Trina Solar (TSL) missed its shipment guidance by 5% using low expectations at 380MW for Q1, a sequential drop of 12% versus Q4-2011. However, the shipments have been greater this year than last year by 18%. The company’s revenue was 349.9M, a decrease of 19.7% from Q4-2011, due to low ASP for modules. Trina’s average selling price was at $0.92 per watt in comparison to Canadian Solar’s (CSIQ) at $0.89 per watt, and Renesola (SOL) at $0.84.
Operationally, the company achieved a new record for non -silicon processing costs at $0.58 per watt, which is a sequential drop in costs by $0.06, or a 10% improvement. Procurement of silicon also has improved from $0.29 per watt down to $.21 for Q1, or 28% sequentially. On average Trina polysilicon pricing is still above the $35 per kg, while GCL Poly-sold polysilicon is at $25.98 for Q1. Trina’s long-term procurement contracts are negotiable on a quarterly basis, allowing the company to receive market pricing; however, the delay and lack of stability in pricing keeps the cost higher than spot or current best rates. Overall processing costs and silicon costs per watt were at $0.79 per watt, which on the $0.92 ASP would give Trina around 14% gross margins. The company, in anticipation of the anti-dumping duties, and in light of countervailing duties already assessed, started to provision for the cost of sales to the US. Overall provision taken in Q1 was around $26.2M, or $0.07 per watt, lowering gross margin results by more than half to 5.9%. The revenue by region showed a 38% contribution from the USA, followed closely by Germany with 36% of revenue. Based on revenue source, provision of roughly $0.20 per watt was assessed for sales to the US, which exceeded a total of 20% of duties. However, costs of anti-dumping and countervailing are in the 36% range, suggesting increases in those costs going forward. The company expects Q2 sales to the US in the range of 21%. Second-quarter shipments guidance stands at 500 to 520MW of modules, while the full-year expectation is in the range of 2 to 2.1GW.
The company has announced that by the end of Q2 its cell and module lines of the new “Honey” product will be added to overall capacity, which is expected to reach 2.4GW of cells and modules. Trina’s wafer capacity remains at 1.2GW. The gap for wafers is expected to fill through procurement of wafers from GCL Poly contracts, helping further to reduce costs. In recent tests, Trina recorded output of 284W from modules using 60-Honey cells, confirming high conversion potential of this new module line.
In the balance sheet changes cash accounts dropped by 16% and overall debt increased by 10% through short-term borrowings. Inventory increased by $100M and accounts receivable added $90M, suggesting more sales on credit. In the trend observed with other companies, accounts payables increased by $56M, while the company is adding materials by buying more on credit and holding onto cash longer.
While provisions for anti-dumping duties added costs to Trina, the company is expected to find a solution to lower those costs in the future, while keeping a solid presence in the American markets. Gross margin expectations for Q2 are seen as 10%, including further provisions.
