- Canadian Solar has reported a healthy Q3/2017 with both shipments and revenues exceeding guidance
- Module shipment in the reporting quarter amounted to 1.87 GW, mainly driven by demand from China, US, Japan and India
- Manufacturing capacity expansion is planned for next year, targeting over 10 GW of module production capacity by December 31, 2018
- Revised full year shipment guidance for 2017, now stands in the range of 6.7 GW to 6.8 GW
- Gross margin Q4 outlook in the range of 10.5% to 12.5%, compared to 17.5% in Q3 and 24.2% in the previous quarter
Canadian Solar Inc. (CSI) has revealed its plans to increase its manufacturing capacity next year. By December 31, 2018, it plans to have 10,310 MW of module production capacity and close to 7 GW of solar cell capacity depending on prevalent market conditions. By the end of current year, it expects it global module manufacturing capacity will exceed 8.11 GW.
The ramp-up of the new multicrystalline silicon ingot casting workshop at Baotou in China gives it a total annual capacity of 1.1 GW. This includes capacity relocated from its Luoyang plant. The new factory helps CSI reduce the amount of ingots it purchases externally. Hence, by the end of 2018, it aims to have ingot production capacity going up to 2.5 GW, up from 1.72 GW it had planned to have by June 30, 2018.
In a strong Q3/2017 reported, CSI shipped 1.87 GW of modules exceeding guidance. Net revenue was a total of $912.2 million, an increase of 31.8% from Q2/2017 and 38.8% from Q3/2016. This exceeded guidance in the range of $805 to $825 million. Gross margin in the period was 17.5% compared to 24.2% in the previous quarter.
“Our higher-than-expected solar module shipments in the third quarter were driven by strong demand for solar modules from China, the US, Japan and India. Our higher gross margin was the result of increased average selling price compared to our previous expectation, better cost controls and manufacturing efficiencies,” said Senior Vice President and CFO Huifeng Chang. “We will further reduce our overall debt, after the sale of the 703 MW of US projects, 150 MW UK project and CSIF’s initial public offering in Japan.”
Going forward, Q4/2017 guidance includes module shipments in the range of 1,650 MW to 1,750 MW. It includes around 60 MW of shipments to its own utility-scale PV projects that may not be recognized as revenue in the fourth quarter of 2017.
Total revenue is expected between $1.77 billion to $1.81 billion, including both solar module sales and energy business. If planned sales of some projects is deferred to 2018, then it will reflect in this number. Gross margin could be in the range of 10.5% to 12.5%.
For 2017, the management has revised its shipment guidance from 6.0 to 6.5 GW shared previously, to 6.7 to 6.8 GW. Full year revenue could be between $4.05 billion to $4.09 billion.
“Separately, while Canadian Solar remains an industry cost leader, the unexpected raw material cost increase and the appreciation of Chinese currency over the past few months will make it challenging for us to reach our previously-set solar module manufacturing cost target by the end of 2017,” said Dr Shawn Qu, chairman and CEO. “Canadian Solar will continue to prioritize profitability rather than market share, focus on research and technology, and selectively invest into certain manufacturing processes to optimize our supply chain and cost structure.”
Analysts from investment bank Cowen & Company wrote on the CSI Q3 report: “We see the completion on the company’s project sales in the U.S/U.K.and J-REIT as critical in next 2 quarters to drive the bulk of ’17/’18 earnings power, but note management’s intentions to reinvest the generated capital into capacity additions. GM outlook has dampened in the wake of higher polysilicon costs and below consensus project margins.”