ReneSola Ltd Announces Fourth Quarter and Full Year 2007 Results

JIASHAN, China, March 19 /Xinhua-PRNewswire-FirstCall/ -- ReneSola Ltd ("ReneSola" or the "Company"), a leading Chinese manufacturer of solar wafers, today announced its unaudited financial results for the fourth quarter and year ended December 31, 2007.

Financial Highlights
-- Fourth quarter 2007 net revenues were US$96.0 million, an increase of 197.6% from US$32.3 million in the fourth quarter of 2006, and an increase of 32.4% from US$72.5 million in the third quarter of 2007. Full year 2007 net revenues were US$249.0 million, an increase of 195.1% from US$84.4 million in the full year 2006.
-- Fourth quarter 2007 net income was US$17.5 million, an increase of 87.8% from US$9.3 million in the fourth quarter of 2006, and an increase of 36.8% from US$12.8 million in the third quarter of 2007. Full year 2007 net income was US$42.9 million, an increase of 69.7% from US$25.3 million in the full year 2006.
-- Fourth quarter 2007 basic and diluted earnings per share were US$0.17 and US$0.17, respectively, and basic and diluted earnings per ADS were US$0.34 and US$0.34, respectively. Full year 2007 basic and diluted earnings per share were US$0.43 and US$0.43, respectively, and basic and diluted earnings per ADS were US$0.86 and US$0.86, respectively. Each ADS represents two shares.

Business Highlights
-- Fourth quarter production output was 51.3 MW, an increase of 42.5% from 36.0 MW in the third quarter. Full year production output was 125.6 MW, an increase of 223% from 38.9 MW in the full year 2006, exceeding the top end of guidance.
-- Successfully executed 2007 capacity expansion target with additional 40 monocrystalline furnaces and 17 multicrystalline furnaces installed during the fourth quarter of 2007, bringing total ingot manufacturing capacity to 378 MW and wafer manufacturing capacity to 305 MW, compared with 80 MW of ingot manufacturing capacity as of the end of 2006.
-- Over 90% of raw materials required for 2008 planned production output of 300 MW have been secured through a combination of long-term and short-term procurement contracts, toll arrangements, and expected output from our polysilicon joint venture in Henan Province, China. -- Joint venture in Henan Province, China successfully commenced trial production of polysilicon, and development of wholly-owned green field polysilicon plant in Sichuan Province, China is on track with trial production of this facility expected to begin during the first half of 2009.
Six Three Twelve Six Three Three Twelve
months months months months months months months
ended ended ended ended ended ended ended
6/30 12/31 12/31 6/30 9/30 12/31 12/31
2006 2006 2006 2007 2007 2007 2007
Net revenue
(US$000) 24,042 32,272 84,371 80,387 72,540 96,046 248,973 Gross profit
(US$000) 7,171 8,878 24,725 18,102 15,775 19,619 53,496 Gross margin (%) 29.8% 27.5% 29.3% 22.5% 21.7% 20.4% 21.5%
Operating profit
(US$000) 6,394 8,029 22,235 15,001 13,432 15,000 43,433
Foreign exchange
gain (loss) (US$000) (9) 141 364 (2,304) (569) (1,174) (4,047)
Profit for the
period (US$000) 7,039 9,303 25,301 12,690 12,775 17,471 42,936
Production output (MW) 10.0 15.7 38.9 38.3 36.0 51.3 125.6

"During 2007 ReneSola grew into a leading producer of solar wafers and our business expanded through upstream integration within the solar value chain into polysilicon manufacturing," said Mr. Xianshou Li, ReneSola's Chief Executive Officer. "As one of the fastest growing solar companies in the world, ReneSola achieved substantial top line growth without sacrificing profitability in spite of a significant increase in raw material costs, as demand for wafers, as well as average wafer selling prices, continued to increase. We also successfully executed our growth plan by expanding our raw material procurement and customer network and increasing our total production capacity from 80 MW as of the end of 2006, to 378 MW as of the end of 2007."

"During the year we also took strategic steps to integrate upstream into polysilicon manufacturing. Our joint venture in Henan Province, China commenced polysilicon trial production in mid-January 2008, and the development of our state-of-the-art green field polysilicon project in Sichuan Province, China is on track. In line with ReneSola's strong commitment to maintaining environmentally responsible business practices, the joint venture in Henan Province has met the environmental protection standards set by the government and is equipped to recycle silicon tetrachloride. The polysilicon project in Sichuan Province will utilize proven, high-end equipment with fully closed loop systems to recycle and convert waste into products that can be reused in the production process."

"In 2008, we will maintain our focus on efficient cost production and innovation as we look to build on ReneSola's strong brand name. New equipment using our proprietary technologies and state-of-the-art facilities will include some of the most advanced furnaces and wire saws in the market. We are confident that our expansion efforts and upstream transition into polysilicon manufacturing, paired with a strong feedstock supply pipeline and a customer base of leading industry players, put ReneSola in a unique position to capitalize on the opportunities presented by a rapidly growing solar industry in 2008 and beyond."

Financial Results for the Fourth Quarter and Full Year 2007

Net revenues
Net revenues for the fourth quarter of 2007 were US$96.0 million, an increase of 32.4% sequentially and 197.6% year-over-year. For the full year 2007, ReneSola reported net revenues of US$249.0 million representing a 195.1% increase year-over-year from US$84.4 million in 2006. The rise in fourth quarter and full year 2007 revenues was primarily attributable to an increase in output from the expanded production capacity and increasing wafer ASPs.

Gross profit
Fourth quarter gross profit was US$19.6 million, a 24.4% increase sequentially and 121.0% year-over-year. The gross margin for the fourth quarter was 20.4% compared to 21.7% in the third quarter of 2007. Full year 2007 gross profit was US$53.5 million, a 116.4% increase year-over-year from US$24.7 million in 2006. The gross margin for full year 2007 was 21.5% compared to 29.3% for the full year 2006. The change in gross margin was primarily attributable to increases in average feedstock costs of 13.7% sequentially and 42.1% year-over-year. Increasing feedstock costs were mitigated by a reduction in silicon consumption through a combination of in- house closed-loop scrap recycling, productivity gains from improvements in wafer slicing, a reduction in non-raw material related production costs and increases in wafer ASPs.

Operating profit
Operating profit in the fourth quarter of 2007 was US$15.0 million, an increase of 11.7% sequentially and 86.8% year-over-year. Operating margin was 15.6% in the fourth quarter compared to 18.5% in the third quarter of 2007. Total operating expenses in the fourth quarter of 2007 were US$4.6 million, up from US$2.3 million in the third quarter of 2007. Of the total operating expenses in the fourth quarter US$0.7 million was attributable to share-based compensation expenses.

Operating profit for the full year 2007 was US$43.4 million, a 95.3% increase year-over-year from US$22.2 million in 2006. Operating margin was 17.4% for the full year 2007 compared to 26.4% in the previous year due to the lower gross margin attributable to the significant increase in raw material costs. Total operating expenses increased to US$10.l million for the full year 2007 from US$2.5 million for the full year 2006. This was primarily due to increased general and administrative expenses and R&D costs reflecting higher salary and benefit payments as a result of the need for a greater number of employees to meet our fast growing business, as well as an increase in professional fees and compliance expenses.

Profit before tax

Profit before tax in the fourth quarter was US$12.4 million, a 3.6% increase sequentially and 49.3% increase year-over-year. Finance costs increased by 13.9% sequentially, reflecting increased bank borrowings and interest rates. Finance costs as a percentage of net revenue decreased from 2.0% in the third quarter of 2007 to 1.8% in the fourth quarter of 2007. The fourth quarter foreign exchange loss increased to US$1.2 million from US$0.6 million in the third quarter as a result of appreciation of RMB against the US dollar during the quarter.

Profit before tax for the full year 2007 was US$36.8 million, an increase of 63.0% year-over-year from US$22.6 million in 2006. Finance costs in 2007 increased to US$4.5 million from US$0.3 million in 2006, reflecting increased bank borrowings and the convertible bonds issued in March 2007. The full year 2007 foreign exchange loss was US$4.0 million from a gain of US$0.4 million in the previous year due to appreciation of RMB against the US dollar.

Taxation
ReneSola's subsidiary, Zhejiang Yuhui Solar Energy Source Co. Ltd, ("Zhejiang Yuhui") recognized a tax benefit of US$5.2 million in the fourth quarter of 2007, significantly up from US$0.8 million in the third quarter of 2007. For the full year 2007, Zhejiang Yuhui recognized a tax benefit of US$6.2 million, up from US$2.7 million in 2006, due to an increase in domestic equipment purchases. In accordance with PRC tax regulations, Zhejiang Yuhui received 40% of the amount arising from the purchase of domestic made equipment as an investment tax credit. The tax credit can be carried forward for 7 years to offset future corporate income taxes.

Net profit
Fourth quarter 2007 net profit increased 36.8% sequentially and 87.8% year-over-year to US$17.5 million. Full year 2007 net profit increased 69.7% year-over-year to US$42.9 million due to an increase in production output and improved productivity.

2008 Guidance
In the first quarter of 2008 we expect our gross margin to remain stable and expected production output to be 62 MW, as compared to 51.3 MW in the fourth quarter of 2007 and 15.3 MW in the first quarter of 2007. We maintain our annualized ingot production capacity target of 645 MW by the end of 2008. We anticipate production output of a minimum of 300 MW in 2008 with minimum annual net revenues of US$480 million. This represents year-over-year revenue growth of at least 93%.