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TMCNet:  Trina Solar Posts 3rd Quarter 2012 Results [Professional Services Close - Up]

[November 27, 2012]

Trina Solar Posts 3rd Quarter 2012 Results [Professional Services Close - Up]

(Professional Services Close - Up Via Acquire Media NewsEdge) Trina Solar Limited (TSL), an integrated manufacturer of solar photovoltaic ("PV") products, announced its financial results for the third quarter of 2012.

Third Quarter 2012 Financial and Operating Highlights -Solar module shipments were approximately 380 MW during the third quarter of 2012, representing a decrease of 9.2 percent from the second quarter of 2012 -Net revenues were $298.0 million, a decrease of 13.9 percent from the second quarter of 2012 -Gross profit was $2.4 million, a decrease of 91.9 percent from the second quarter of 2012 -Gross margin was 0.8 percent, compared to 8.4 percent in the second quarter of 2012, and included a non-cash inventory write- down totaling $13.3 million and a reversal of prior provision for anti-dumping and countervailing duties (AD/CVD) in the United States totaling $25.8 million -The Company had no incremental accounts receivables provision, compared to $44.1 million in the second quarter of 2012 -Operating loss, including one-time tax and organization restructuring charges totaling $15.2 million, was $76.0 million, compared to $78.6 million in the second quarter of 2012 -Operating margin was negative 25.5 percent, compared to negative 22.7 percent in the second quarter of 2012 -Net loss was $57.5 million, compared to $92.1 million in the second quarter of 2012 -Loss per fully diluted American Depositary Share ("ADS") were $0.81, compared to $1.30 in the second quarter of 2012 (each ADS represents 50 ordinary shares) "Our third quarter sales were adversely impacted by the ongoing supply-demand imbalance in the global PV industry, high inventories and the irrational pricing practices by some competitors in the market," said Jifan Gao, Chairman and CEO of Trina Solar. "These factors contributed to declines in our average selling prices, despite cost improvements of our key materials. Higher historical costs of our inventory also contributed to the low gross margin and net loss in the third quarter. In response to this challenging operating environment, we focused our efforts on retaining quality customers and maximizing operating cash flow, which resulted in improvements in trade receivables and inventory balance from the previous quarter.


"As recently announced, we have also successfully implemented two major initiatives. During the third quarter, we conducted the restructuring of our global business into distinct modules and systems business units. We believe this will allow us to more efficiently manage operating costs for product development to address increasing PV solar end-use applications and geographic expansion, as well as to grow our project systems as a percentage of our total business. In conjunction with this restructuring, we performed a top-down review of our operations to reallocate and reduce our headcount and other operating expenses. These initiatives address current industry conditions as well as the shift in regional demand and changes to our customers' business models as a result of the increasingly attractive economics of solar energy for utility scale applications." In a release on November 20, the Company noted that during the third quarter of 2012, it: -Announced the appointment of Henry Chow to its board of directors. Prior to his retirement from IBM in 2009, Chow served in numerous executive positions in the Asia Pacific region, and was most recently general manager and then chairman of the IBM Greater China Group. He also served on IBM's Worldwide Management Council and its Strategy Team, a group of senior IBM executives responsible for advising, reviewing, and formulating IBM's business strategy. Chow currently serves as a non-executive director to AMD, a semiconductor company based in the United States.

-Announced the availability of its newest line of high performance solutions, Trinasmart. Trinasmart combines the Company's high performance modules with new optimizing and monitoring technologies to deliver a solution to maximize roof space and overall power output, resulting in better project economics for both customers and installers.

-Announced a new Ontario, Canada sales and business development office as the Company also announced a partnership with Silfab Ontario, enabling Trina Solar to offer modules that are locally- manufactured to the Canadian market.

-Announced the completion of a large-scale rooftop PV system in Switzerland to use the Company's high-performance Honey modules. The system, deployed on the roofs of Sagewerke Christen AG's production and storage buildings in Luthern in the canton of Lucerne, has an installed capacity of 900kWp and produces up to 6,000kWh of solar energy per day.

-Announced a new sales and business development presence in Santiago, Chile. The Company's coverage now encompasses all of the Americas, including the United States, Canada, Mexico, the Caribbean, Central and South America.

-Held its 2012 annual general meeting of shareholders on September 7.

-Announced the U.S. launch of Trina Solar Partner Plus, a partnership loyalty and incentive program that provides tools to help solar installers grow their businesses.

-Announced its plans to streamline its organizational structure to manage its business operations more efficiently. The initiatives include separating the Company's PV module and systems business units and adopting an operating expense reduction program.

-Announced that it has published its 2011 Corporate Social Responsibility (CSR) Report.

Third Quarter 2012 Results Net Revenues Net revenues in the third quarter of 2012 were $298.0 million, a decrease of 13.9 percent sequentially and 38.2 percent year-over- year. Total shipments were 380.3 MW, compared to 418.8 MW in the second quarter of 2012 and 370.1 MW in the third quarter of 2011. The sequential decrease in shipments was caused by a continued supply-demand imbalance and the decrease in revenue resulted from the effect of this imbalance on market pricing and commercial terms.

Gross Profit and Margin Gross profit in the third quarter of 2012 was $2.4 million, compared to a gross profit of $29.0 million in the second quarter of 2012 and $52.0 million in the third quarter of 2011. Gross profit during the third quarter of 2012 includes a $25.8 million reversal of prior provisions for AD/CVD in the United States, relating to the ITC's decision to not impose duties retroactively due to the lack of evidence for critical circumstances. Gross profit during the third quarter of 2012 includes a provision of $13.3 million for non-cash inventory write-down.

Gross margin was 0.8 percent in the third quarter of 2012, compared to 8.4 percent in the second quarter of 2012 and 10.8 percent in the third quarter of 2011. The sequential decrease in gross margin was due primarily to higher inventory carrying costs and inventory write-down in connection with decreasing average selling price of modules; the year-on-year decrease in gross margin was due primarily to declines in the average selling price of modules that exceed reductions in cost. The impact of the inventory write-down on the Company's gross margin was 4.5 percent in the third quarter of 2012.

Operating Expense, Income and Margin Operating expenses in the third quarter of 2012 were $78.3 million, a decrease of 27.2 percent sequentially and an increase of 3.8 percent year-over-year. The Company's operating expenses, which included one-time tax and organization restructuring charges totaling $15.2 million, represented 26.3 percent of its third quarter net revenues, a decrease from 31.1 percent in the second quarter of 2012 and an increase from 15.7 percent in the third quarter of 2011. The sequential percentage decrease was primarily due to decrease in provision made to account receivables in the third quarter of 2012 while the year-to-year percentage increase was primarily due to the decrease in net revenues. Operating expenses in the third quarter of 2012 included $1.1 million in share-based compensation expenses, compared to $2.7 million in the second quarter of 2012 and $2.0 million in the third quarter of 2011.

As a result of the foregoing, operating loss in the third quarter of 2012 was $76.0 million, compared to an operating loss of $78.6 million in the second quarter of 2012 and an operating loss of $23.5 million in the third quarter of 2011. Operating margin was negative 25.5 percent in the third quarter of 2012, compared to negative 22.7 percent in the second quarter of 2012 and negative 4.9 percent in the third quarter of 2011.

Net Interest Expense Net interest expense in the third quarter of 2012 was $13.8 million, compared to $9.3 million in the second quarter of 2012 and $9.7 million in the third quarter of 2011. The sequential increase in net interest expense was primarily due to an increase in average bank borrowings in the third quarter of 2012.

Foreign Currency Exchange The Company had a foreign currency exchange gain of $18.2 million in the third quarter of 2012, which included changes in fair value of derivative instruments, compared to a net loss of $22.5 million in the second quarter of 2012 and a net gain of $0.4 million in the third quarter of 2011. This net gain was primarily due to the appreciation of the Euro against the U.S. dollar during the third quarter of 2012, augmented by gains from foreign currency hedging contracts used by the Company to mitigate its foreign currency risk exposure.

The Company continued to mitigate the effects of foreign exchange rate volatility during the third quarter of 2012 by using hedging contracts involving the Euro, Renminbi, and U.S. dollar.

Income Tax Benefit and Expense Income tax benefit was $11.7 million in the third quarter of 2012, compared to income tax benefit of $16.1 million in the second quarter of 2012 and $2.9 million in the third quarter of 2011. The income tax benefit in the third quarter of 2012 was primarily the result of a deferred tax benefit recognized in connection with the net operating losses incurred in the quarter.

Net Loss and EPS As a result of the foregoing, net loss was $57.5 million in the third quarter of 2012, compared to net loss of $92.1 million in the second quarter of 2012 and $31.5 million in the third quarter of 2011.

Net margin was negative 19.3 percent in the third quarter of 2012, compared to negative 26.6 percent in the second quarter of 2012 and negative 6.5 percent in the third quarter of 2011.

Loss per fully diluted ADS were $0.81 in the third quarter of 2012. The impact of the third quarter provision for non-cash inventory write-down was approximately negative $0.19, while the effect of the foreign currency exchange net gain was approximately $0.26, per ADS.

Financial Condition As of September 30, the Company had $703.4 million in cash and cash equivalents and restricted cash, and a working capital balance of $360.6 million. Total bank borrowings were $1,120.8 million, of which $431.0 million were long-term borrowings. The Company decreased its short-term borrowings by $44.0 million to approximately $689.7 million as of September 30.

During the third quarter of 2012, the Company also repurchased $14.9 million of its senior convertible notes due July 2013, which resulted in a gain of $1.8 million.

Shareholders' equity was $969 million as of September 30, a decrease from $1.02 billion at the end of the second quarter of 2012.

More information: www.trinasolar.com ((Comments on this story may be sent to newsdesk@closeupmedia.com)) (c) 2012 ProQuest Information and Learning Company; All Rights Reserved.

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