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Hanwha Q CELLS Reports Second Quarter 2016 Results

Hanwha Q CELLS Co., Ltd.
2016-08-23 18:23 2644

SEOUL, South Korea, August 23, 2016 /PRNewswire/ -- Hanwha Q CELLS Co., Ltd. ("Hanwha Q CELLS" or the "Company") (Nasdaq: HQCL), one of the world's largest photovoltaic manufacturers of high-quality, high-efficiency solar modules, today reported its unaudited financial results for the second quarter of 2016. The Company will host a conference call to discuss the results at 8:00 am Eastern Time (9:00 pm Korea Standard Time) on August 23, 2016.

SECOND QUARTER 2016 HIGHLIGHTS

  • Net revenues were $638.0 million, compared with $514.9 million in the first quarter of 2016 and $338.0 million in the second quarter of 2015.
  • Gross profit was $151.2 million, compared with $109.0 million in the first quarter of 2016 and $58.4 million in the second quarter of 2015.
  • Gross margin was 23.7%, compared with 21.2% in the first quarter of 2016 and 17.3% in the second quarter of 2015.
  • Operating income was $84.5 million, compared with $56.7 million in the first quarter of 2016 and $1.0 million in the second quarter of 2015.
  • Net income attributable to Company's ordinary shareholders was $76.8 million, compared with a net income of $27.5 million in the first quarter of 2016 and a net loss of $14.2 million in the second quarter of 2015.
  • Earnings per fully diluted American Depositary Share ("ADS" and each ADS represents 50 of the Company's ordinary shares) were $0.92, compared with earnings per fully diluted ADS of $0.33 in the first quarter of 2016 and a net loss per fully diluted ADS of $0.17 in the second quarter of 2015.

Mr. Seong-woo Nam, Chairman and CEO of Hanwha Q CELLS, remarked, "We are pleased to report a solid quarterly execution which exceeded our financial targets driven by disciplined, yet flexible global operations, while adopting into continuously changing market environments cost effectively."

"We continue to improve our financial positions and cash management to support our growing business rationally," Mr. Nam emphasized. "This year we are maintaining net debt to equity ratio below 250% level and our cash conversion cycle has fallen below 60 days compared with over 100 days a year ago."

Mr. Nam concluded by noting, "Despite highly cyclical and dynamic nature of our industry, we remain optimistic about long term growth prospects in our industry as solar power will have much higher penetration in global energy mix, and we are focused to expand our competitive advantage delivering sustainable growth as a prominent solar technology leader."

SECOND QUARTER 2016 RESULTS

Net Revenues

  • Total net revenues were $638.0 million, up 23.9% from $514.9 million in the first quarter of 2016 and up 88.8% from $338 million in the second quarter of 2015.

Gross Profit and Margin

  • Gross profit in the second quarter of 2016 was $151.2 million, compared with $109.0 million in the first quarter of 2016 and $58.4 million in the second quarter of 2015.
  • Gross margin in the second quarter of 2016 was 23.7%, compared with 21.2% in the first quarter of 2016 and 17.3% in the second quarter of 2015.

Operating Expense, Income and Margin

  • Total operating expenses were $66.7 million in the second quarter of 2016, up 27.5% from $52.3 million in the first quarter of 2016 and up16.2% from $57.4 million in the second quarter of 2015. Total operating expenses as a percentage of revenues were largely unchanged at 10.5% in the second quarter of 2016 compared with 10.2% in the first quarter of 2016 and substantially lower compared with 17.0% in the second quarter of 2015.
  • Selling and marketing expenses were $33.1 million in the second quarter of 2016, up 45.2% from $22.8 million in the first quarter of 2016 and up 67.2% from $19.8 million in the second quarter of 2015.
  • General and administrative expenses were $19.6 million in the second quarter of 2016, up 9.5% from $17.9 million in the first quarter of 2016 and down 23.7% from $25.7 million in the second quarter of 2015.
  • Research and development expenses were $14.0 million in the second quarter of 2016, up 20.7% from $11.6 million in the first quarter of 2016 and up 17.6% from $11.9 million in the second quarter of 2015.

Net Interest Expense

  • Net interest expense was $9.3 million in the second quarter of 2016, compared with $12.8 million in the first quarter of 2016 and $14.8 million in the second quarter of 2015.
  • Interest coverage ratio was 7.7x in the second quarter of 2016, compared with 3.6x in the first quarter of 2016 and 0.1x in the second quarter of 2015.

Foreign Currency Exchange Gain (Loss)

  • Net foreign currency exchange gain was $1.8 million in the second quarter of 2016, compared with a net gain of $4.0 million in the first quarter of 2016.

Changes in Fair Value of Derivative Contracts

  • The Company recorded a net loss of $13.7 million in the second quarter of 2016 from the change in fair value of derivatives in hedging activities, compared with a net loss of $15.3 million in the first quarter of 2016 and a net gain of $1.2 million in the second quarter of 2015.

Income Tax Expense (Benefit)

  • Income tax benefit was $8.8 million in the second quarter of 2016, compared with an income tax expense of $4.6 million in the first quarter of 2016 and an income tax expense of and $0.8 million in the second quarter of 2015.

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

  • Net income attributable to Company's ordinary shareholders was $76.8 million in the second quarter of 2016, compared with a net income of $27.5 million in the first quarter of 2016 and a net loss of $14.2 million in the second quarter of 2015.
  • Earnings per fully diluted ADS on a GAAP basis was $[0.92] in the second quarter of 2016, compared with earnings per fully diluted ADS of $0.33 in the first quarter of 2016 and a net loss per fully diluted ADS of $0.17 in the second quarter of 2015.

FINANCIAL POSITIONS

As of June 30, 2016, the Company had cash and cash equivalents of $255.4 million, compared with $327.3 million as of March 31, 2016. The restricted cash as of June 30, 2016 was $165.2 million, compared with $158.6 million in the previous quarter.

Total short-term bank borrowings (including the current portion of long-term bank borrowings) were $379.7 million as of June 30, 2016, a decrease of $71.0 million from the first quarter of 2016. As of June 30, 2016, the Company had total long-term debt (net of current portion and long-term notes) of $799.6 million, an increase of $151.6 million from the first quarter of 2016. The Company's long-term bank and government borrowings are to be repaid in installments until their maturities, which range from one to sixteen years.

Net cash used in operating activities was $72.8 million in the second quarter of 2016. As of June 30, 2016, accounts receivable was $518.3 million. Days sales outstanding ("DSO") was 71 days in the second quarter of 2016. As of June 30, 2016, inventories totaled $485.3 million. Days inventory turn was 89 days in the second quarter of 2016.

Capital expenditures were $36.5 million in the second quarter of 2016.

OPERATION UPDATES and BUSINESS OUTLOOK

Capacity Status

As of June 30, 2016, the Company had annualized production capacities of 1,500 MW for ingot, 900 MW for wafer, 4,000 MW for cell and 4,000 MW for module.

  • Manufacturing Capacity (in nameplate MW)

4Q15

2Q16

YE16(E)

Module

3,800

4,000

4,100

Cell

3,700

4,000

4,100

Wafer

900

900

900

Ingot

1,400

1,500

1,500

Business Outlook

For the full year 2016, the Company expects:

  • Total module shipments of 4,800 to 5,000 MW
  • Capital expenditures of approximately $180 million, of which $100 million for capacity expansion and the remaining $80 million for manufacturing technology upgrades and certain R&D related expenditures

Conference Call

The Company will host a conference call to discuss the results at 8:00 am Eastern Time (9:00 pm Seoul Time) on August 23, 2016. The management will discuss the results and take questions following the prepared remarks.

A live webcast of the conference call will be available on the investor relations section of the Company's website at www.hanwha-qcells.com or by clicking the following hyperlink: http://edge.media-server.com/m/p/u3ietgsn.

The dial-in details for the live conference call are as follows:

International Toll Free Dial-In Number

+65 67135090

United States

+1 (866) 519-4004

South Korea

+82 (0)2 6490-3660 / 00308132266

Germany

08001820671

China, Domestic

8008190121 / 4006208038

Passcode: HQCL

A replay of the call will be available after the conclusion of the conference call on the investor relations section of the Company's website at www.hanwha-qcells.com and also by dialing numbers below:

International Toll Free Dial-In Number

+61 2 8199 0299

United States

+1 (855) 452-5696

South Korea

0079861361602

Germany

08001802149

China, Domestic

8008700206 / 4006322162

Conference ID 58032852

Replay time period: Aug 23, 2016 11:00 ET - Aug 31, 2016 09:59 ET

About Hanwha Q CELLS

Hanwha Q CELLS Co., Ltd. (NASDAQ:HQCL) is one of the worlds largest and most recognized photovoltaic manufacturers for its high-quality, high-efficiency solar cells and modules. It is headquartered in Seoul, South Korea (Global Executive HQ) and Thalheim, Germany (Technology & Innovation HQ). With its diverse international manufacturing facilities in South Korea, Malaysia and China, Hanwha Q CELLS is in a unique position to flexibly address all global markets. Hanwha Q CELLS offers the full spectrum of photovoltaic products, applications and solutions, from modules to kits to systems to large scale solar power plants. Through its growing global business network spanning Europe, North America, Asia, South America, Africa and the Middle East, the company provides excellent services and long-term partnership to its customers in the utility, commercial, government and residential markets. Hanwha Q CELLS is a flagship company of Hanwha Group, a FORTUNE Global 500 firm and a Top 10 business enterprise in South Korea. For more information, visit http://investors.hanwha-qcells.com.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends, "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release and the Company's operations and business outlook, contain forward-looking statements. These forward-looking statements also include 3Q16, 2H16 and full-year 2016 estimates for PV product shipments, production capacities and other results of operations. Forward-looking statements involve inherent risks and uncertainties and actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Hanwha Q CELLS Co., Ltd.

Interim Condensed Consolidated Balance Sheets

(in millions of US dollars, except share data)



June 30,
2016

December 31,
2015

ASSETS

(unaudited)

(audited)

Current assets




Cash and cash equivalents

255.4

200.0

Restricted cash

165.2

172.2

Accounts and notes receivable

316.4

365.1

Receivables from related parties

198.9

276.8

Inventories

485.3

406.1

Loans to related parties

147.0

47.8

Other current assets

100.2

102.7

Total current assets

1,668.4

1,570.7







Long-term prepayments

1.9

2.6

Fixed assets - net

823.6

877.3

Intangible assets - net

14.3

14.8

Land use right - net

50.1

51.8

Deferred tax assets - net

0.1

0.8

Receivables from related parties - non-current

3.0

9.3

Other long-term assets

24.7

20.2

Total assets

2,586.1

2,547.5

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities




Accounts payable

160.1

226.1

Notes payable

146.8

129.0

Payables to related parties

253.6

169.0

Loan from related parties

4.4

32.4

Deferred revenue

225.9

402.1

Accrued expenses

37.2

41.8

Other payables

31.9

25.0

Tax payables

10.9

0.2

Short-term debt

349.2

255.6

Current portion of long-term debt

30.5

161.1

Customer deposits

6.1

7.0

Unrecognized tax benefit

-

17.9

Derivative contracts

17.1

0.8

Litigation accruals

2.1

5.9

Deferred tax liabilities

2.6

5.7

Warranty provision

40.7

43.6

Other current liabilities

4.4

7.3

Total current liabilities

1,323.5

1,530.5







Long-term debt, net of current portion

799.6

653.5

Long-term warranty provision

19.6

17.4

Deferred tax liabilities

5.8

5.9

Total liabilities

2,148.5

2,207.3

Redeemable ordinary shares

-

-

Stockholders' Equity




Ordinary shares

0.4

0.4

Additional paid-in capital

431.5

431.1

Accumulated income(deficit)

84.1

(20.2)

Accumulated other comprehensive loss

(78.4)

(71.1)

Total stockholders' equity

437.6

340.2

Total liabilities, redeemable ordinary shares and stockholders' equity

2,586.1

2,547.5

Hanwha Q CELLS Co., Ltd.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Income(Loss)

(in millions of US dollars, except share data and net income(loss) per share)


For the three months ended


For the six months ended


June 30, 2016


March 31, 2016


June 30, 2016


June 30, 2015

(unaudited)


(unaudited)


(unaudited)


(unaudited)

Net sales

638.0

514.9

1,152.9

671.5

Cost of goods sold

486.8

405.9

892.7

564.7

Gross profit

151.2

109.0

260.2

106.8

Selling and marketing expenses

33.1

22.8

55.9

35

General and administrative expenses

19.6

17.9

37.5

44.2

Research and development expenses

14.0

11.6

25.6

21.8

Restructuring charges

-

-

-

22.1

Operating income (loss)

84.5

56.7

141.2

(16.3)

Other expense






Interest income

1.7

3.1

4.8

2.4

Interest expense

(11.0)

(15.9)

(26.9)

(28.1)

Foreign exchange gain (loss)

1.8

4.0

5.8

0.0

Changes in fair value of derivative contracts

(13.7)

(15.3)

(29.0)

9.4

Investment loss

-

(1.5)

(1.5)

(1.5)

Other income (expense) - net

4.8

1.0

5.8

1.7

Other expense, net

(16.4)

(24.6)

(41.0)

(15.2)

Income (Loss) before income taxes

68.0

32.1

100.1

(31.5)








Income taxes expenses

(8.8)

4.6

(4.2)

3.1

Net income (loss)

76.8

27.5

104.3

(34.6)
























Net income (loss) attributable to Hanwha Q CELLS Co., Ltd.'s stockholders per share:



Basic

US$0.02


US$0.01


US$0.03


(US$0.01)

Diluted

US$0.02


US$0.01


US$0.03


(US$0.01)








Net income (loss) attributable to Hanwha Q CELLS Co., Ltd.'s stockholders per ADS:



Basic

US$0.92


US$0.33


US$1.25


(US$0.42)

Diluted

US$0.92


US$0.33


US$1.25


(US$0.42)








Number of shares used in computation of net income (loss) per share:





Basic

4,159,105,023

4,158,891,211

4,158,998,117

4,082,030,404

Diluted

4,160,058,250

4,159,413,477

4,159,363,156

4,082,030,404








Number of shares used in computation of net income (loss) per ADS:





Basic

83,182,100

83,177,824

83,179,962

81,640,608

Diluted

83,201,165

83,188,270

83,187,263

81,640,608








Other comprehensive income (loss)






Foreign currency translation adjustment

(29.7)

22.4

(7.3)

(29.1)

Comprehensive income (loss)

47.1

49.9

97.0

(63.7)

Hanwha Q CELLS Co., Ltd.

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(in millions of US dollars)



For the three months ended

For the six months ended


June 30, 2016

March 31, 2016

June 30, 2016

June 30, 2015


(unaudited)

(unaudited)

(unaudited)

(unaudited)

Cash flows from operating activities







Net income (loss)

76.8

27.5

104.3

(34.6)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities







Depreciation, amortization and impairment

30.9

18.3

49.2

61.0

Provision for doubtful collection of accounts receivable

(1.5)

3.1

1.6

0.7

Non-cash interest expense(income) on amortization of long-term debt and litigation accruals

1.5

(1.5)

-

9.7

Unrealized (gains) losses on derivative contracts

5.2

11.4

16.6

(5.7)

Stock compensation expense

0.3

0.1

0.4

0.4

Reversal of litigation accruals

(2.7)

-

(2.7)

-

Amortization of long-term loan

2.6

-

2.6

-

Loss (gain) from disposal of subsidiaries

-

-

-

1.5

Deferred tax expense(income)

0.6

(2.9)

(2.3)

3.1

Unrecognized tax benefit

(7.2)

-

(7.2)

-

Amortization of long-term deferred expense

2.3

1.6

3.9

-

Gain on disposal of business

(3.0)

-

(3.0)

-

Foreign currency exchange losses (gains)

(8.4)

2.7

(5.7)

-

Changes in operating assets and liabilities







Accounts and notes receivable

20.8

61.4

82.2

(122.4)

Inventories

(42.3)

(35.4)

(77.7)

(84.6)

Restricted cash

(6.6)

8.6

2.0

(44.4)

Other current assets

(81.5)

131.8

50.3

(84.8)

Other non current assets

(1.2)

(2.7)

(3.9)

(1.2)

Accounts payable

(26.6)

(27.4)

(54.0)

74.1

Notes payable

(2.3)

3.8

1.5

24.8

Warranty provision

(12.2)

11.1

(1.1)

13.6

Accrued expenses

4.5

(8.9)

(4.4)

8.4

Deferred revenue

(152.6)

(23.6)

(176.2)

442.2

Other current liabilities

129.8

19.4

149.2

132.5

Cash provided by (used in) operating activities

(72.8)

198.4

125.6

394.3









Cash flows from investing activities







Net cash received from an acquisition

-

-

-

70.2

Cash paid for long-term investment

(10.7)

(1.8)

(12.5)

-

Capital expenditures

(36.5)

(53.1)

(89.6)

(58.5)

Changes in restricted cash

-

5.0

5.0

4.9

Net cash received from disposal of subsidiaries

-

-

-

0.5

Repayment of loans by related parties

-

26.0

26.0

-

Issuance of loans to related parties

(95.2)

(30.0)

(125.2)

(36.4)

Net cash received from asset acquisitions

1.9

-

1.9

-

Net cash flow in disposal of business

18.9

-

18.9

-

Net cash provided by (used in) investing activities

(121.6)

(53.9)

(175.5)

(19.3)









Cash flows from financing activities







Proceeds from borrowings from banks

255.2

154.7

409.9

380.4

Principal payments on bank borrowings

(139.9)

(119.4)

(259.3)

(428.4)

Principal payments on capital lease obligations

-

-

-

(2.7)

Proceeds from related party borrowings


-

4.4

4.4

8.0

Principal payments on related party borrowings


(0.1)

(32.2)

(32.3)

(11.4)

Principal payments on government borrowings

-

-

-

-

Arrangement fee and other related costs for bank borrowings

-

(1.7)

(1.7)

(1.6)

Arrangement fee and other related cost for long-term notes


-

(1.0)

(1.0)

(1.0)

Net cash provided by (used in) financing activities

115.1

4.8

119.9

(56.7)

Net increase (decrease) in cash and cash equivalents

(79.3)

149.3

70.0

318.3









Effect of exchange rate changes on cash and cash equivalents

7.4

(22.0)

(14.6)

0.9









Cash and cash equivalents at beginning of period

327.3

200.0

200.0

156.7

Cash and cash equivalents at end of period

255.4

327.3

255.4

475.9

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hanwha-q-cells-reports-second-quarter-2016-results-300316934.html

Source: Hanwha Q CELLS Co., Ltd.
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