Xinyi Solar 2017 Interim Net Profit Reaches Record High of HK$1,254.9 Million

2017-08-01 03:14 2010

HONG KONG, Aug. 1, 2017 /PRNewswire/ -- Xinyi Solar Holdings Limited ("Xinyi Solar" or the "Group"; stock code: 968), the largest ultra-clear photovoltaic ("PV") raw glass manufacturer in the world, today announced it has achieved another remarkable interim results performance for the six months ended 30 June 2017 ("1H 2017"). Turnover for 1H 2017 increased by 67.2% to HK$5,309.7 million. Gross profit soared by 16.1% to HK$1,801.9 million and net profit surged by 12.5% to HK$1,254.9 million. Gross and net profit margins were 33.9% and 23.6% respectively. Substantial increases in profitability were reported in the solar farm business and EPC service segment, contributing to the encouraging result of the Group for the period under review.

Basic earnings per share were 18.25 HK cents. The confluence of the cash flow generating from the Group's business operations, significant banking facilities and the rights issue in June 2017, has significantly strengthened the Group's financial resources. As at 30 June 2017, the Group held a strong financial position with cash on hand of HK$2,449.7 million (As at 31 December 2016: HK$843.3 million). The Board of Directors proposed payment of an interim dividend of 8.0 HK cents per share. Dividend payout ratio for 1H 2017 was 47.3%.

Business Review
Solar Glass - PV Demand Remained Strong in China and Growth Momentum Shifted to Emerging MarketsStrategic Overseas Capacity Expansion and Continuous Efficiency Improvement to Capture Market Opportunities

In 1H 2017, the higher-than-expected volume of PV installations in China and the robust demand from emerging markets have sustained the continued growth of solar products. In China, policy inclination and aggressive support contributed to the rapid development of distributed generation PV projects. The annual installation target of 18.1GW (for 2016 to 2017) and the additional quota of 5.3GW (released in late 2016 and early 2017 to eight provinces) and 5.16GW (for PV poverty alleviation projects) also helped to sustain the growth momentum of PV installation. According to the National Energy Administration ("NEA"), 24.4GW of new PV capacity was commissioned in 1H 2017, representing a year-on-year increase of 9%. The more evenly distributed closure deadlines for installation in 2017 is expected to cause less volatile changes in the PV demand of China in the first-half versus the second-half of the year. With the quickly increasing project pipelines in emerging countries, the potential for further growth of the global PV market in 2017 remains high. As for the emerging markets, India has overtaken Japan as the third-largest global PV market and rapid development was also noted in Middle East and Asia-Pacific regions.

To capture the market opportunities, the Group has adopted a proactive and flexible marketing strategy, and by taking advantage of its increased capacity and cost advantages, it has speeded up the inventory turnover and successfully increased its global market share during 1H 2017. The Group's solar glass sales revenue increased by 1.2% to HK$2,447.3 million.

Meanwhile, timely expansion of capacity and continuous upgrade of solar glass production facilities not only enables the Group to expand market share and capture growth opportunities, but also further strengthens the competitive advantages of the Group. During Q4 2016 and Q1 2017, the Group has added three new ultra-clear PV raw glass production lines, increasing its aggregate daily melting capacity from 3,900 tonnes to 6,800 tonnes and reinforcing its position as the world's largest solar glass manufacturer. The scale advantage of these newly added production lines (900 / 1,000 tonnes/day) has further enhanced the Group's economies of scale and production efficiency. This, together with the highly automated, fully integrated and streamlined production processes have enabled the Group to stay ahead of its competitors, operate in a more cost-efficient manner.

The 900 tonnes/day PV raw glass production line in Malaysia has steadily ramped up during 1H 2017 and achieved satisfactory production efficiency around June 2017, representing the successful operation of the Group's first solar glass production line outside China and an important milestone of its strategic advance in overseas expansion. The geographical and low-cost advantages offered by this line have strengthened the Group's overall competitiveness.

Solar Farms –Technological Innovation for Solar Farm Development and EPC Services Leading to Growing Revenue Contribution

The 13th Five-Year Plan released by China's National Development and Reform Commission aims to carry out industrial and technological upgrade, reduce costs and promote the wider application of solar technology so as to achieve market-oriented and self-sustainable growth without relying on the subsidy from the government. To achieve the targeted timing for grid parity on the consumer side is 2020, a further tariff cut is a must so as to encourage an accelerated pace of efficiency improvement and cost reduction, resulting in more intense competition in the coming years. As a leading solar farm developer, the Group can ride on its experiences in the solar value chain and strive to advance itself through technological innovation.

As at 30 June 2017, the Group had 17 utility-scale ground mounted solar farm projects in operation. Its accumulated approved grid-connected capacity increased from 974MW at 30 June 2016 to 1,584MW at 30 June 2017. The increase is attributable to the additions of 490MW and 120MW in 2H 2016 and 1H 2017, respectively. Increased grid-connected capacity contributed to the remarkable growth in revenue and profit contribution of the Group's solar farm business. During the period under review, this segment accounted for 13.8% and 31.3% of the Group's total revenue and gross profit, respectively.

Currently, the Group has two solar farm projects, with an aggregate capacity of 250MW successfully listed on the 6th catalogue batch. Subsidies for their electricity generation incurred up to July 2015 have already been received by the Group. And the application for the 7th catalogue batch, which covered solar farm projects connected to the grid between March 2015 and March 2016, has started sooner than expected in March 2017. The Group has eight solar farm projects with an aggregate capacity of 724 MW eligible for application for the 7th catalogue batch.

Despite the competitive bidding and limited land supply, technological advancement and rapidly declining costs have largely expanded the opportunities and application of distributed generation ("DG") in China. The robust DG development has created immense opportunities for the Group's EPC services business. In 1H 2017, the Group has secured several EPC services projects in relation to the PV poverty alleviation programmes for building collectively-deployed village-level DG power plants in different counties of Anhui province. Thanks to the concerted effort of the EPC services team and various department of the Group, all of these EPC projects, with an aggregate capacity of 296MW, have been completed within a few months despite the substantial amount of construction work and very large number of villages involved. Revenue from EPC services of the Group for the period under review amounted to HK$2,127.9 million, representing a year-on-year increase of 656.9%.

Looking ahead, given the fierce market competition, more consolidation is expected in the solar glass industry amid the substantial increase in the capacity of leading players and the gradual phase-out of some small and inefficient production lines. The Group will continue to adopt flexible production plans, improve production techniques and increase the extent of automation to further improve operational efficiency. The Group plans to expand its solar glass production capacity by adding two new solar glass production lines in Malaysia with a daily melting capacity of 1,000 tonnes each. The expected commencement dates of their operation are Q4 2018 and mid-2019, respectively.

In 2H 2017, while the Group continues to exploit the potential of the DG market in China, including the development of self-owned DG projects on third parties' roof-tops as well as EPC services for PV poverty alleviation programs, the development focus and more resources will be shifted back to utility-scale ground mounted solar farm projects. The Group will step up efforts in the coming months and targets to increase its aggregate accumulated grid-connected capacity to more than 2GW by the end of 2017.

In addition to the set-up of the solar glass production complex in Malaysia, the Group also plans to take its business international and gradually broaden its business presence in overseas solar farm projects. In April 2016, the acquisition of 60% equity interest in Polaron Solartech Corporation, a solar power system provider in Canada, has marked a successful start of the Group in this aspect. The Group is continuing its effort to explore other downstream solar opportunities in overseas countries. Recently, the Group has been granted the permission to conduct a feasibility study on a solar farm project with a capacity of 100MW in Cambodia, to further achieve strategic overseas expansion.

Datuk LEE Yin Yee, B.B.S., Chairman of Xinyi Solar, said, "In the first half of 2017, thanks to the timely expansion of capacity and continuous upgrade of solar glass production facilities, the Group has actively speeded up the pace of sales to seize market share, with a satisfactory growth in sales volume recorded during the period under review by taking advantage of its increased capacity and cost advantages. As a leading enterprise in the industry, Xinyi Solar continues to leverage its advantages in scale, optimise operational efficiency and explore new markets to sustain growth with continuous expansion and innovation. It has successfully developed a balanced business model with diversified sources of revenue from both the solar glass and solar farm businesses. Leveraging its solid foundation and competitive advantages, the Group is well-positioned to capture new business opportunities, rise above the rapidly changing and challenging market conditions and reinforce its leading position in the industry."


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