an industrywide lower average module selling price. The solar policy change in China effective on May 31, 2018 has caused a significant disruption in China, and the global solar industry. We also incurred a relatively large foreign exchange loss due to the depreciation of currencies in certain developing countries against US dollar during the quarter. However, we are confident we can navigate this challenging period given our proven track record even in prior periods of volatility. On the energy business side, as of July 31, 2018, we have increased our late-stage, utility-scale solar power project pipeline to 2.2GWp and our portfolio of solar power plants in operation to 1.4GWp."

Dr. Huifeng Chang, Senior Vice President and Chief Financial Officer of Canadian Solar, commented, "We were able to improve our gross margin excluding the AD/CVD reversal benefits to 20.5% as we balanced higher than expected shipments of solar modules with our continued focus on cost controls. During the quarter, we achieved several milestones in our energy business. We energized a large fleet of solar power projects in China, Brazil, Japan and Australia. We further diversified our late-stage, utility-scale solar power project pipeline in new countries, including Malaysia. Finally, we are on track to monetize additional solar power assets, including three of our solar power plants in the U.S. totaling 394MWp.Our continued progress in this regard reflects our ongoing efforts to improve our balance sheet."

Manufacturing Capacity

Subject to market conditions, the Company plans to expand its ingot, wafer, cell and module manufacturing capacity to 1.65GW, 5.0GW, 6.25GW and 9.13GW, respectively, by December 31, 2018. This represents a reduction from the Company's previously announced ingot, cell and module manufacturing capacity expansion plan by 355MW, 800MW and 780MW, respectively.


All of the Company's wafer manufacturing capacity uses diamond wire-saw technology. Diamond wire-saw technology is compatible with the Company's proprietary and highly efficient black silicon multi-crystalline solar cell technology, thereby reducing silicon usage and manufacturing cost.

The Company owns solar module manufacturing factories in Canada and Brazil, with nominal capacity of 400MW and 360MW, respectively. Due to lower volume in the Canadian market and the Section 201 import duty in the U.S., the Canadian factory has been running at a low utilization rate since February of 2018. The Brazilian plant is also running at a relatively low utilization rate as we completed our planned utility scale projects in the market. As a result, the Company considers its effective solar module production capacity being 7,550MW as of June 30, 2018, and expects it to be 8,370MW on December 31, 2018.

Business Outlook

The Company's business outlook is based on management's current views and estimates with respect to operating and market conditions, its current order book and the global financing environment. It is subject to uncertainty relating to solar module average selling prices, final customer demand and solar project construction and sale schedules. Management's views and estimates are subject to change without notice.

For the third quarter of 2018, the Company expects total solar module shipments to be in the range of 1.5GW to 1.6GW, including approximately 210MW of shipments to the Company's utility-scale, solar power projects that may not be recognized as revenue in third quarter 2018. Total revenue for the third quarter of 2018 is expected to be in the range of $790 million to $840 million. Gross margin for the thirdquarter is expected to be between 20.0% and 23.0%.

Given global market changes following the new policy announcement in China effective on May 31, 2018 and the policy and market changes in other key markets, the Company is updating its full year 2018 total module shipment guidance to be in the range of 6.0GW to 6.2GW, compared to 6.6GW to 7.1GW previously. The Company now expects total revenue for the full year 2018 to be in the range of $4.0 billion to 4.2 billion, compared to $4.4 billion to $4.6 billion previously.

Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar, commented, "The revision of our annual guidance is in-line with the boarder industry and mainly reflects the expected reduction of shipment volumes to the Chinese market in the second half of the year, as well as the expected lower solar module average selling price. In the near-term, we will focus on maintaining our market share and protecting a reasonable profit margin. In the longer-term, we remain confident that global demand for solar power products will continue to increase in light of solar energy's compelling lower cost of ownership and ability to accommodate locations underserved by other grid power options."

Recent Developments

On August 7, 2018, Canadian Solar announced that it closed a $45 million financing with Natixis, an arm of Groupe BPCE, the second largest banking group in France. Proceeds from the non-recourse financing will be used to construct the Company's 68MWp solar power project in Aguascalientes, Mexico.

On June 28, 2018, Canadian Solar announced the COD of its 56.3MWp Yamaguchi Shin Mine solar power project in Japan.

On May 15, 2018, Canadian Solar announced the COD of its 35MWp commercial and industrial (C&I) solar portfolio in the state of Karnataka, India in March 2018.

On May 15, 2018, Canadian Solar announced that its wholly-owned subsidiary, Recurrent Energy, had closed on debt financing and tax equity investment commitments for its 102MWp NC 102 solar power project, located in Cabarrus County, North Carolina. Prudential Capital Group will provide a $106.7 million debt facility for the project, including a tax equity bridge loan, term loan and revolving loan. U.S. Bancorp Community Development Corporation, a division of U.S. Bank, will make a tax equity investment in the project under a separate agreement.


ENF Profiles For Companies Mentioned in This Article

CSI Solar (Solar Materials): https://www.enfsolar.com/csi-solar
CSI Solar (Solar Panels): https://www.enfsolar.com/csi-solar
CSI Solar (Solar Components): https://www.enfsolar.com/csi-solar
CSI Solar (Solar System Installers): https://www.enfsolar.com/csi-solar
PV industry news is republished free of charge, please send your news to