Canadian Solar Inc. (NASDAQ:CSIQ) is diversifying its market and manufacturing portfolio to stave off the impact of impending sanctions from the USA and EU in June against Chinese solar products, according to the company's CEO, Qu Xiaohua, at the SNEC International Photovoltaic Power Generation Conference & Exhibition in Shanghai this week. If all goes according to plan, the company will buck the trend and see profit gains this year when multiple big names in the industry crumble toward bankruptcy.
Diversifying Markets
According to Qu, contingency plans have long been in the works within Canadian Solar to minimize the negative impact of the EU’s impending imposition of anti-dumping and anti-subsidy sanctions upon Chinese solar products from a comprehensive list of Chinese manufacturers, set to take effect in June.
The company has been steadily shifting its market focus away from Europe.
“Around 2008 and 2009, the European market accounted for 80% to 90% of our total output. The figure has been reduced to below 40% by Q4 last year. This year, it is expected that export to the EU will be below 30% of output,” Qu says.
The company’s goal for 2013 is to turn a profit by pivoting into smaller markets with healthier growth, such as Japan, Southeast Asia, and South Africa.
Diversifying Products
Since as early as 2009, Canadian Solar has been actively diversifying its production portfolio. Instead of solely focusing on solar modules manufacturing, the company has been actively engaged in power station development as well as EPC projects to decentralize market risk and maintain sustainable growth.
It is expected that in 2013 revenues from sectors other than module manufacturing will account for as much as 40% of the company’s total revenue.
Canadian Solar is actively developing solar power plants both in China and in overseas markets with a rigorous selection process that emphasizes low risk, stable government policy and good performance.
Tighter Control on Accounts Receivable
At the same time, Canadian Solar makes sure to collect payments for its accounts receivable (AR) in a timely fashion to maintain a healthy cash flow.
“I examine the spreadsheets regularly to check if each quarter’s AR is equivalent to that quarter’s monthly or 45-day revenue. If not, measures are taken to meet that criterion,” Qu says.
According to Qu, compared to the standard practice of Net 30 days, within the Chinese solar PV industry payment terms are often stretched to as long as a year, causing a chain reaction that results in delayed payment at each point of the PV production cycle.
Related government policies are cited among the major reasons for delayed payment of AR. Government subsidies to the new energy industries, including wind, solar PV and refuse incineration power plants, have generally been slow in actual delivery, resulting in prolonged lack of funds in their operation, which in turn delays their payment to partners upstream, such as equipment and module manufactures and EPC contractors.
