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ReneSola Ltd Announces Third Quarter 2008 Results

2008-11-18 20:13 1079

Third Quarter Revenues Increased 197.4% Year-Over-Year; Third Quarter Net Income Increased 153.5% Year-Over-Year

JIASHAN, China, Nov. 18 /PRNewswire-FirstCall/ -- ReneSola Ltd ("ReneSola" or the "Company"), a leading global manufacturer of solar wafers, today announced its unaudited financial results for the third quarter of 2008.

(Logo: http://www.prnasia.com/sa/200806261902.jpg )

Financial and Business Highlights

-- Third quarter 2008 net revenues were US$215.8 million, an increase of

197.4% from US$72.5 million in the third quarter of 2007, and an

increase of 25.5% from US$171.9 million in the second quarter of 2008.

-- Third quarter 2008 gross margin was 21.2% compared to 22.4% in the

second quarter of 2008.

-- Third quarter 2008 net income was US$32.4 million, an increase of

153.5% from US$12.8 million in the third quarter of 2007, and an

increase of 38.9% from US$23.3 million in the second quarter of 2008.

-- Third quarter 2008 basic and diluted earnings per share were US$0.24

and US$0.23, respectively, and basic and diluted earnings per ADS were

US$0.48 and US$0.46, respectively. Each ADS represents two shares.

-- Third quarter production output was 102.1 MW, an increase of 23.8% from

82.5 MW in the second quarter of 2008, exceeding previously issued

guidance released in the second quarter of 2008 and at the high-end of

our revised guidance issued on November 3, 2008.

-- Silicon consumption rate decreased to 6.1 grams per watt in the third

quarter of 2008 from 6.24 grams per watt in the second quarter of 2008.

-- Commissioned 90 MW of multicrystalline ingot and wafer capacity and 35

MW of monocrystalline ingot and wafer capacity on schedule.

-- Secured additional credit lines with two of China's leading banks

providing the Company with an aggregate of RMB2.8 billion in new and

existing credit facilities. The Company had US$125.2 million in cash,

cash equivalents and restricted cash on its balance sheet as of

September 30, 2008.

-- Development of wholly-owned Sichuan polysilicon project progressing on-

schedule.

Note: For ease of comparison, pro forma results are shown throughout this

statement for the second quarter of 2008, reflecting the

contribution of the Company's polysilicon production joint venture

in Henan province, China under the equity accounting method, which

was adopted with effect from June 28, 2008.

Three Three Three

months months months

ended ended ended

9/30/07 6/30/08 9/30/08

(Pro forma)

Net revenue (US$000) 72,540 171,889 215,754

Gross profit (US$000) 15,775 38,426 45,809

Gross margin (%) 21.7 22.4 21.2

Operating profit (US$000) 13,432 30,535 36,888

Foreign exchange loss

(US$000) (569) (797) (1,192)

Profit for the period

(US$000) 12,775 23,309 32,385

Production output (MW) 36.0 82.5 102.1

"We enjoyed an outstanding third quarter with continued significant growth driven by strong market demand for our quality wafer products, further reductions in our silicon consumption rate and the successful implementation of our expansion strategy," said Mr. Xianshou Li, ReneSola's chief executive officer. "Our third quarter expansion and ramp-up in wafer production capacity was smooth and keeps us on track to reach our 2008 full year capacity expansion target of 645 megawatts in annualized ingot production capacity."

Mr. Li continued, "The third quarter momentum continued through the first month of the fourth quarter and we saw strong results for October. However, since the beginning of November, we have seen downstream industry demand from Chinese customers being negatively impacted by various factors as a result of the global financial crisis."

"Whilst we may benefit from a lack of direct exposure to many of the negative factors, we recognize the challenges that the industry faces in the near term. Spot polysilicon prices have declined significantly in recent weeks. Although this will translate to a lower cost base for our wafer production, we are experiencing pressure on wafer ASPs. The combination of these factors is likely to have a negative impact on our operating and financial results for the fourth quarter of 2008 into the first quarter of 2009."

"Looking ahead, we are confident the current challenges in the industry are temporary and that the mid- to long-term prospects remain strong, particularly as lower raw material costs and ASPs should increase demand and lessen the industry's reliance on government subsidies. While the Company's cash position remains healthy and funding availability is further strengthened by the additional credit facilities from two of China's largest banks, we will continue to focus on streamlining our operations through strict cost controls while working to achieve further technological improvements as we position our company for continuing long-term success. The incremental supply from our upstream polysilicon manufacturing, combined with an expected increase in tolling production, and our continuing efforts in achieving productivity gains and diversifying our customer base, will help to alleviate the pressure on our business."

Financial Results for the Third Quarter

Net Revenues

Net revenues for the third quarter of 2008 were US$215.8 million, an increase of 25.5% sequentially and 197.4% year-over-year. The increase in third quarter revenues was primarily attributable to an increase in output from the expanded production capacity and an increase in wafer ASPs.

Gross Profit

Gross profit for the third quarter of 2008 was US$45.8 million, a 19.2% increase sequentially and 190.4% year-over-year. The gross margin for the third quarter of 2008 was 21.2% compared to 22.4% in the second quarter of 2008. The decrease in gross margin was primarily attributable to an increase in feedstock costs, higher non-material related production costs due to higher inflation and a write-down of approximately $5.3 million on the value of certain raw materials. This was partially offset by a further reduction in the silicon consumption rate to 6.1 grams per watt from 6.24 grams per watt in the second quarter of 2008 and increases in wafer ASPs.

Operating Profit

Operating profit for the third quarter of 2008 was US$36.9 million, an increase of 20.8% sequentially and 174.6% year-over-year. The operating margin was 17.1% in the third quarter of 2008 compared to 17.8% in the second quarter of 2008. Total operating expenses in the third quarter of 2008 increased to US$8.9 million from US$7.9 million in the second quarter of 2008.

Earnings before Income Tax, Minority Interest and Equity in Earnings of Investee

Earnings before income tax, minority interest and equity in earnings of investee for the third quarter of 2008 were US$32.7 million, a 20.3% increase sequentially and 174.4% year-over-year. Finance costs increased by 19.0% sequentially, reflecting higher interest rates. Finance costs as a percentage of net revenue decreased from 1.6% in the second quarter of 2008 to 1.5% in the third quarter of 2008. The third quarter foreign exchange loss was approximately US$1.2 million compared to a foreign exchange loss of US$0.8 million in the second quarter of 2008 due to the significant depreciation of the Euro.

Taxation

The Company recognized a tax expense of US$5.5 million in the third quarter of 2008, compared to a tax expense of US$4.8 million in the second quarter of 2008.

Share of Income in an Equity Investee

In the third quarter of 2008, the Company recognized income of US$5.2 million from its equity investment in a 49% owned joint venture company, Linzhou Zhongsheng Semiconductor, which is engaged in virgin polysilicon production in Linzhou, Henan province, China.

Net Profit

Net profit during the third quarter of 2008 increased 38.9% sequentially and 153.5% year-over-year to US$32.4 million.

Other Recent Business Developments

Capacity Expansion

The Company has completed and commissioned 110 MW of multicrystalline ingot and wafer capacity and 35 MW of monocrystalline ingot and wafer capacity on schedule, bringing the Company's annualized monocrystalline ingot production capacity to 325 MW and annualized multicrystalline ingot production capacity to 270 MW. With the delivery of an additional 50 MW of multicrystalline furnaces expected during the fourth quarter, the Company expects to achieve its capacity expansion target of 645 MW in annualized ingot production capacity and 585 MW in annualized wafer production capacity by the end of 2008.

Additional Credit Facilities

As announced on November 3, 2008, ReneSola's principal operating subsidiary, Zhejiang Yuhui Solar Energy Source Co. Ltd. ("Zhejiang Yuhui"), has secured additional banking facilities with two of China's largest banks: Industrial and Commercial Bank of China and Agricultural Bank of China. The two banks have agreed to provide Zhejiang Yuhui with additional credit lines of an aggregate of RMB1.06 billion. Under the new and existing credit facilities, Zhejiang Yuhui has credit lines of approximately RMB2.8 billion in aggregate.

Sichuan Polysilicon Project

The project construction is on schedule at an advanced stage with completion of steel and concrete structures for reactors ready for piping and equipment installation. Pipe rack and 220 kv and 10 kv transmission systems are at an advanced stage of construction. TCS distillation towers have been erected and construction of the control building is near completion. Construction of CDI civil works are under way and piping is on-going and on schedule. The facility is expected to be operational in the second quarter of 2009.

Senior Management Changes

Chief Operating Officer, Mr. Cheng-Hsien Yeh, resigned effective November 1, 2008 to pursue other interests. Mr. Yeh served as the Company's COO beginning in October 2007. The Company does not have an immediate plan to hire a replacement COO.

Dr. Mingde Wang was appointed as vice president of manufacturing effective November 15, 2008. Prior to joining ReneSola, Dr. Wang served as general manager at Wuxi Weifuautocam Precision Machinery Co. Ltd. and as China project director for Wuxi Kent Precision Automotive Components Inc, Ltd. Prior to that, Dr. Wang spent nine years at Autocam Corporation based in Grand Rapids, Michigan serving in various roles such as China project director, product manager and senior materials engineer. Dr. Wang holds a bachelor of engineering degree and masters of engineering degree in material engineering from Zhejiang University and a Ph.D in materials science and engineering from the University of Pennsylvania.

"We appreciate the contributions made by Mr. Yeh during the last 12 months and I am very pleased to welcome Dr. Wang to our management team," said Mr. Xianshou Li, ReneSola's chief executive officer. "His experience and expertise in managing global companies provides us with a valuable resource as we pursue long-term prospects. Dr. Wang's primary responsibility will be to enhance and implement world-class management and business processes to further strengthen ReneSola's competitive advantage."

2008 Outlook

Despite the anticipated impact of the current industry environment on the results for the fourth quarter, the Company is currently in advanced negotiations to secure wafer sales. Therefore, the Company still maintains its full year output and revenue estimates for 2008. Annual production output is expected to be in the range of 340 MW to 350 MW and annual net revenues are expected to be in the range of US$640 million to US$670 million.

While the Company maintains its 2008 outlook, it does not believe it would be prudent to provide guidance for 2009 at this time given the current industry environment and the highly volatile global financial situation.

Conference Call Information

ReneSola's management will host an earnings conference call on Tuesday, November 18, 2008 at 8 AM U.S. Eastern Time / 9 PM Beijing/Hong Kong time / 1 PM Greenwich Mean Time.

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

U.S. / International: +1-617-213-8057

United Kingdom: +44-207-365-8426

Hong Kong: +852-3002-1672

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 November 25, 2008:

International: +1-617-801-6888

Passcode: 18256459

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 Ltd ("ReneSola") is a leading global manufacturer of solar wafers based in China. Capitalizing on proprietary technologies and technical know-how, ReneSola manufactures monocrystalline and multicrystalline solar wafers. In addition, ReneSola strives to enhance its competitiveness through upstream integration into virgin polysilicon manufacturing. ReneSola possesses a global network of suppliers and customers that include some of the leading global manufacturers of solar cells and modules. ReneSola's shares are currently traded on the New York Stock Exchange (NYSE: SOL) and the AIM of the London Stock Exchange (AIM: SOLA). 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 we describe what we "believe," "expect" or "anticipate" will occur, what "will" or "could" happen, and other similar statements), you must remember that our expectations may not be correct, even though we believe that they are reasonable. We do 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 our filings with the U.S. Securities and Exchange Commission, including our registration statement on Form F-1. We undertake 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 our situation may change in the future.

For investor and media inquiries, please contact:

In China:

Mr. Charles Bai

ReneSola Ltd

Tel: +86-573-8477-3061

Email: charles.bai@renesola.com

Mr. Derek Mitchell

Ogilvy Financial, Beijing

Tel: +86-10-8520-6284

Email: derek.mitchell@ogilvy.com

In the United States:

Mr. Thomas Smith

Ogilvy Financial, New York

Tel: +1-212-880-5269

Email: thomas.smith@ogilvypr.com

In the UK:

Mr. Tim Feather / Mr. Richard Baty

Hanson Westhouse Limited

Tel: +44-20-7601-6100

Email: tim.feather@hansonwesthouse.com / richard.baty@hansonwesthouse.com

CONSOLIDATED INCOME STATEMENT

Three Three Three

months ended months ended months ended

September 30, June 30, September 30,

2007 2008 2008

US$000 US$000 US$000

Net revenue 72,540 173,007 215,754

Total cost of revenues (56,765) (130,221) (169,945)

Gross profit 15,775 42,786 45,809

Operating expenses:

Sales and marketing (152) (231) (79)

General and administrative (2,354) (4,869) (5,471)

Research and development (82) (3,504) (2,997)

Other general income (expenses) 245 353 (374)

Total operating expenses (2,343) (8,251) (8,921)

Income from operations 13,432 34,535 36,888

Other income (expenses):

Interest income 551 234 314

Interest expenses (1,484) (2,755) (3,278)

Foreign exchange (loss) gain (569) (797) (1,192)

Total other expenses: (1,502) (3,318) (4,156)

Earnings before income tax,

minority interest and equity in

earnings of investee 11,930 31,217 32,732

Income tax benefit(expenses) 807 (6,844) (5,454)

Minority interest 38 (1,064) (68)

Equity in earnings of investee -- -- 5,175

Net income 12,775 23,309 32,385

Weighted average number of shares

used in computing earnings

Basic shares 100,000,032 120,159,747 137,624,912

Diluted shares 100,147,666 130,890,990 148,480,310

Earnings per share

Basic 0.13 0.19 0.24

Diluted 0.13 0.19 0.23

CONSOLIDATED BALANCE SHEET

As at As at

December 31, 2007 September 30, 2008

US$000 US$000

ASSETS

Current assets:

Cash and cash equivalents 53,137 99,441

Restricted cash -- 25,755

Accounts receivable, net of

allowances for doubtful receivables 8,755 3,367

Inventories 110,630 319,744

Advances to suppliers 53,727 123,955

Amounts due from related parties 17,213 5,954

Value added tax recoverable 117 982

Prepaid expenses and other current

assets 9,654 15,048

Deferred tax assets 10,487 1,330

Total current assets 263,720 595,576

Property, plant and equipment, net 136,598 260,864

Prepaid land rent, net 7,502 7,900

Deferred tax assets 284 227

Deferred convertible bond issue costs 3,336 2,384

Equity investment in joint venture -- 23,423

Advances for purchases of property,

plant and equipment 29,648 182,586

Other long-term assets 760

Total assets 441,088 1,073,720

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term borrowings 71,691 167,225

Accounts payable 13,147 20,177

Advances from customers 59,626 152,189

Other current liabilities 13,912 28,283

Total current liabilities 158,376 367,874

Convertible bond payable 128,265 139,173

Long-term borrowings 17,797 44,773

Other long-term liabilities 1,246 7,875

Total liabilities 305,684 559,695

Minority interest: 9,696 775

Shareholders' equity

Common shares 36,266 330,666

Additional paid-in capital 14,827 17,674

Retained earnings 66,200 139,569

Accumulated other comprehensive

income 8,415 25,341

Total shareholders' equity 125,708 513,250

Total liabilities and shareholders'

equity 441,088 1,073,720

CONSOLIDATED CASH FLOW STATEMENT

Three Three Three

Months ended months ended months ended

September 30, June 30, September 30,

2007 2008 2008

US$000 US$000 US$000

Cash flows from operating

activities:

Net income 12,775 23,309 32,385

Adjustments for:

Minority interest (38) 1,064 68

Investment profit -- -- (5,175)

Depreciation 1,214 3,653 4,273

Amortization of deferred convertible

bond issue costs and premium 729 775 797

Allowances for doubtful receivables 3 249 942

Provision of Inventory 46 -- 5,305

Prepaid land rent expensed -- 82 51

Share-based compensation 95 1,175 1,064

Derivatives -- (573) --

Deferred taxes (809) 3,650 4,203

Changes in operating assets and

liabilities:

Accounts receivable (4,994) 13,440 (600)

Inventories (17,774) (44,017) (117,657)

Advances to suppliers (238) (11,447) (23,045)

Amounts due from related parties (3,396) 18,649 22,037

Value added tax recoverable 3,790 2,672 1,049

Prepaid expenses and other current

assets (5,512) (5,867) (10,406)

Prepaid land rent (19) -- (1)

Accounts payable 3,988 (1,029) (1,722)

Advances from customers 8,973 20,925 56,561

Other liabilities 145 7,727 3,801

Net cash provided by (used in)

operating activities (1,022) 34,437 (26,070)

Cash flows from investing

activities:

Purchases of property, plant and

equipment (33,421) (50,668) (71,126)

Advances for purchases of property,

plant and equipment 15,119 (11,915) (91,379)

Cash received from government

subsidy income -- -- 6,126

Cash decreased due to

deconsolidation -- (4,416) --

Restricted cash -- -- (25,755)

Net cash used in investing

activities (18,302) (66,999) (182,134)

Cash flows from financing

activities:

Net proceeds from short-term

borrowings 16,646 51,369 32,058

Proceeds from capital contribution 2,133 -- --

Contribution from minority

shareholder of subsidiaries 361 -- --

Proceeds from issuance of common

shares -- 196,017 --

Share issuance costs -- (10,787) --

Cash received from related parties (1) -- --

Cash paid to related parties (225) -- --

Net cash provided by financing

activities 18,914 236,599 32,058

Effect of exchange rate changes 1,441 2,675 1,434

Net increase (decrease) in cash and

cash equivalents 1,031 206,712 (174,712)

Cash and cash equivalents, beginning

of year 67,904 67,441 274,153

Cash and cash equivalents, end of

year 68,935 274,153 99,441

Source: ReneSola Ltd
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