Canadian Solar Exits 2019 With $171.6 Million Net Income

Having Come Out Of 2019 With Flying Colors, Canadian Solar Experiencing ‘Delays & Weakening Demand’, Yet Module Capacity Expansion On Cards
03:10 AM (Beijing Time) - 30. March 2020
Presentation1

Canadian Solar accepts that there has been a weakening of demand of late in the solar industry but has shared plans to increase its manufacturing capacity in 2020.

Key Takeaways

  • 2019 shipments for Canadian Solar added up to 8.6 GW with revenues of $3.2 billion
  • Q4/2019 shipments of 2.5 GW and revenues of $920 million exceeded company’s expectations
  • Canadian Solar expects its Q1/2020 shipments between 2.15 GW to 2.25 GW with total revenues of $780 million to $810 million
  • Management is cautious in its future outlook as it expects total module shipment of 10 GW to 12 GW for 2020
  • Despite the weakening demand experienced by Canadian Solar of late, the company is steaming ahead with its production capacity expansion plans

‘Some delays and weakening demand’ is now being experienced by Chinese solar power company Canadian Solar Inc. (CSI) that was hitherto experiencing ‘strong demand across all regions until the past few days’. This change in circumstances has impacted its future guidance for 2020, said the company’s Acting CEO Yan Zhuang.

Cautious on 2020 outlook with high gross margin for Q1

Cautioning that its 2020 fiscal year guidance may change depending on various factors including the coronavirus outbreak, Canadian Solar expects its Q1/2020 shipments between 2.15 GW to 2.25 GW with total revenues of $780 million to $810 million. Gross margin for this quarter is expected to be between 26% and 28%. “The margin guidance is higher-than-expected due to CSIQ’s 2/19/20 sale of the high-margin 56MW Yamaguchi Shin Mine project for ~$205mn,” explained Roth Capital Philip Shen in a note to investors.

For fiscal year 2020, the company has guided for total module shipments ranging between 10 GW and 12 GW to bring in revenues of $3.4 billion to $3.9 billion.

“Our current guidance incorporates the estimated impact to the best of our knowledge today, but the situation is fluid and we are closely monitoring and analyzing market conditions. We have a globally diversified revenue base and tight control over the supply chain, which gives us significant flexibility and room to adjust to external changes. Our long-term outlook remains optimistic and we will continue to execute on our strategy and create value for the Company and its shareholders,” said Zhuang.

Strong Q4/2019

Canadian Solar’s Q4/2019 quarterly results were heartening as it sold 2.5 GW shipments during the period, exceeding its guidance of 2.3 GW to 2.4 GW. Net revenues of $920 million were also over and above the guided range. Gross margin for the quarter was 24.3% with net income of $67.7 million.

2019

For 2019, the company’s shipments were a total of 8.6 GW, growing from 6.6 GW in the previous year. Its revenues were $3.2 billion, dropping from $3.74 billion in 2018 but exceeding the guidance of up to $3.16 billion. Net income for the company was $171.6 million, compared to $237.1 million the year before.

“Our liquidity is healthy and our balance sheet continues to improve. We are proactively taking contingency measures to preserve cash and minimize risk, should the macro situation deteriorate further. Likewise, our financial plan has the flexibility to quickly switch gears if the global economy recovers faster than expected,” shared Senior Vice President and CFO Huifeng Chang. “We plan to continue with our stock repurchase program to create extra value for shareholders as recent COVID-19-related panic-selling has brought our equity valuation below book value.”

Total project backlog above 11 GW

Till January 31, 2020, Canadian Solar’s project backlog of late-stage utility scale solar power projects, added up to 3.7 GW and includes projects to be built in the next 4 years. “All projects in the current backlog have secured or are reasonably assured to secure a PPA or FiT,” it added. Its total project pipeline comprising early-to-mid stage utility scale projects, totaled 11.7 GW as of the above date.

Manufacturing capacity expansion to continue

Despite the weakening demand experienced by Canadian Solar of late, the company is steaming ahead with its production capacity expansion plans. For modules, from 13.04 GW at the end of December 2019 the idea is to increase it to 14.85 GW by June 2020 and further 16.05 GW till December 2020.

Solar cell capacity is to be increased from 9.6 GW to 10.1 GW by June 2020, ingot capacity from 1.85 GW to 2.35 GW by December 2020, while wafer capacity remains the same at 5 GW.

Roth Capital’s Shen concluded: “CSIQ delivered a strong Q4/Q1 margin guide. Despite being fully booked for Q2 and 40-50% booked for H2’20, we expect to see weaker-than-expected volumes through 2020 as COVID-19 goes global and take our shipments/estimates down . CSIQ’s global diversification, in our view, should be a source of strength as staggered shutdowns may close one country as others open up.”

 

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani