SHANGHAI, Aug. 24, 2011 /PRNewswire/ -- Hanwha SolarOne Co., Ltd. ("SolarOne" or the "Company") (Nasdaq: HSOL), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic ("PV") cells and modules in China, today reported its unaudited financial results for the quarter ended June 30, 2011. The Company will host a conference call to discuss the results at 8:00 am Eastern Time (8:00 pm Shanghai Time) on August 24, 2011 . A slide presentation with details of the results will also be available on the Company's website prior to the call.
SECOND QUARTER 2011 HIGHLIGHTS
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Total net revenues were RMB1,791.2 million (US$277.1 million), a decrease of 18.4% from 1Q11 and an increase of 2.2% from 2Q10.
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PV module shipments, including module processing services, reached 205.9 MW, a decrease of 17.1% from 248.5 MW in 1Q11 and relatively flat compared with 2Q10.
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Average selling price ("ASP"), excluding module processing services, decreased to RMB10.09 per watt (US$1.56) from RMB11.23 per watt in 1Q11.
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Gross profit decreased 60.8% to RMB139.9 million (US$21.6 million) from RMB356.9 million in 1Q11, and decreased 62.1% from RMB368.8 million in 2Q10.
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Gross margin decreased to 7.8% from 16.3% in 1Q11, primarily due to a combination of a decline in ASP and an increase in the blended cost of goods sold ("COGS") as a result of lower manufacturing utilization. Gross margin in 2Q10 was 21.0%.
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The Company recorded an operating loss of RMB32.3 million (US$5.0 million) compared with an operating profit of RMB253.9 million in 1Q11 andRMB274.3 million in 2Q10. The sequential decrease in operating profit was primarily due to the lower gross profit and higher operating expenses as the Company continued to invest in personnel, management systems, branding and technology, and to one-time severance expenses paid to former management.
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Operating margin was negative 1.8% in 2Q11 as compared to 11.6% in 1Q11 and 15.7% in 2Q10.
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Net loss attributable to shareholders on a non-GAAP basis(1) was RMB64.9 million (US$10.0 million), compared with net income attributable to shareholders of RMB154.4 million in 1Q11 and RMB231.7 million in 2Q10.
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Net loss per basic ADS on a non-GAAP basis(1) was RMB0.77 (US$0.12), compared with net income per basic ADS on a non-GAAP basis ofRMB1.84 in 1Q11 and RMB4.00 in 2Q10.
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Net loss attributable to shareholders on a GAAP basis was RMB69.0 million (US$10.7 million), compared with net income attributable to shareholders of RMB149.4 million and RMB272.8 million in 1Q11 and 2Q10, respectively.
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Net loss per basic ADS on a GAAP basis was RMB0.82 (US$0.13), compared with net income per basic ADS on a GAAP basis of RMB1.78 in 1Q11 and RMB4.71 in 2Q10.
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Annualized Return on Equity ("ROE") on a non-GAAP basis(1) was negative 5.2% in 2Q11, compared with 12.6% in 1Q11 and 35.9% in 2Q10.
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Annualized ROE on a GAAP basis was negative 5.2% in 2Q11, compared with 11.3% in 1Q11 and 35.2% in 2Q10.
Mr. Ki-Joon HONG, Chairman and CEO of Hanwha SolarOne, commented, "We were not insulated from the difficult operating environment during the second quarter. Regulatory changes in Italy, rapidly falling module prices, industry overcapacity and large channel inventories all negatively affected our second quarter results. We consciously reduced our manufacturing activities for a period of time to control expenses, manage working capital, and prevent the build-up of high cost inventory. We did not retreat from our aggressive posture towards the future. We moved forward with our capacity expansion plan, invested in management systems and personnel and made good progress in branding initiatives and research and development. We expect that demand will improve for the remainder of the year."
SECOND QUARTER 2011 RESULTS
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Total net revenues were RMB1,791.2 million (US$277.1 million), a decrease of 18.4% from RMB2,194.8 million in 1Q11 and an increase of 2.2% from 2Q10. The decrease compared with 1Q11 was primarily due to lower shipments, and lower ASP..
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Revenue contribution from PV module processing services as a percentage of total net revenues was 6.8%, compared with 10.7% in 1Q11 and 11.9% in 2Q10.
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PV module shipments, including module processing services, were 205.9 MW, a decrease of 17.1% from 248.5 MW in 1Q11 and 204.6 MW in 2Q10. The decrease was due to soft market demand early in the quarter and the Company's decision to reduce manufacturing utilization in light of the rapidly falling selling prices.
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The United States market continued its strong momentum, accounting for 30% of total 2Q11 shipments, an increase from 10% in 1Q11. Module shipments attributable to Germany decreased to 21% in 2Q11 from 39% in 1Q11, as we believe customers there were deferring their purchases in anticipation of a more favorable module price considering that the German government recently announced the lower Feed-In-Tariff ("FIT") structure. Italy decreased from 11% in 1Q11 to 5% in 2Q11, largely due to the pending regulatory changes reducing FIT incentives. China declined to 4% versus 9% quarter-over-quarter, as pricing in that market was low relative to others. Other notable new markets were Canada and India, each with 4% of total shipments. Australia remained a consistently strong market for the Company, at 11% of shipments in 2Q11.
(Photo: http://photos.prnewswire.com/prnh/20110824/LA56904-a)
(Photo: http://photos.prnewswire.com/prnh/20110824/LA56904-b)
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ASP, excluding module processing services, decreased to RMB10.09 per watt (US$1.56) from RMB11.23 per watt in 1Q11, as a result of industry supply/demand imbalance, and FIT reductions in Germany and Italy.
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Gross profit decreased 60.8% to RMB139.9 million (US$21.6 million) from RMB356.9 million in 1Q11 and decreased 62.1% from RMB368.8 million in 2Q10.
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Gross margin decreased to 7.8% from 16.3% in 1Q11, primarily due to a combination of a decline in ASP and an increase in the blended COGS as a result of lower manufacturing utilization. Gross margin in 2Q10 was 21.0%.
(Photo: http://photos.prnewswire.com/prnh/20110824/LA56904-c)
(Photo: http://photos.prnewswire.com/prnh/20110824/LA56904-d)
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The blended COGS per watt, excluding module processing services, was US$1.44, representing a 0.7% increase from US$1.43 in 1Q11. The blended COGS takes into account the production cost (silicon and non-silicon) using internally sourced wafers, purchase costs and additional processing costs of externally sourced wafers and cells, as well as freight costs.
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The production cost (including both silicon and non-silicon costs) using internal wafers was US$1.32 per watt, representing a 3.9% increase fromUS$1.27 per watt in 1Q11. The increase was primarily due to a slight increase in the price of polysilicon and lower manufacturing utilization. The cost of polysilicon used in our production increased to US$74/kg in 2Q11 from US$73/kg in 1Q11. The Company expects the price of polysilicon will decline in 3Q11.
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The Company recorded an operating loss of RMB32.3million ( US$5.0 million) compared to an operating profit of RMB253.9 million in 1Q11. In 2Q10, the operating profit was RMB274.3 million and the operating margin was 15.7%.
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Operating expenses as a percentage of total net revenues were 9.6% in 2Q11, compared with 4.7% in 1Q11 and 5.4% in 2Q10. The higher operating expenses in 2Q11 compared with 1Q11 were primarily due to increased spending on branding, research and development and severance ( net of tax effect ) of US$4.4 million. Interest expense was RMB40.3 million (US$6.2 million), compared with RMB41.8 million in 1Q11 and RMB40.2 million in 2Q10.
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The Company recorded a foreign exchange gain and loss on change in fair value of derivatives of RMB38.2 million (US$5.9 million), compared with a foreign exchange gain and loss on change in fair value of derivatives of RMB36.8 million in 1Q11.
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Gain from the change in fair value of the conversion feature of the Company's convertible bonds was RMB51.9 million (US$8.0 million), compared with a gain of RMB47.9 million in 1Q11 and a gain of RMB57.8 million in 2Q10. The fluctuations resulting from applying ASC 815-40 were primarily due to changes in the Company's ADS price during the quarter. This line item has fluctuated, and is expected to continue to fluctuate quarter-to-quarter. The Company has no direct control over the fluctuations.
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Income tax expense in 2Q11 decreased to RMB16.1 million (US$2.5 million) compared with RMB84.3 million in 1Q11 and RMB52.2 million in 2Q11.
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Net loss attributable to shareholders on a non-GAAP basis(1) was RMB64.9 million (US$10.0 million), compared with net income attributable to shareholders of RMB154.4 million in 1Q11 and RMB231.7 million in 2Q10.
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Net loss per basic ADS on a non-GAAP basis(1) was RMB0.77 (US$0.12).The Company recorded a net income per basic ADS on a non-GAAP basis of RMB1.84 in 1Q11 and RMB4.00 in 2Q10.
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Net loss attributable to shareholders on a GAAP basis was RMB69.0 million (US$10.7 million), compared with net income of RMB149.4 million in 1Q11.
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Net loss per basic ADS on a GAAP basis was RMB0.82 (US$0.13), compared with net income per basic ADS of RMB1.78 in 1Q11 and RMB4.71 for 2Q10.
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Annualized ROE on a non-GAAP basis(1) was negative 5.2% in 2Q11, compared with 12.6% in 1Q11 and 35.9 % in 2Q10.
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Annualized ROE on a GAAP basis was negative 5.2% in 2Q11, compared to 11.3% in 1Q11 and 35.2% in 2Q10.
FINANCIAL POSITION
As of June 30, 2011, the Company had cash and cash equivalents of RMB1,485.7 million (US$229.9 million) and net working capital of RMB1,850.0 million (US$286.2 million), compared with cash and cash equivalents of RMB1,354.4 million and net working capital of RMB2,486.3 million as ofMarch 31, 2011. Total short-term bank borrowings and the current portion of long-term bank borrowings was RMB1,093.6 million (US$169.2 million), compared with RMB987.2 million as of March 31, 2011. The increase was because the Company drew down some of its bank credit facilities to finance its 2011 capital expenditure program.
As of June 30, 2011, the Company had total long-term debt of RMB995.9 million (US$154.1 million), which was comprised of both the non-current portion of long-term bank borrowings and convertible bonds. The Company's long-term bank borrowings are to be repaid in installments until their maturities in 2012, 2014 and 2015. Holders of the convertible bonds, which have a final maturity in 2018, have an option to require the Company to redeem the bonds on January 15, 2015.
Net cash generated from operating activities in 2Q11 was RMB443.8 million (US$68.7 million), compared with net cash used from operating activities of RMB67.5 million in 1Q11. Net cash generated from operating activities in 2Q10 was RMB417.5 million.
As of June 30, 2011, accounts receivable were RMB1,300.8 million (US$201.3 million) compared with RMB1,722.0 million as of March 31, 2011. Days sales outstanding increased to 76 days in 2Q11 from 62 days in 1Q11 and 48 days in 2Q10.
As of June 30, 2011, inventories decreased to RMB885.0 million (US$136.9 million) from RMB990.7 million as of March 31, 2011. Days inventory was 51 days in 2Q11 compared with 44 days in 1Q11 and 43 days in 2Q10.
Capital expenditures were RMB701.8 million (US$108.6 million) in 2Q11 as the Company made significant additions to manufacturing capacity.
CAPACITY EXPANSION
Details on the Company's annual production capacities and expected annual production capacities as of end of the stated quarters are as follows:
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Capacity ramp-up plan
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End of Q4 2010
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End of Q1 2011
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End of Q2 2011
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End of Q3 2011 (Projected)
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End of Q4 2011 (Projected)
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Ingot
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MW
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400
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400
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415
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650
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1,000
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Wafer
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MW
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400
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450
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500
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850
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1,000
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Cell
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MW
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600
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