Solarfun Reports Third Quarter 2007 Results
SHANGHAI, China, Nov 29, 2007 (BUSINESS WIRE) -- Solarfun Power Holdings Co. , Ltd. ("Solarfun" or "the Company") (NASDAQ:SOLF), a vertically-integrated manufacturer of silicon ingots and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the quarter ended September 30, 2007.
Third Quarter 2007 Highlights
-- Net revenue was RMB 753.8 million (US$ 100.6 million), up 312 % from the comparable quarter in 2006, and 63% higher than 2Q 2007.
-- Total PV module shipments were 27.3 MW, continuing a trend of strong sequential increases from 16.4 MW and 6.5 MW in 2Q and 1Q 2007, respectively.
-- The average selling price ("ASP") remained stable at $3.66, compared to $3.68 in 2Q 2007.
-- Gross profit reached RMB 120.7 million (US$ 16.1 million), an increase of 133 % from the same quarter last year, and 72 % from 2Q 2007.
-- Gross margin improved to 16% from 15.2 % in 2Q 2007.
-- Net income was RMB 59.6 million (US$ 8.0 million), a gain of 146 % from the same quarter in 2006, and 190% from 2Q 2007.
-- Earnings per basic ADS were RMB 1.24 (US$ 0.17), in the third quarter of 2007, a 22% gain from the same quarter a year ago and 190% above 2Q 2007.
Mr. Yonghua Lu, Chairman and CEO of Solarfun commented, "We are quite pleased with our progress at all levels. Our shipments continued to increase and demand remained robust. We successfully completed the addition of PV cell production lines 7 and 8 in November 2007 and have achieved annual manufacturing capacity of 240 MW. Our gross profit margin increase is a reflection of stabilizing ASP in addition to reduced raw material costs, and we have been able to leverage growing economies of scale by spreading our operating expenses across our higher sales volumes."
"During the quarter, we continued to broaden the size and quality of our customer base, as well as our suppliers of polysilicon and wafers. Additionally, we are making solid progress on the development of our new ingot manufacturing subsidiary, Jiangsu Yangguang Solar Technology Co. Ltd. We already received wafer samples and they have met our high standards of quality. Now we are in the planning stages of a full delivery schedule."
Other Financial Highlights for the Third Quarter of 2007
-- Income from operations increased to RMB 63.3 million (US$ 8.4 million), or 8.4% of total net revenue, from RMB 29.1 million (US$ 3.9 million), or 6.3% of total net revenue, in 2Q 2007. The operating profit margin in the third quarter of 2006 was 16.5%. The decline compared to last year was primarily due to spending on corporate infrastructure and sales and marketing expenses. The sequential increase in operating profit margin was largely due to spreading costs across the higher sales volume.
-- Interest expense more than doubled to RMB 6.7 million (US$ 0.9 million) from 2Q 2007 due to higher short-term bank debt borrowings.
-- Exchange losses of RMB 0.7 million (US$ 0.09 million) decreased significantly from RMB 10.4 million (US$ 1.4 million) in 2Q 2007, primarily because cash balances in U.S. dollars dropped as our IPO proceeds were invested in growing the business.
-- Share-based compensation expenses rose to RMB 5.6 million (US$ 0.74 million), from RMB 5.1 million (US$ 0.68 million) in 2Q 2007.
Financial Position
As of September 30, 2007, the Company had cash and cash equivalents of RMB 345.4 million (US$ 46.1 million) and working capital of RMB 1,234.0 million (US$ 165 million). Total bank borrowings were RMB 775.9 million (US$ 103.6 million). The Company filed a registration statement on Form F-1 on November 27, 2007. This registration statement seeks to register the sale of ADSs that will be used to facilitate hedging transactions by purchasers of the convertible notes that we plan to offer concurrently in a transaction pursuant to Rule 144A once the registration statement is declared effective by the SEC.
Net accounts receivable increased to RMB 681.9 million (US$ 91.0 million), from RMB 360.3 million (US$ 48.1 million) in 2Q 2007, largely due to the Company's higher sales volumes. Days Sales Outstanding ("DSO") continued to improve to 63 days in 3Q 2007.
Recent Events
-- The Company previously announced that it had secured several large multi-year framework commitments for over 185 MW for 2008 delivery. The Company had entered into signed contracts for the sale of 38.5 MW of these PV modules from 2007 to 2008.
-- In November 2007, the Company entered into an agreement with LDK, under which LDK agreed to deliver to us multicrystalline wafers valued at approximately RMB 2 billion from early 2008 to 2010.
-- On November 26, 2007, the Company announced a $306 million polysilicon supply contract with Hoku Scientific, Inc., with deliveries beginning in 2009 and continuing over an eight-year period.
-- The company made certain adjustments to its financial results for the six months ended June 30, 2007, resulting in an increase in net income of RMB 1.2 million from its previously announced results for the two quarters ended June 30, 2007. These adjustments primarily include a decrease in the Company's operating expenses due to forfeiture of options granted to departing employees, partially offset by an increase in income tax.
Management Changes
We recently appointed Ms. Amy Jing Liu to be our chief financial officer, replacing Mr. Kevin C. Wei, whose employment contract expired on October 31, 2007. Ms. Liu brings broad finance and operations management experience with large multi-national companies, having previously worked as VP- Director of Finance- China and Hong Kong in Thermo Fisher Scientific and as Finance manager in DuPont. Ms. Ru Cai, our principal accounting officer whose employment contract also expired on October 31, 2007, departed the Company. In addition, Mr. Fei Yun recently resigned as director of technology.
Business Outlook 2007
Based on current operating trends and other conditions, Solarfun is raising its 2007 full year guidance as follows:
-- Net revenue of US$280-US$300 million, which represents an increase of 230%-250% over 2006. This compares to the previously announced guidance of US$250 million to US$270 million.
-- Full-year shipments at the high end of the previously communicated guidance of 70-80MW, which represents a 210% to 254% increase over 2006.
-- The Company already reached its target of hitting annualized total PV cell production capacity of 240MW by the end of 2007.
Chairman Lu concluded, "Looking forward, we are reiterating our optimism for the fourth quarter and full year ahead. We now have 240 MW of capacity in place, and we plan to continue to expand our production capacity in order to meet our anticipated demand, which remains robust. Additionally, our supply situation is improving; we believe we have secured 100% of our needs in 2007 and a significant portion of our anticipated needs in 2008, and pricing through the remainder of this year and well into next looks to be quite strong"
Conference Call
Management will host a conference call to discuss the results at 8:00 am U.S. Eastern Time (9:00 pm Shanghai time) on November 29, 2007.
Mr. Yonghua Lu, Chairman and Chief Executive Officer, Ms. Amy Jing Liu, Chief Financial Officer, and Paul Combs, Vice President of Strategic Planning, will discuss the results and take questions following the prepared remarks.
The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: 1 877 847 0047
- International dial-in number: +852 3006 8101
- China Toll Free Number: 800 876 5011
Passcode: Solarfun Call.
A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.solarfun.com.cn. A replay of the webcast will be available for one month.
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
For the three months ended
September 30 June 30 September 30 September 30
2006 2007 2007 2007
RMB RMB RMB US$
Net revenue
Photovoltaic
modules 180,834 462,282 752,613 100,445
Photovoltaic cells 52 501 1,227 164
Photovoltaic cells
processing 1,872 - - -
------------ ------------ ------------ ------------
Total net revenue 182,758 462,783 753,840 100,609
------------ ------------ ------------ ------------
Cost of revenue
Photovoltaic
modules (129,919) (391,889) (632,026) (84,351)
Photovoltaic cells (71) (559) (1,072) (143)
Photovoltaic cells
processing (880) - - -
------------ ------------ ------------ ------------
Total cost of
revenue (130,870) (392,448) (633,098) (84,494)
------------ ------------ ------------ ------------
Total gross profit 51,888 70,335 120,742 16,115
------------ ------------ ------------ ------------
Operating expenses
Selling expenses (2,906) (13,014) (21,020) (2,806)
G&A expenses (17,194) (18,740) (29,368) (3,919)
R&D expenses (1,543) (9,433) (7,053) (942)
------------ ------------ ------------ ------------
Total operating
expenses (21,643) (41,187) (57,441) (7,667)
------------ ------------ ------------ ------------
Operating profit 30,245 29,148 63,301 8,448
------------ ------------ ------------ ------------
Interest expenses (2,077) (2,694) (6,683) (892)
Interest income 389 4,159 4,333 578
Exchange losses (2,225) (10,370) (698) (93)
Other income (244) 2,201 19,173 2,559
Other expenses (240) (350) (20,946) (2,795)
Value of embedded
foreign currency
derivative (1,648) - - -
Government grant - - 700 93
------------ ------------ ------------ ------------
Net income (loss)
before tax and
minority interest 24,200 22,094 59,180 7,898
------------ ------------ ------------ ------------
Income tax benefit
/ (expenses) 311 (1,889) (387) (52)
Minority interest (319) 344 828 111
------------ ------------ ------------ ------------
Net income (loss) 24,192 20,549 59,621 7,957
============ ============ ============ ============
Net income
attributed to
ordinary
shareholders 20,517 20,549 59,621 7,957
============ ============ ============ ============
Net income/ (loss)
per share
Basic 0.20 0.09 0.25 0.03
Diluted 0.14 0.09 0.25 0.03
Shares used in
computation
Basic net income
per share 100,350,000 240,024,754 240,024,754 240,024,754
Diluted net income
per share 175,633,633 240,024,754 240,024,754 240,024,754
Net income/ (loss)
per ADS
Basic 1.02 0.43 1.24 0.17
Diluted 0.69 0.43 1.24 0.17
Shares used in
computation
Basic net income
per ADS 20,070,000 48,004,951 48,004,951 48,004,951
Diluted net income
per ADS 35,126,727 48,004,951 48,004,951 48,004,951
For the nine months ended
September 30 September 30 September 30
2006 2007 2007
RMB RMB USD
Net revenue
Photovoltaic modules 360,154 1,405,370 187,563
Photovoltaic cells 6,624 1,994 266
Photovoltaic cells processing 19,461 - -
------------ ------------ ------------
Total net revenue 386,239 1,407,364 187,829
------------ ------------ ------------
Cost of revenue
Photovoltaic modules (255,867) (1,181,615) (157,700)
Photovoltaic cells (5,548) (1,856) (248)
Photovoltaic cells processing (6,014) - -
------------ ------------ ------------
Total cost of revenue (267,429) (1,183,471) (157,948)
------------ ------------ ------------
Total gross profit 118,810 223,893 29,881
------------ ------------ ------------
Operating expenses
Selling expenses (6,023) (40,472) (5,401)
G&A expenses (31,585) (64,000) (8,542)
R&D expenses (2,723) (22,710) (3,031)
------------ ------------ ------------
Total operating expenses (40,331) (127,182) (16,974)
------------ ------------ ------------
Operating profit 78,479 96,711 12,907
------------ ------------ ------------
Interest expenses (3,855) (14,685) (1,960)
Interest income 492 18,049 2,409
Exchange losses (2,123) (22,321) (2,979)
Other income 486 22,424 2,993
Other expenses (474) (21,627) (2,886)
Value of embedded foreign
currency derivative (1,082) - -
Government grant 640 720 96
------------ ------------ ------------
Net income (loss) before tax
and minority interest 72,563 79,271 10,580
------------ ------------ ------------
Income tax benefit / (expenses) 573 (2,700) (360)
Minority interest (266) 1,067 142
------------ ------------ ------------
Net income (loss) 72,870 77,638 10,362
============ ============ ============
Net income attributed to
ordinary shareholders 69,195 77,638 10,362
============ ============ ============
Net income/ (loss) per share
Basic 0.69 0.32 0.04
Diluted 0.55 0.32 0.04
Shares used in computation
Basic net income per share 100,350,000 240,024,754 240,024,754
Diluted net income per share 131,624,178 240,024,754 240,024,754
Net income/ (loss) per ADS
Basic 3.45 1.62 0.22
Diluted 2.77 1.62 0.22
Shares used in computation
Basic net income per ADS 20,070,000 48,004,951 48,004,951
Diluted net income per ADS 26,324,836 48,004,951 48,004,951
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
December 31 June 30 September 30 September 30
2006 2007 2007 2007
RMB RMB RMB US$
Assets
Current assets:
Cash and cash
equivalents 1,137,792 447,940 345,448 46,104
Restricted cash 33,822 24,352 34,171 4,560
Accounts receivable,
net 147,834 360,343 681,914 91,009
Inventories, net 372,504 411,344 522,955 69,794
Advance to suppliers 238,178 397,394 588,371 78,525
Other current assets 75,525 86,608 148,551 19,826
Deferred tax assets 3,400 3,891 5,214 696
Amount due from
related parties 153 - 3,008 402
Amount due from
shareholders 578 - - -
----------- --------- ------------ ------------
Total current assets 2,009,786 1,731,872 2,329,633 310,916
----------- --------- ------------ ------------
Non-current assets:
Fixed assets - net 207,449 397,811 525,880 70,185
Intangible assets -
net 12,897 12,766 161,334 21,532
Long-term investment 300 300 300 40
----------- --------- ------------ ------------
Total non-current
assets 220,646 410,877 687,515 91,757
----------- --------- ------------ ------------
Total assets 2,230,432 2,142,749 3,017,148 402,673
----------- --------- ------------ ------------
Liabilities preference
shares and
shareholders' equity
Current liabilities:
Short-term bank
borrowings 379,900 200,000 752,887 100,481
Long-term bank
borrowings, current
portion 16,000 16,000 16,000 2,135
Accounts payable 51,452 133,807 146,400 19,539
Notes payable 14,020 17,800 5,000 667
Accrued expenses and
other liabilities 33,619 44,791 71,531 9,547
Customer deposits 17 940 84,825 11,321
Amount due to related
parties 32,058 2,259 18,971 2,532
----------- --------- ------------ ------------
Total current
liabilities 527,066 415,597 1,095,613 146,222
----------- --------- ------------ ------------
Non-current
liabilities:
Deferred tax liability 38,633 5,156
Long-term bank
borrowings, non-
current portion 15,000 7,000 7,000 934
----------- --------- ------------ ------------
Commitments and
contingencies
Minority interests 10,151 9,912 100,496 13,412
----------- --------- ------------ ------------
Shareholders' Equity
Ordinary shares
(par value US$0.0001
per share;
400,000,000 shares
authorized;
100,350,000 shares
and 239,994,754
shares issued and
outstanding at
December 31, 2005 and
2006, respectively 193 193 193 26
Additional paid-in
capital 1,565,524 1,579,525 1,585,069 211,546
Statutory reserves 16,024 20,884 28,309 3,778
Retained earnings 96,474 109,638 161,835 21,599
----------- --------- ------------ ------------
Total shareholders'
equity 1,678,215 1,710,240 1,775,406 236,948
=========== ========= ============ ============
Total liabilities,
preference shares and
shareholders' equity 2,230,432 2,142,749 3,017,148 402,673
=========== ========= ============ ============
The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York as of September 28, 2007, which was RMB7.4928 to US$1.0000. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on September 28, 2007, or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts.
About Solarfun
Solarfun Power Holdings Co, Ltd. manufactures both PV cells and PV modules, provides PV cell processing services to convert silicon wafers into PV cells, and supplies solar system integration services in China. The Company produces both monocrystalline and multicrystalline silicon cells and modules, and manufactures 100% of its modules with in-house produced PV cells. Solarfun sells its products both through third-party distributors and directly to system integrators. The Company was founded in 2004 and its products have been certified to TUV and UL safety and quality standards. SOLF-G
http://www.solarfun.com.cn
Safe Harbor Statement
This news release contains forward-looking statements, such as the Company's business outlook for 2007, including full year 2007 estimates for net revenue, PV product shipments and PV cell production capacity. Actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Solarfun disclaims any obligation to update or correct this information.
SOURCE: Solarfun Power Holdings Co. , Ltd.
Solarfun Power Holdings Co., Ltd.
Paul Combs, 8621-6393-8206
V.P. Strategic Planning IR@solarfun.com.cn or
Christensen
Peter Homstad, 480 614 3026 phomstad@ChristensenIR.com or
Roger Hu, 852 2117 0861 rhu@ChristensenIR.com
Copyright Business Wire 2007
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