ReneSola Ltd Announces Second Quarter 2011 Results

JIASHAN, China, August 9, 2011 /PRNewswire-Asia-FirstCall/ -- ReneSola Ltd ("ReneSola" or the "Company") (NYSE: SOL), a leading global manufacturer of solar products, today announced its unaudited financial results for the quarter ended June 30, 2011.

Second Quarter 2011 Financial and Operating Highlights

• Total solar product shipments in Q2 2011 were 295.5 megawatts ("MW"), compared to 330.4 MW in Q1 2011.
• Q2 2011 net revenues were US$249.3 million, a decrease of 30.6% from US$359.2 million in Q1 2011.
• Q2 2011 gross profit was US$45.9 million and gross margin was 18.4%, compared to US$101.2 million and 28.2% in Q1 2011.
• Q2 2011 operating income was US$23.0 million and operating margin was 9.2%, compared to US$75.6 million and 21.0% in Q1 2011.
• Q2 2011 net income was US$1.8 million, representing basic and diluted earnings per share of US$0.01, and basic and diluted earnings per American depositary share ("ADS") of US$0.02.
• Cash and cash equivalents plus restricted cash reached US$480.8 million as of June 30, 2011, compared to US$435.9 million as of March 31, 2011.

"Both wafer and module prices fell faster than expected in the second quarter as European subsidy cuts weakened demand and led to oversupply in the industry," said Mr. Xianshou Li, ReneSola's chief executive officer. "Although this affected both our top and bottom lines, we were able to maintain a gross margin of 18.4% with our industry-low wafer processing costs and growing in-house polysilicon production. Our new Virtus wafer, a multicrystalline wafer that can achieve cell efficiency rates of up to 18.2%, has an even higher profit margin than our existing wafers and has been well-received by clients with its high efficiency-to-price ratio. We expect Virtus wafers to replace all of ReneSola's existing multicrystalline wafers by the end of 2011. As the solar market matures, we will continue to focus on wafer production to capitalize on our brand name, scale of operations and innovative technologies to lead the industry in cost-competitive solar manufacturing."

Henry Wang, ReneSola's chief financial officer, commented, "We continued to execute our cost reduction strategy in the second quarter. Although wafer processing cost rose $0.02 per watt in the second quarter, the increase was primarily due to our transition to Virtus wafer production, which has not yet reached full efficiency. As we continue to improve Virtus wafer production, we expect our wafer processing cost to decrease to US$0.19 per watt by the end of 2011. Our cost control can also be accredited to our prudent polysilicon purchasing and the decrease in our internal polysilicon cost to approximately $40 per kilogram at the end of the second quarter. Our cost-competitive solar manufacturing platform is further bolstered by our efficient operational management and strong balance sheet. Our inventories remain stable, with only modules increasing slightly, illustrating sound market judgment and inventory control. We also hold one of the largest cash positions in the industry, allowing us to make strategic investments to increase efficiency or make debt repurchases, such as buying back our convertible bonds, which we have done and may continue to do from time to time. Despite relatively tough market conditions, we are confident we are well positioned for long-term growth."

Second Quarter 2011 Results

Total Solar Product Shipments

The sequential decrease in wafer shipments was affected by the transition toward Virtus wafer production, which resulted in a temporary loss of 25 MW of capacity for Q2 2011. The Company operates its wafer production near its operational capacity to meet customer demand.

Net Revenues

The sequential decrease in revenues was driven by a decline in the average selling price ("ASP") of solar wafers and modules to US$0.69 per watt ("W") and US$1.53/W, respectively, as well as a relatively large decrease in module shipments and a slight decrease in wafer shipments.

Gross Profit

The sequential decrease in gross margin was primarily due to the decline in solar wafer and module ASPs as well as the transition toward Virtus wafer production, offset by a decline in polysilicon prices.

Operating Income

The decrease in operating expenses was primarily due to the mixed impact from lower general and administrative expenses as a result of overall expense control and decreased R&D spending in line with reduced revenues. Operating margins represented 9.2% of total revenues in Q2 2011, a decrease from 21.0% in Q1 2011.

Foreign Exchange Gain (Loss)

The Company had a foreign exchange gain of US$0.9 million in Q2 2011, primarily due to the appreciation of the Euro against USD. The Company also recognized a US$1.4 million loss in the fair value of foreign exchange forward contracts, compared to a loss of US$19.8 million in Q1 2011, as the Euro appreciated more than the forward rate hedged. The Company also recognized an investment loss of US$7.8 million, relating to the Company's foreign exchange forward contracts.

Net Income Attributable to Holders of Ordinary Shares

Business Highlights

Wafer Business

The Company's solar wafer business achieved a gross margin of 14.3% in Q2 2011, impacted by the decline in solar wafer ASPs. In Q2 2011, the Company's non-silicon wafer processing cost was US$0.26/W, a slight increase from US$0.24/W in Q1 2011 primarily due to the transition toward Virtus wafer production, which is expected to replace production of the Company's existing multicrystalline wafers by the end of the year. Virtus wafer production is currently operating at an annual production capacity of 900 MW. The Company also reduced its polysilicon raw material cost to approximately US$54.10 per kilogram ("kg"), well below the market spot price. The Company will continue its cost reduction efforts through advancements in technology and manufacturing, and expects its processing cost to reach US$0.19/W by the end of 2011 as the Company begins steel wire production and undertakes slurry recycling.

Module Business

The Company delivered solar module shipments of 65.0 MW with an ASP of US$1.53/W in Q2 2011. Module shipments declined 25.2% quarter-over-quarter. The Company expects to continue to reduce its module processing cost and expand its module sales force internationally.

Polysilicon Update

The Company's Sichuan polysilicon plant continued to make increasing contributions to profitability in Q2 2011. In Q2 2011, the Company produced approximately 787 metric tons ("MT") of polysilicon, an increase from approximately 750 MT in Q1 2011. The Company's polysilicon production cost was reduced to approximately US$40/kg by the end of Q2 2011, compared to approximately US$45/kg at the end of Q1 2011.

The Company now expects to expand its polysilicon production capacity to 8,500 MT by Q2 2012, due to a deferment of ongoing capital expenditures. In Q3 2011, the Company expects polysilicon production to decrease to between 600 MT and 700 MT as a result of temporary electricity shortages from government-sponsored infrastructure upgrades and facility improvements. The Company is still targeting to reduce production cost to US$35/kg by the end of 2011.

Strong Cash Position

Net cash and cash equivalents plus restricted cash were US$480.8 million at the end of Q2 2011, compared to US$435.9 million at the end of Q1 2011. Total debt was US$560.7 million in Q2 2011, compared to US$522.8 million in Q1 2011, excluding the US$200 million of convertible notes offered in the first and second quarters.

Capital expenditures were US$22.8 million for Q2 2011. Short-term borrowings were US$428.0 million in Q2 2011, an increase from US$404.0 million in Q1 2011. Short-term borrowings consisted of US$174.5 million in trade finance, US$181.9 million in short-term facilities and US$71.6 million as the short-term portion of the long-term debt.

The Company repurchased a portion of its convertible bonds in Q3 2011. As in previous quarters, the Company may repurchase its convertible bonds from time to time.

2011 Capacity Expansion Plans and Related CAPEX

The Company expects to reduce its capital expenditures for the full year 2011 from $350 million to $270 million as a result of the deferment of a portion of the Company's polysilicon production capacity expansion into the first half of 2012. The Company expects to spend the $270 million in 2011 to expand wafer production capacity from the current 1.3 gigawatts ("GW") to 2.0 GW, consisting of 1.8 GW of Virtus wafers and 200 MW of monocrystalline wafers, expand module production capacity from the current 400 MW to 600 MW and launch steel wire production with an annualized capacity of 8,400 MT. The Company also expects to spend a significant portion of its 2011 capital expenditure to increase polysilicon production from the current 3,000 MT to 8,500 MT by the end of Q2 2012.

Outlook

In Q3 2011, the Company expects total solar wafer and module shipments to be in the range of 330 MW to 350 MW, revenues to be in the range of US$220 million to US$240 million and gross profit margin to be in the range of 6% to 8%, as market conditions continue to be challenging. The Company is also withdrawing its guidance for the full year.

Conference Call Information

ReneSola's management will host an earnings conference call on Tuesday, August 9, 2011 at 8 am U.S. Eastern Time (8 pm Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "ReneSola Call".

A replay of the conference call may be accessed by phone at the following number until August 16, 2011:

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of ReneSola's website at http://www.renesola.com.

About ReneSola

ReneSola is a leading global manufacturer of solar wafers and producer of solar power products based in China. Capitalizing on proprietary technologies, economies of scale, low-cost production capabilities and technological innovations and know-how, ReneSola leverages its in-house virgin polysilicon and solar cell and module production capabilities to provide its customers with high-quality, cost-competitive solar wafer products and processing services. The Company possesses a global network of suppliers and customers that includes some of the leading global manufacturers of solar cells and modules. ReneSola's ADSs are traded on The New York Stock Exchange (NYSE: SOL). For more information about ReneSola, please visit http://www.renesola.com.

Safe Harbor Statement

This press release contains statements that 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. Whenever you read a statement that is not simply a statement of historical fact (such as when the Company describes what it "believes," "expects" or "anticipates" will occur, what "will" or "could" happen, and other similar statements), you must remember that the Company's expectations may not be correct, even though it believes that they are reasonable. The Company does not guarantee that the forward-looking statements will happen as described or that they will happen at all. Further information regarding risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements is included in the Company's filings with the U.S. Securities and Exchange Commission, including the Company's annual report on Form 20-F. The Company undertakes no obligation, beyond that required by law, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, even though the Company's situation may change in the future.