Trina Solar Revenues, Margins Weak; Forecast Is Even Weaker

November 24, 2014 by Paul Ausick

Chinese solar PV maker Trina Solar Ltd. (NYSE: TSL) posted third-quarter 2014 results before markets opened on Monday. The company posted diluted earnings per American Depositary Share (ADS) of $0.14, identical with its first-quarter earnings, but a penny below the consensus estimate at Thomson Reuters. Revenues rose 18.8% quarter-over-quarter to $616.8 million, which was sharply below the consensus estimate of $645.68 million.

Module shipments rose nearly 13% sequentially to 1,064 megawatts in the third quarter, and gross profits rose 28% as gross margins increased from 15.4% in the first quarter to 16.7%. Operating margin rose sequentially from 3% to 5.8% and net income rose 217.2% to $26.9 million, excluding exchange rate changes.

Adjusted to exclude the unrealized loss on exchange rates, Trina’s earnings per ADS totaled $0.34. Each ADS is equal to 50 ordinary shares.

Trina raised $138.9 million in a secondary offering of ADSs in October, following a prior offering and sale of convertible notes in June that raised a total of $222.7 million.

The company’s CEO said:

Despite foreign exchange fluctuations and weaker demand in Europe, we continue to meet or exceed our financial and performance targets. Particularly, gross margin significantly exceeded management guidance. In the third quarter, we strengthened the competitive advantages of our module business with our efforts to reduce module manufacturing costs and our emphasis on technology breakthroughs generating positive results. We continue to leverage the synergies between our module and downstream business units and expect the resulting positive momentum to continue through the rest of this year and into next year.

For the third quarter, the company expects to ship between 1,045 and 1,095 megawatts of PV modules, of which 40 to 60 megawatts will be shipped to its downstream PV projects. Trina expects blended gross margin for the fourth quarter of 2014 to be between 14.5% and 15.5%.

Trina lowered and narrowed its estimate of module shipments for the year to a range of 3,610 to 3,660 megawatts with 340 to 360 megawatts shipped to the company’s own downstream projects. The original guidance had forecast at between 3,600 and 3,800 megawatts. That cut will be a significant weight on the shares Monday, especially when added to the fourth-quarter gross margin estimate that is below third-quarter results.

Trina’s shares were down about 5.5% in Monday premarket trading, at $10.33 in a 52-week range of $8.67 to $18.77. The consensus price target from Thomson/First Call is around $18.30.

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