JinkoSolar Announces Third Quarter 2018 Financial Results

Published on 28 Nov 2018
Jinko Solar 
JinkoSolar Holding Co., Ltd. announced its unaudited financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Highlights

- Total solar module shipments were 2,953 megawatts ("MW") (including 0.2MW to the Company's overseas downstream segment for which no revenue has been recognized), an increase of 5.7% from 2,794MW in the second quarter of 2018 and an increase of 24.4% from 2,374MW in the third quarter of 2017.
- Total revenues were RMB6.69 billion (US$974.8 million), an increase of 10.5% from the second quarter of 2018 and an increase of 4.3% from the third quarter of 2017.
- Gross margin was 14.9%, compared with 12.0% in the second quarter of 2018, and 12.0% in the third quarter of 2017.
- Income from operations was RMB188.0 million (US$27.4 million), compared with RMB94.6 million in the second quarter of 2018 and RMB91.9 million in the third quarter of 2017.
- Net income attributable to the Company's ordinary shareholders was RMB189.1 million (US$27.5 million) in the third quarter of 2018, compared with RMB99.0 million in the second quarter of 2018 and RMB11.3 million in the third quarter of 2017.
- Diluted earnings per American depositary share ("ADS") were RMB4.84 (US$0.72) in the third quarter of 2018.
- Non-GAAP net income attributable to the Company's ordinary shareholders in the third quarter of 2018 was RMB206.3 million (US$30.0 million), compared with RMB106.7 million in the second quarter of 2018 and RMB25.9 million in the third quarter of 2017.
- Non-GAAP basic and diluted earnings per ADS were both RMB 5.28 (US$0.76) in the third quarter of 2018, compared with RMB2.73 and RMB2.71 in the second quarter of 2018 and RMB0.80 and RMB0.76 in the third quarter of 2017.

Mr. Kangping Chen, JinkoSolar's Chief Executive Officer commented, "We had a solid quarter with module shipments hitting record high of 2,953MW, an increase of 5.7% sequentially and 24.4% year-over-year. Our gross margin was 14.9%, compared with 12.0% in the second quarter and non-GAAP net income US$30.0 million. While Chinese demand softened following the May 31 policy announcement, our business continued to grow thanks to our diverse global customer base and strong brand recognition. Overseas module shipments accounted for almost 80% of total shipments during the quarter which offset the impact of softened demand domestically. We are confident in our ability to further expand our market share with global demand expected to recover next year as solar energy becomes more competitive and grid parity approaches in more key markets."

"Despite the impacts of May 31 polices, China installed 34.5GW by the end of September which has already exceeded many analysts' expectations for the entire year. Recent positive changes from policy side are providing support for a possible rebound in Chinese demand next year, especially possible policies discussed during the Solar Industry symposium held by the NEA at the beginning of November which are expected to support the smooth transition from a policy-driven industry to a grid parity driven one. We will continue to focus on top runner projects and poverty alleviation projects, and will take advantage of the increasing opportunities for grid parity projects. We are confident that Chinese demand will return next year."

"We continue to allocate resources towards the application of high-efficiency technologies while constantly optimizing their cost structure. We made solid progress in improving wafer efficiency and reducing both oxygen content and light induced degradation. We also made breakthroughs with our new generation of N type HOT cell and optimized the structure of the P type PERC cell to further improve its efficiency. The Cheetah series modules are selling rapidly with the 72-piece mono PERC Cheetah module hitting above 400W in efficiency during mass production. Sustainable technology development and the falling cost of raw materials are helping us to increase market share by allowing us to cater to our client's diverse demands at cost effective prices."

"We are confident that Chinese and global demand next year will recover as the cost of solar energy becomes more competitive. This trend is irreversible. We are now ideally positioned with our order book in Q4 almost full from growing overseas markets and our products being in short supply. We will benefit from growth in demand for solar energy and believe we have the right strategy in place to further expand our market share, distinguish ourselves from the competition, and consolidate our leading position in the industry."

Third Quarter 2018 Financial Results

Total Revenues

Total revenues in the third quarter of 2018 were RMB6.69 billion (US$974.8 million), an increase of 10.5% from RMB6.06 billion in the second quarter of 2018 and an increase of 4.3% from RMB6.42 billion in the third quarter of 2017. The sequential increase was mainly attributable to an increase in the shipment of solar modules in the third quarter of 2018. The year-over-year increase was mainly attributable to an increase in the shipment of solar modules, which was partially offset by a decline in the average selling price of solar modules in the third quarter of 2018.

Gross Profit and Gross Margin

Gross profit in the third quarter of 2018 was RMB997.6 million (US$145.3 million), compared with RMB727.6 million in the second quarter of 2018 and RMB772.4 million in the third quarter of 2017. The sequential increase was mainly attributable to an increase in the shipment of solar modules in the third quarter of 2018 and the benefit of Countervailing Duty ("CVD") reversal of RMB 140.4 million (US$20.5 million), based on the final results of the fourth administrative review of the CVD order published by the U.S. Department of Commerce. The year-over-year increase was mainly attributable to the same reasons above, which was partially offset by a decline in the average selling price of solar modules in the third quarter of 2018.

Gross margin was 14.9% in the third quarter of 2018, compared with 12.0% in the second quarter of 2018 and 12.0% in the third quarter of 2017. The sequential increase was mainly attributable to (i) the benefit of CVD reversal of RMB 140.4 million (US$20.5 million), based on the final results in the fourth administrative review of the CVD order published by the U.S. Department of Commerce, and (ii) a decrease in solar module cost. Excluding the CVD reversal benefit, gross margin was 12.8% in the third quarter of 2018, which was attributable to a decrease in solar module cost. The year-over-year increase was mainly attributable to the same reasons above, and was partially offset by a decline in the average selling price of solar modules in the third quarter of 2018.

Income from Operations and Operating Margin

Income from operations in the third quarter of 2018 was RMB188.0 million (US$27.4 million), compared with RMB94.6 million in the second quarter of 2018 and RMB91.9 million in the third quarter of 2017. Excluding the CVD reversal benefit, income from operations in the third quarter of 2018 was RMB47.6 million (US$6.9 million). Operating margin in the third quarter of 2018 was 2.8%, compared with 1.6% in the second quarter of 2018 and 1.4% in the third quarter of 2017. Excluding the Countervailing Duty reversal benefit, operating margin in the third quarter of 2018 was 0.7%.

Total operating expenses in the third quarter of 2018 were RMB809.6 million (US$117.9 million), an increase of 27.9% from RMB633.0 million in the second quarter of 2018 and an increase of 19.0% from RMB680.5 million in the third quarter of 2017. The sequential and year-over-year increases were mainly due to an increase in shipping cost as a result of an increase in solar module shipment.

Total operating expenses accounted for 12.1% of total revenues in the third quarter of 2018, compared to 10.4% in the second quarter of 2018 and 10.6% in the third quarter of 2017.

Interest Expense, Net

Net interest expense in the third quarter of 2018 was RMB55.6 million (US$8.1 million), a decrease of 31.0% from RMB80.6 million in the second quarter of 2018 and an increase of 9.5% from RMB52.3 million in the third quarter of 2017. The sequential decrease was mainly due to an increase in capitalized interest caused by construction development of the Company's overseas projects.

Exchange Gain / (Loss), Net and Change in Fair Value of Forward Contracts

The Company recorded a net exchange gain (including change in fair value of forward contracts) of RMB93.5 million (US$13.6 million) in the third quarter of 2018, compared to a net exchange gain of RMB20.8 million in the second quarter of 2018 and a net exchange loss of RMB49.3 million in the third quarter of 2017. The sequential increase was primarily due to the appreciation of the US dollar against the RMB during the quarter.

Change in Fair Value of Derivatives

The Company entered into Interest Rate Swap agreements with several banks and bought foreign exchange options from several banks for the purpose of reducing interest rate and exchange rate risk exposure. The Company recorded a gain of RMB4.3 million (US$0.6 million) in the third quarter of 2018, which included a gain of RMB12.8 million (US$1.8 million) from the Interest Rate Swap agreements and a loss of RMB8.5 million (US$1.2 million) from the foreign exchange options, compared to a gain of RMB14.3 million in the second quarter of 2018 and a loss of RMB3.4 million in the third quarter of 2017. The sequential and year-over-year changes in gain/loss from Interest Rate Swap agreements were primarily due to an increase in the LIBOR rate.

Equity in Income of Affiliated Companies

The Company indirectly holds 20% equity interest of Sweihan PV Power Company P.J.S.C, which develops and operates solar power projects in Dubai and accounts for its investments using the equity method. The Company also holds 30% equity interest in Jiangsu Jinko-Tiansheng Co., Ltd, which processes and assembles PV modules as OEM manufacturer and accounts for its investments using the equity method. The Company recorded equity in income of affiliated companies of RMB4.9 million (US$0.7 million) in the third quarter of 2018, compared with an income of RMB28.0 million in the second quarter of 2018 and a loss of RMB0.4 million in the third quarter of 2017.

Income Tax Benefit / (Expense), Net

The Company recorded an income tax expense of RMB61.2 million (US$8.9 million) in the third quarter of 2018, compared with an income tax benefit of RMB10.0 million in the second quarter of 2018 and an income tax expense of RMB4.5 million in the third quarter of 2017. The sequential change was mainly due to the additional 2017 income tax deduction for R&D costs approved by the local tax bureau in the second quarter of 2018.

Net Income and Earnings per Share

Net income attributable to the Company's ordinary shareholders was RMB189.1 million (US$27.5 million) in the third quarter of 2018, compared with RMB99.0 million in the second quarter of 2018 and RMB11.3 million in the third quarter of 2017.

Basic and diluted earnings per ordinary share were both RMB1.21 (US$0.18) during the third quarter of 2018. This translates into basic and diluted earnings per ADS both of RMB4.84 (US$0.72).

Non-GAAP net income attributable to the Company's ordinary shareholders in the third quarter of 2018 was RMB206.3 million (US$30.0 million), compared with RMB106.7 million in the second quarter of 2018 and RMB25.9 million in the third quarter of 2017.

Non-GAAP basic and diluted earnings per ordinary share were both of RMB1.32 (US$0.19) during the third quarter of 2018. This translates into non-GAAP basic and diluted earnings per ADS both of RMB5.28 (US$0.76).

Financial Position

As of September 30, 2018, the Company had RMB3.03 billion (US$441.6 million) in cash and cash equivalents and restricted cash, compared with RMB2.56 billion as of June 30, 2018.

As of September 30, 2018, the Company's accounts receivables due from third parties were RMB5.28 billion (US$768.4 million), compared with RMB4.77 billion as of June 30, 2018.

As of September 30, 2018, the Company's inventories were RMB5.56 billion (US$809.6 million), compared with RMB5.89 billion as of June 30, 2018.

As of September 30, 2018, the Company's total interest-bearing debts were RMB9.46 billion (US$1.38 billion), compared with RMB9.29 billion as of June 30, 2018.

Third Quarter 2018 Operational Highlights

Solar Module Shipments

Total solar module shipments in the third quarter of 2018 were 2,953MW, including 0.2MW to the Company's overseas downstream segment.

Solar Products Production Capacity

As of September 30, 2018, the Company's in-house annual silicon wafer, solar cell and solar module production capacity was 9.2GW, 6.5GW and 10.0GW, respectively.

Recent Business Developments

- In August 2018, JinkoSolar announced that it had signed a 240MW solar module supply agreement with POWERCHINA Huadong Engineering Corporation Limited for the second phase of the 420MW Dau Tieng solar plant in Vietnam, which will become the largest solar power project in Southeast Asia when completed.
- In September 2018, JinkoSolar announced that it was ranked as a top solar brand in debt financed projects and named the most "bankable" PV manufacturer by Bloomberg New Energy Finance (BNEF) for the second consecutive year.
- In September 2018, JinkoSolar announced a partnership with Edisun Microgrids, Inc., a solar technology company that develops patented, distributed solar and energy storage technologies, to develop the Eagle PowerTrack, a performance bundle for commercial and industrial (C&I) rooftops. The new performance bundle will feature JinkoSolar's high-efficiency Eagle G2 modules in combination with Edisun's PV Booster breakthrough rooftop tracking technology.
- In October 2018, JinkoSolar announced that it had been recognized as a Top Performer on DNV GL's 2018 PV Module Reliability Scorecard for the fourth consecutive year.

Operations and Business Outlook

Fourth Quarter and Full Year 2018 Guidance

For the fourth quarter of 2018, the Company estimates total solar module shipments to be in the range of 3.7GW to 4.0GW.

For the full year 2018, the Company estimates total solar module shipments to be in the range of 11.5GW to 11.8GW.


ENF Profiles For Companies Mentioned in This Article

Jinko Solar (Solar Materials): https://www.enfsolar.com/directory/material/4383
Jinko Solar (Solar Panels): https://www.enfsolar.com/directory/panel/4383
Jinko Solar (Solar Components): https://www.enfsolar.com/directory/component/4383
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