ReneSola Ltd Announces First Quarter 2008 Results

May 14, 2008

JIASHAN, China, May 14 /Xinhua-PRNewswire/ -- ReneSola Ltd ("ReneSola" or the "Company"), a leading Chinese manufacturer of solar wafers, today announced its unaudited financial results for the first quarter ended March 31, 2008.

Financial and Business Highlights

-- First quarter 2008 net revenues were US$123.0 million, an increase of 242.4% from US$35.9 million in the first quarter of 2007, and an increase of 28.0% from US$96.0 million in the fourth quarter of 2007.
-- First quarter 2008 gross margin was 22.1% compared to 20.4% in the fourth quarter of 2007.
-- First quarter 2008 net income was US$17.7 million, an increase of 160.6% from US$6.8million in the first quarter of 2007, and an increase of 1.2% from US$17.5 million in the fourth quarter of 2007.
-- First quarter 2008 basic and diluted earnings per share were US$0.15 and US$0.14, respectively, and basic and diluted earnings per ADS were US$0.30 and US$0.28, respectively. Each ADS represents two shares.
-- First quarter production output was 66.5 MW, an increase of 29.6% from 51.3 MW in the fourth quarter of 2007, exceeding previously issued guidance of 62 MW.
-- Silicon consumption rate decreased to 6.3 grams per watt in the first quarter of 2008 from 6.5 grams per watt in the fourth quarter of 2007.
-- Wafer production capacity is planned to increase to 1,000 MW by the end of 2009.

Three months ended,
March 31, December 31, March 31,
2007 2007 2008
Net revenue (US$000) 35,916 96,046 122,982
Gross profit (US$000) 8,152 19,619 27,234
Gross margin (%) 22.7% 20.4% 22.1%
Operating profit (US$000) 6,939 15,000 23,187
Foreign exchange gain (loss) (US$000) (63) (1,174) (56)
Income tax benefit (expense) (US$000) 23 5,171 (3,560)
Net income for the period (US$000) 6,783 17,471 17,675
Production output (MW) 15.3 51.3 66.5

"We exceeded our targeted output and once again achieved record revenues for the quarter," said Mr. Xianshou Li, ReneSola's chief executive officer. "During the first quarter, we increased production output to 66.5 MW through the successful ramp-up of production capacity that was installed in the fourth quarter of 2007. This resulted in substantial growth in revenue and operating profits. Our dedication to efficient production processes and innovation continued to yield impressive performance."

In January 2008, we completed our initial public offering on the New York Stock Exchange, generating net proceeds of approximately US$109.0 million, continued Mr. Li. The listing strengthened our balance sheet and increased our brand recognition. We remain optimistic about the remainder of 2008, and are committed to growing in order to meet increasing demand for our high quality wafer products.

Financial Results for the First Quarter

Net revenues

Net revenues for the first quarter of 2008 were US$123.0 million, an increase of 28.0% sequentially and 242.4% year-over-year. The increase in first quarter revenues was primarily attributable to an increase in output from the expanded production capacity and increasing wafer ASPs.

Gross profit

First quarter 2008 gross profit was US$27.2 million, a 38.8% increase sequentially and 234.1% year-over-year. The gross margin for the first quarter 2008 was 22.1% compared to 20.4% in the fourth quarter of 2007. The increase in gross margin was achieved despite an increase in average feedstock costs of 21.0% sequentially and was primarily attributable to a further reduction in silicon consumption rate to 6.3 grams per watt from 6.5 grams per watt in fourth quarter of 2007, a continuing reduction in non-raw material related production costs and an increase in wafer ASPs due to the high demand for our wafer products.

Operating profit

Operating profit in the first quarter of 2008 was US$23.2 million, an increase of 54.6% sequentially and 234.2% year-over-year. Operating margin was 18.9% in the first quarter compared to 15.6% in the fourth quarter of 2007. Total operating expenses in the first quarter of 2008 were US$4.0 million, down from US$4.6 million in the fourth quarter of 2007.

Profit before tax

Profit before tax in the first quarter was US$21.3 million, a 72.2% increase sequentially and 215.0% increase year-over-year. Finance costs increased by 26.9% sequentially, reflecting increased bank borrowings and interest rates. Finance costs as a percentage of net revenue decreased from 1.8% in the fourth quarter of 2007 to 1.7% in the first quarter of 2008. The first quarter foreign exchange loss was US$0.06 million compared to foreign exchange loss of US$1.2 million in the fourth quarter of 2007.

Taxation

We recognized a tax charge of US$3.6 million in the first quarter of 2008, compared to a tax credit of US$5.2 million in the fourth quarter of 2007. ReneSola's subsidiary, Zhejiang Yuhui Solar Energy Source Co. Ltd, ("Zhejiang Yuhui"), after the first two years of exemptions, is now subject to a tax rate of 12.5% under the new PRC Enterprise Income Tax Law, or the EIT Law. The current applicable tax rate is half the statutory rate of 25%, which is expected to apply to Zhejiang Yuhui, effective from the beginning of 2010. Furthermore, in 2007 Zhejiang Yuhui received an income tax credit equivalent to 40% of the cost of capital equipment manufactured in the PRC. This tax policy has now been withdrawn from 2008 with the enactment of the New Enterprise Income Tax Law.

Net profit

First quarter 2008 net profit increased 1.2% sequentially and 160.6% year- over-year to US$17.7 million.

Other Recent Business Developments

ReneSola announced on November 19, 2007 that it planned to develop a polysilicon manufacturing facility with an annualized capacity of 1,500 tons in Meishan, Sichuan province, China. With a substantial pipeline of wafer sales secured under various long term contracts and strong customer interest in signing further long-term contracts, ReneSola has decided to increase the previously announced 1,500 tons of annual polysilicon manufacturing to 3,000 tons on the same site in Meishan to secure more in-house polysilicon supplies. Land leveling has been completed and construction has commenced with completion expected in early 2009. The facility is expected to be operational in the first half of 2009. As part of the project, ReneSola has signed purchasing contracts and made down-payments for major capital equipment from world-class international equipment suppliers.

On May 12, 2008 an earthquake with a magnitude of 7.8 struck China's Sichuan province. There was no damage to ReneSola's facilities and construction remains on schedule. ReneSola does not expect the earthquake to have a material effect on its operations in Sichuan province.
Production Capacity

With our current facilities reaching full capacity and strong customer demand for additional wafer sales contracts, ReneSola is pleased to announce a further expansion in its wafer manufacturing capacity to 1,000 MW by the end of 2009. The Company believes the new wafer manufacturing capacity will provide important ramp-up capabilities to meet increasing market demand. Negotiations on equipment purchases are currently under way and are expected to be completed within the next couple of months.

Second Quarter Outlook

We anticipate production output to be in the range of 75 MW to 80 MW in the second quarter of 2008 compared to 66.5 MW in the first quarter of 2008 and 23 MW in the second quarter of 2007. Gross margin for the second quarter of 2008 is expected to remain stable. On April 17, 2008, we increased previously issued full year 2008 production output to 310 MW to 320 MW and revenue guidance to US$530 million to US$550 million for 2008. We are once again increasing our outlook for full year 2008 and expect production output to be in the range of 330 MW to 340 MW with annual net revenues of approximately US$570 million to US$590 million.