SolarPVInvestor Forums

Question:
Q1 processing costs estimated at 0.55, this includes currently either poly at 0.11 or 0.10, as per cc. March 14 is Q1 still, the company states 0.44 or 0.45 processing.
Describe what is dropping cost for wafer and module in Q2, Q3, Q4 aggregated drop of 1.5 cents wafer (described by the company as Q1 0.11 processing remaining for the rest of the year.) 2.5 for module aggregated.

In addition, describe difference of selling versus processing cost.

The inventory cost is a cost of processing and raw material cost. The inventory value for each quarter represents the value of the lower of low processing cost or the market. The company does not have to write off the value of the inventory but should adjust it. Looks like they have adjusted inventory by $700K in Q4. What I am trying to say that inventory cost (value) should represent processing costs of each quarter. $59M for 2012 in inventory adjustments.

Bottom line I think that ReneSola's supply chain mechanism seems efficient, leaving very little or no room to improve, at the same time its financial setting is not very solid, and holds risk when ASP remains low. The $70M in capital expenditure cannot simply come from cash line. It has to be borrowed. It does not seem a lot but if you have $93M cash on hand sounds plenty.
My view is if they are producing at 100% utilization level, others still have a room for improvement.
Another challenge is with statement of $0.44-0.45 processing and poly at $0.11-0.10.
How much more benefit SOL is going to see on poly aspect.
Its own poly at $18 is pretty much the cost they have now for it. Yes there is a benefit to unlock difference between market ASP versus production cost when poly goes up SOL will have to charge its own poly costs to wafer and absorb that cost in module, making accounting in fashion of GCL. They will make money on poly, granted, while others cannot. However chances are that poly bought from import sources will be cheaper, which will benefit others.
One would say what stop SOL to use this ASP now? Perhaps nothing accept the risk of selling below own costs of poly.

The next risk is the growth, selling expenses mostly, which adds cost accounting parts for raw material (cells, modules) to meet its production objectives. Also R&D is not finished. Polysilicon plants have a tendency not delivering costs as desired unless the massive scale is embarked upon. 10KMT is not big, and costing can turn quickly higher. Also the same scale offer costs savings. IS GCL able to turn its 65KMT per year to churn cheaper poly, now with FBR possibility? I think it is safe to assume that poly manufacturers will keep the pricing competitive for others, and in fact have no intention to move above $20 mark. In the same statement about GCL not selling at the loss to CSIQ, Taiwanese are less likely to sell at the loss to Mainland Chinese. Therefore there is a risk (not only for SOL but all of them) for strategy to outsource cells. So either you sell in new markets or high ASP markets, so you do not have to. Who's branding is going to take over in those places?
Furthermore. considering the size of the vertical value chain will SOL have a chance to extract its costs as efficiently as those who will sell twice much when fully utilized?
It will be interesting to see. Good work Explo.

I made this table to show comparable values in the financial setting for each company, which has delivered results thus far for Q4
This view is not showing the potential of earnings, it just shows what I consider needs versus sources of cash.
Note, since I was asked.

This is why I also still own YGE versus switching say to CSIQ. First I have more compounding growth for the price of shares ( I own more shares of YGE today versus the same total value if put in CSIQ). I am a long term holder/investor so I do not pay attention to daily shifts. I have probably 10 years time span of holding shares ahead of me.

A few tables.

Quoted from "explo"

Cost of goods produced (call it cogp) and cost of goods sold in a quarter is not the same.

Explo, just to be clear, you are assuming all of it as nothing has a fact supporting it? When they had said their 0.60 you include 0.04 for shipment of cell from Taiwan (example). so when they say 0.55 in Q1, this of course includes it..

How do you move down if this is a constant factor? Furthermore how do you go down if you increase procurement of items you do not make?

I think that you are too generous in your assessment of cost reductions, I also believe you are making an error how cogs is calculated and in particular way the inventory value or cost of inventory. Q4 is pegged to 0.60, when we speak about modules. The selling cost as they call it includes all those elements already. Your supply chain will cost you more if you buy elsewhere, and if prices recover, your cost will rise as well. A low ASP seller globally, will see their GM shrink if ASP goes up.

Quoted from "explo"

Nice. Yes, SOL doesn't have the cleanest balance sheet, but they are in good position to start clean it up. The wafers they sell don't earn much profit, but they do generate nice cash flow contribution. As long as cash flow is there the ST debt will roll-over. SOL said it is easy for them to get ST debt from local banks.

I am showing the financial picture of each company. SOL has no money, and its immediate needs for cash exceed its cash sources by over 100%. This has nothing to do with opearting dynamic, as results of this for next quarter are simply to small to change this.

I added data for HSOL. They have 1.32 coverage from sources of cash versus needs of cash. They are in fact the best off in this comparison out of the group. HSOL seems to be better financially to weather the downturn. Now in order to find a company which offers both, financial and operating picture, could be the key here.

Did somebody say JASO?

Wow....interesting to see two completely different opinions on SOL, looking at the same metrics. Makes me want to SELL SOL immediately....or BUY more! LOL

Quoted from "Paybak66"

Wow....interesting to see two completely different opinions on SOL, looking at the same metrics. Makes me want to SELL SOL immediately....or BUY more! LOL

LOL,

Yes, quite a mindf--k.

At least we can laugh about it. (or cry) ;)

Quoted from "larryvand"

Quoted from "odyd12"

SOL has no money, and its immediate needs for cash exceed its cash sources by over 100%.

SOL had cash+restricted cash January 1st 2013 of $268.1 million.

Also, during the Q4 CC, SOL had this to say about their cash position (see below). It is very clear to me from reading that, that they have a borrowing facility and good relations with their bank to get whatever they need. On top of that they are cash flow positive.

So are you saying that they can not borrow from their bank if they need money? On top of that they have no debt due till 2018, unlike other Chinese solars that have immediate needs in 2013 to service their debt.

Unlike almost all the other Chinese solars, SOL is closer to turning profitable and they have a very good handle on their costs. And I'm sure their banks KNOW that and can see that. If you were a banker and had to choose extending a credit facility to SOL, or STP, or YGE, or LDK, who will you pick. My choice is SOL, but then I'm neither a banker nor an accountant. LOL

Quoted from "odyd12"

SOL has no money, and its immediate needs for cash exceed its cash sources by over 100%.

SOL had cash+restricted cash January 1st 2013 of $268.1 million.

Also, during the Q4 CC, SOL had this to say about their cash position (see below). It is very clear to me from reading that, that they have a borrowing facility and good relations with their bank to get whatever they need. On top of that they are cash flow positive.

So are you saying that they can not borrow from their bank if they need money? On top of that they have no debt due till 2018, unlike other Chinese solars that have immediate needs in 2013 to service their debt.

Unlike almost all the other Chinese solars, SOL is closer to turning profitable and they have a very good handle on their costs. And I'm sure their banks KNOW that and can see that. If you were a banker and had to choose extending a credit facility to SOL, or STP, or YGE, or LDK, who will you pick. My choice is SOL, but then I'm neither a banker nor an accountant. LOL

http://seekingalpha.com/article/1273901-renesola-management-discusses-q4-2012-results-earnings-call-transcript

Henry Wang - Chief Financial officer
Okay. So let me explain a little bit about our cash position. Actually, at the end of last -- in the last quarter, we retained about USD 60 million back to the bank. And there also, additionally, some CapEx payment in the last quarter. But we maintain a good relationship with our local banks, and we can get -- we still have some bank facility to be there. So if we need the money, we can still can get the borrowing from the banks, and they also give us a great support for our business.

Anthony Hung - Vice President of Capital Markets
Yes, I think, Brandon, a little bit I'd like to add to Henry's comments, is you will probably also notice that in Q4 actually, we were operating cash flow positive, and as a company, we consistently give out cash flow numbers. So we try to be very open and transparent about this. And the big picture is, if you look at our overall numbers in the fourth quarter cash flow, I think we were about EBITDA neutral and again, we've got operating cash flow. And I think depending on where poly and other things go, our trends may only improve.

Quoted from "larryvand"

Quoted from "larryvand"

Quoted from "larryvand"

SOL has only $93 million unrestricted cash for operational uses. Restricted cash is a requirement for loan repayment. But I won't worry too much if it since SOL is still generating positive operating cash flow. One concern is chinese banks are now very conservative in extending loans for operating uses to solar firms. On the other hand, they will give you project loan if your projects have good IRR.

Quoted from "larryvand"

I think odyd looks at it from a static point in time of view. From that point of view he maybe correct, but as we all know, nothing is static in the solar industry.

Larry, what I am looking at is the bs, remember how you laughed at this, when I said CSIQ has a good bs? Balance sheet for SOL has it $1 of cash for $2 of immediate cash needs, even a broken spoke YGE has 91 cents for a dollar. SOL is not generating operating cash flow. In Q4 they had it by writting off their tax benefit and reversed their goodwill.
Please review the table I attached. Once again no manufacturing concepts are here to see.

SOL needs at least $300M in debt by Q3, in my opinion. If banks are not seeing SOL on the list to save, this could be a problem for the corporation. At the end of the day we will have to see what is the list good for with Suntech, maybe SOL will take that spot.

Quoted from "odyd12"

Quoted from "larryvand"

I think odyd looks at it from a static point in time of view. From that point of view he maybe correct, but as we all know, nothing is static in the solar industry.

Larry, what I am looking at is the bs, remember how you laughed at this, when I said CSIQ has a good bs? Balance sheet for SOL has it $1 of cash for $2 of immediate cash needs, even a broken spoke YGE has 91 cents for a dollar. SOL is not generating operating cash flow. In Q4 they had it by writting off their tax benefit and reversed their goodwill.
Please review the table I attached. Once again no manufacturing concepts are here to see.

SOL needs at least $300M in debt by Q3, in my opinion. If banks are not seeing SOL on the list to save, this could be a problem for the corporation. At the end of the day we will have to see what is the list good for with Suntech, maybe SOL will take that spot.

Thanks for the info.

I might not sleep tonight, yet thanks.

Do you any a position is SOL?

Would you move from SOL to CSIQ if you did?


Thanks.