Hanwha SolarOne Shipments Increase 43% in Q2

The revenues have gone up 33.3% sequentially to $168.7M, but are down 40.4% as compared to the second quarter last year

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Hanwha SolarOne (NASDAQ:HSOL), the China-based solar company in which the South Korean Hanwha Group has a minority controlling stake, has announced its Q2 results for the current year. Due to effective cost reductions coupled with better sales volumes, the business is back to making gross profits.

The revenues have gone up 33.3% sequentially to $168.7M, but are down 40.4% as compared to the second quarter last year. The second quarter of 2012 has witnessed an increase in shipments by 43.6% over the previous quarter, and 12% over last year’s to the present 230.7MW. This was attributed to an increase in demand from Europe, particularly Germany, which was fuelled due to the scheduled feed-in-tariff cuts.

Germany accounted for more than half (57%) of the total shipments, while the Asia Pacific region that includes the business’s home countries, i.e. China and Korea, as well as Australia and Japan, contributed 17% to total shipments.

The average selling prices (ASPs) have continued their decline and were $0.77 per watt, down from $0.84 in Q1 2012 and $1.59 in Q2 2011. The business was able to reduce its cost of goods sold by 21.7% sequentially to $0.72 per watt, while the costs of goods produced from internally manufactured wafers were $0.71, showing a 9% decline. As a result, the company ended up making a gross profit of $10.6M, a significant improvement over the previous quarter’s gross loss of $11.87M.

The operating loss also decreased significantly to $13M from $34.87M in the previous quarter. Consequently, operating margins also improved from -27.5% in Q1 to -7.7% in Q2. The net loss decreased by 12.4% from $47.94M in Q1 to the current $42M, which translates as loss per share of $0.50.

Commenting on the results, Hanwha SolarOne’s CEO Mr. Ki-Joon Hong said, "In spite of a difficult operating environment, we achieved some good progress during the second quarter. Our shipment volumes grew nicely quarter-to-quarter, our production costs continued to improve and now are in reach of our year-end target, and we are increasingly seeing synergies with our parent company, particularly in downstream activities.”

Like its peers, such as Trina Solar Limited (ADR) (NYSE: TSL) and China Sunergy Co Ltd (NASDAQ:CSUN), Hanwha has also revised the yearly shipment guidance from 1GW to 0.9GW-1GW, as it expects demand to freeze during the third quarter while gross margins remain positive.

A few weeks ago, Hanwha Group, the parent of Hanwha SolarOne, purchased the insolvent Q-Cells by beating Spain-based Isofoton’s bid, which was backed by Samsung Group, another large Korean conglomerate. Hanwha SolarOne does all of its production in China, which means that despite Korean ownership, the US tariffs will still be imposed on its products. Furthermore, there is a looming threat emerging from EU investigations. However, now that Hanwha Group owns Q-Cells’ 200MW German plant and 750MW Malaysian plant, SolarOne can easily bypass both US duties and potential EU tariffs, which the management believes is an “advantage.” Presently, North America, including the US, comprises just 7% of total shipments.