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JinkoSolar Announces Second Quarter 2019 Financial Results

Published on 3 Sep 2019
Jinko Solar 
JinkoSolar Holding Co., Ltd. today announced its unaudited financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

- Total solar module shipments were 3,386MW, an increase of 11.5% from 3,037 (including intragroup solar module shipments)MW in the first quarter of 2019 and an increase of 21.2% from 2,794MW in the second quarter of 2018.
- Total revenues were RMB6.91 billion (US$1.01 billion), an increase of 18.7% from the first quarter of 2019 and an increase of 14.1% from the second quarter of 2018.
- Gross margin was 16.5%, compared with 16.6% in the first quarter of 2019, and 12.0% in the second quarter of 2018.
- Income from operations was RMB260.3 million (US$37.9 million), compared with RMB235.7 million in the first quarter of 2019 and RMB94.6 million in the second quarter of 2018.
- Net income attributable to the Company's ordinary shareholders was RMB125.4 million (US$18.3 million) in the second quarter of 2019, compared with RMB40.2 million in the first quarter of 2019 and RMB99.0 million in the second quarter of 2018.
- Diluted earnings per American depositary share ("ADS") were RMB1.260 (US$0.184) in the second quarter of 2019.
- Non-GAAP net income attributable to the Company's ordinary shareholders in the second quarter of 2019 was RMB202.9 million (US$29.6 million), compared with RMB33.3 million in the first quarter of 2019 and RMB106.7 million in the second quarter of 2018.
- Non-GAAP basic and diluted earnings per ADS were both RMB4.872 (US$0.708) in the second quarter of 2019, compared with RMB0.848 and RMB0.840 in the first quarter of 2019, respectively and RMB2.728 and RMB2.708 in the second quarter of 2018, respectively.

Mr. Kangping Chen, JinkoSolar's Chief Executive Officer, commented, "We continued our strong start of the year by further diversifying our global distribution network and expanding our market share in key overseas markets. Module shipments during the second quarter were 3,386 megawatts, a year-over-year increase of 21.2% and a sequential increase of 11.5%. Our gross margin was 16.5%, up from 12.0% during the same period last year, while non-GAAP net income surged to US$29.6 million. With the expansion of our mono wafer production capacity and optimization of cost structure, we are confident that our bottom line will have room to grow during the second half of the year."

"2019 will be a milestone for the global solar industry as grid parity rapidly approaches. A number of emerging overseas markets are quickly reachingGW-level as the cost of PV power generation continues to decline, which is creating enormous opportunities for us and, our high-efficiency mono products in particular. With our new production facility in Leshan, Sichuan Province expected to reach full mono production capacity of 5GW by the end of 2019 and preparations for another 5GW capacity expansion already underway, we are ideally positioned to benefit from the growth opportunities ahead."

"Following the announcement of China's National Energy Administration in May regarding the first batch of wind power and PV grid parity projects, a list of approved solar projects that secured government subsidies for 2019 was released in July. China is now expected to install approximately 40GW of solar projects and connect them to the grid by the end of the year."

"We are accelerating the expansion of our high-efficiency mono production capacity to meet growing demand globally. This is mainly being driven by our new production facility in Leshan, the mono production capacity of which is expected to reach 5GW by the end of 2019 and 16.5GW once the second phase of the capacity expansion is complete. As of June 30, 2019, our in-house annual silicon wafer, solar cell and solar module production capacity reached 10.5GW, 7.4GW and 12.6GW, respectively. By the end of 2019, we expect our in-house annual silicon wafer, solar cell and solar module production capacity to reach 15.0GW, 10.5GW and 16.0GW, respectively, including 11.5GW of mono capacity, 9.7GW of PERC cell capacity and 800MW of N-type cell capacity."

"We continue to invest in our technological development capabilities and are optimizing our cost structure. This helped create new industry benchmarks for our highly-efficient N-type cells and our latest product, the "swan" bifacial module with DuPont™ Tedlar® based backsheets. This new lightweight, bifacial technology has huge potential to go mainstream because it not only alleviates problems encountered during installation and lowers cost per kilowatt hour of electricity generated, but also improves module efficiency and overall power plant production."

"In conclusion, we made significant progress during the quarter in positioning ourselves for future sustainable growth and strengthening the reputation our high-quality products have in the market, especially at a time when the industry is racing towards grid parity. As one of the largest and most innovative solar module manufacturers in the world, we are setting new standards for the industry with our highly-efficient products and ability to continuously lowering costs through technological innovation. With our global distribution network and support teams working closely, we will continue to drive growth in this new era of grid parity."

Second Quarter 2019 Financial Results

Total Revenues

Total revenues in the second quarter of 2019 were RMB6.91 billion (US$1.01 billion), an increase of 18.7% from RMB5.82 billion in the first quarter of 2019 and an increase of 14.1% from RMB6.06 billion in the second quarter of 2018. The sequential increase was mainly attributable to an increase in the shipment of solar modules in the second quarter of 2019. 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 second quarter of 2019.

Gross Profit and Gross Margin

Gross profit in the second quarter of 2019 was RMB1.14 billion (US$166.6 million), compared with RMB964.3 million in the first quarter of 2019 and RMB727.6 million in the second quarter of 2018. The sequential increase was mainly attributable to an increase in the shipment of solar modules in the second quarter of 2019. The year-over-year increase was mainly attributable to (i) an increase in the shipment of solar modules in the second quarter of 2019, and (ii) a decrease of solar module cost in the second quarter of 2019, which were partially offset by a decline in the average selling price of solar modules in the second quarter of 2019.

Gross margin was 16.5% in the second quarter of 2019, compared with 16.6% in the first quarter of 2019 and 12.0% in the second quarter of 2018. The year-over-year increase was mainly attributable to a decrease in solar module cost in the second quarter of 2019, which was partially offset by a decline in the average selling price of solar modules in the second quarter of 2019.

Income from Operations and Operating Margin

Income from operations in the second quarter of 2019 was RMB260.3 million (US$37.9 million), compared with RMB235.7 million in the first quarter of 2019 and RMB94.6 million in the second quarter of 2018. Operating margin in the second quarter of 2019 was 3.8%, compared with 4.0% in the first quarter of 2019 and 1.6% in the second quarter of 2018.

Total operating expenses in the second quarter of 2019 were RMB883.6 million (US$128.7 million), an increase of 21.3% from RMB728.6 million in the first quarter of 2019 and an increase of 39.6% from RMB633.0 million in the second quarter of 2018. The sequential increase was mainly due to an increase in shipping costs associated with an increase in solar module shipments in the second quarter of 2019. The year-over-year increase was primarily due to an increase in shipping costs in the second quarter of 2019.

Total operating expenses accounted for 12.8% of total revenues in the second quarter of 2019, compared to 12.5% in the first quarter of 2019 and 10.4% in the second quarter of 2018. The sequential increase of operating expenses as a percentage of total revenue was primarily due to the increase in shipping costs as a percentage of total revenue associated with a higher percentage of shipments to overseas markets in the second quarter of 2019.

Interest Expense, Net

Net interest expense in the second quarter of 2019 was RMB116.8 million (US$17.0 million), an increase of 21.5% from RMB96.1 million in the first quarter of 2019 and an increase of 44.8% from RMB80.6 million in the second quarter of 2018. The sequential increase was mainly due to (i) an increase in borrowings, (ii) the cessation of interest capitalization on certain completed solar projects, and (iii) issuance of additional convertible senior notes in May 2019. The year-over-year increase was mainly due to an increase in borrowings.

Exchange (Loss)/Gain and Change in Fair Value of Foreign Exchange Derivatives

The Company recorded a net exchange gain (including Change in fair value of foreign exchange derivatives) of RMB45.9 million (US$6.7 million) in the second quarter of 2019, compared to a net exchange loss of RMB62.9 million in the first quarter of 2019 and a net exchange gain of RMB20.8 million in the second quarter of 2018. The Company bought foreign exchange forward contracts and foreign exchange options from several banks for the purpose of reducing exchange rate risk exposure. The sequential change was primarily due to the appreciation of the US dollar against the RMB in the second quarter of 2019.

Change in Fair Value of Interest Rate Swap

The Company entered into Interest Rate Swap agreements with several banks for the purpose of reducing interest rate risk exposure associated with the Company's overseas solar power projects. The Company recorded a loss arising from change in fair value of interest rate swap of RMB46.1 million (US$6.7 million) in the second quarter of 2019, compared to a loss of RMB30.2 million in the first quarter of 2019. The loss arising from change in fair value of interest swap was primarily due to a continuous decrease in long-term interest rates. The Company did not elect to use hedge accounting for any of its derivatives.

Change in Fair Value of Convertible Senior Notes and Call Option

The Company issued US$85.0 million of 4.5% convertible senior notes due 2024 (the "Notes") in May 2019 and has elected to measure the Notes at fair value. The Company recognized loss from a change in fair value of the Notes of RMB118.6 million (US$17.3 million) primarily due to the increase in the stock price of the Company in the second quarter of 2019 and other comprehensive income resulted from a change in the instrument-specific credit risk of RMB 5.5million (US$ 0.8 million).

The Notes grant each holder the right, at such holder's option, to require the Company to repurchase for cash on June 1, 2021 (the "Repurchase Date") all of such holder's Notes, or any portion thereof that is an integral multiple of US$1,000 principal amount, at a repurchase price that is equal to 100% of the outstanding principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the Repurchase Date. The holders exercising such option must deliver a repurchase notice within the prescribed period as provided in the Notes indenture. If a repurchase notice is not given within the prescribed period, the Company will not be obligated to repurchase the relevant Notes. The Notes also grant each holder a conversion right, at such holder's option, at any time prior to the close of business on the third Business Day immediately preceding the Maturity Date, to convert all or any portion of such Note into the Company's ADSs at the applicable conversion rate.

Concurrent with the issuance of the Notes in May 2019, the Company entered into a call option transaction with an affiliate of Credit Suisse Securities (USA) LLC. The Company accounted for the call option transactions as freestanding derivative assets in the consolidated balance sheets, which is marked to market at each reporting period. The Company recorded a gain from a change in fair value of the call option of RMB73.5 million (US$10.7 million) in the second quarter of 2019.

Equity in (Loss)/Income of Affiliated Companies

The Company indirectly holds a 20% equity interest in Sweihan PV Power Company P.J.S.C, a developer and operator of solar power projects in Dubai, and accounts for its investment using the equity method. The Company also holds a 30% equity interest in Jiangsu Jinko-Tiansheng Co., Ltd, which processes and assembles PV modules as an OEM manufacturer, and accounts for its investments using the equity method. The Company recorded equity in loss of affiliated companies of RMB28.6 million (US$4.2 million) in the second quarter of 2019, compared with a loss of RMB23.7 million in the first quarter of 2019 and an income of RMB28.0 million in the second quarter of 2018. The loss was primarily arising from change in fair value of interest rate swap agreements purchased by Sweihan PV Power Company P.J.S.C due to a continuous decrease in long-term interest rates. Hedge accounting was not applied for the derivative.

Income Tax Benefit, Net

The Company recorded an income tax benefit of RMB55.9 million (US$8.1 million) in the second quarter of 2019, compared with an income tax benefit of RMB4.3 million in the first quarter of 2019 and an income tax benefit of RMB10.0 million in the second quarter of 2018. 

The sequential increase was mainly due to additional 2018 income tax deduction for R&D costs approved by the local tax bureau in the second quarter of 2019.

Net Income and Earnings per Share

Net income attributable to the Company's ordinary shareholders was RMB125.4 million (US$18.3 million) in the second quarter of 2019, compared with RMB40.2 million in the first quarter of 2019 and RMB99.0 million in the second quarter of 2018.

Basic and diluted earnings per ordinary share were RMB0.753(US$0.110) and RMB0.315 (US$0.046), respectively, during the second quarter of 2019. This translates into basic and diluted earnings per ADS of RMB3.012 (US$0.440) and RMB1.260 (US$0.184), respectively.

Non-GAAP net income attributable to the Company's ordinary shareholders in the second quarter of 2019 was RMB202.9 million (US$29.6 million), compared with RMB33.3 million in the first quarter of 2019 and RMB106.7 million in the second quarter of 2018.

Non-GAAP basic and diluted earnings per ordinary share were both RMB1.218 (US$0.177) during the second quarter of 2019. This translates into non-GAAP basic and diluted earnings per ADS of RMB4.872 (US$0.708).

Financial Position

As of June 30, 2019, the Company had RMB4.81 billion (US$701.1 million) in cash and cash equivalents and restricted cash, compared with RMB4.36 billion as of March 31, 2019.

As of June 30, 2019, the Company's accounts receivables due from third parties were RMB4.94 billion (US$719.4 million), compared with RMB5.20 billion as of March 31, 2019.

As of June 30, 2019, the Company's inventories were RMB6.63 billion (US$966.3 million), compared with RMB6.48 billion as of March 31, 2019.

As of June 30, 2019, the Company's total interest-bearing debts were RMB13.34 billion (US$1.94 billion), of which RMB2.16 billion (US$314.0 million) was related to the Company's overseas downstream solar projects, compared with RMB12.04 billion, of which RMB1.74 billion was related to the Company's overseas downstream solar projects, as of March 31, 2019. The increase of interest-bearing debts was mainly due to (i) issuance of additional convertible senior notes, and (ii) an increase in borrowings.

Second Quarter 2019 Operational Highlights

Solar Module Shipments

Total solar module shipments in the second quarter of 2019 were 3,386MW.

Solar Products Production Capacity

As of June 30, 2019, the Company's in-house annual silicon wafer, solar cell and solar module production capacity was 10.5GW (including 6.5GW of mono wafers), 7.4GW (including 5.8GW of PERC cells) and 12.6GW, respectively.

JinkoSolar expects its annual silicon wafer, solar cell and solar module production capacity to reach 15.0GW (including 11.5GW of mono wafers), 10.5GW (including 9.7GW of PERC cells) and 16.0GW, respectively, by the end of 2019.

Recent Business Developments

- In June 2019, JinkoSolar Japan K.K., a subsidiary of JinkoSolar, upsized a two-year JPY5.3 billion syndicated loan signed in June 2018 to JPY6.7 billion during its annual review in June 2019.
- In July 2019, the world's largest solar plant of 1,177MWp, which was jointly developed by JinkoSolar, Japan's Marubeni Corp. and Emirates Water and Electricity Company (EWEC), started commercial operations as scheduled at Sweihan in Abu Dhabi. The AED3.2 billion project used highly-efficient mono panels, all of which were supplied by JinkoSolar which hit another record at the time of bid submission.
- In July 2019, JinkoSolar supplied I+D Energias with 7.8MW of solar modules which were installed at two PV power plants in Hungary.
- In July 2019, JinkoSolar supplied 95MW of highly-efficient solar panels to Vena Energy Australia, an independent power producer with shareholders including Global Infrastructure Partners (GIP) and China Investment Corp., (CIC), for use in the Tailem Bend Solar Project.
- In July 2019, JinkoSolar was recognized for augmenting solar PV efficiency in a cost-effective manner with the Frost & Sullivan 2019 Global Solar PV Technology Leadership Award
- In July 2019, JinkoSolar was ranked 340th on the 2019 Fortune China 500 and first among solar module manufacturers. This marks the fifth consecutive year that the Company has been included in the Fortune China 500 list.
- In August 2019, JinkoSolar was one of only four PV module suppliers to receive a "AA" bankability rating from PV-Tech & Solar Media, Ltd., a leading global source of in-depth news and research on the photovoltaic industry. JinkoSolar is the only PV module supplier to have AA-Ratings for the past 12 consecutive quarters.

Operations and Business Outlook

Third Quarter and Full Year 2019 Guidance

The Company's business outlook is based on management's current views and estimates with respect to market conditions, production capacity, the Company's order book and the global economic environment. This outlook is subject to uncertainty on final customer demand and sale schedules. Management's views and estimates are subject to change without notice.

For the third quarter of 2019, the Company expects total solar module shipments to be in the range of 3.2GW to 3.5GW. Total revenue for the third quarter is expected to be in the range of US$ 980 million to US$ 1.07 billion. Gross margin for the third quarter is expected to be between 18% and 20%.

For the full year 2019, the Company estimates total solar module shipments to be in the range of 14.0GW to 15.0GW.


Source: JinkoSolar
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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