ReneSola Ltd Announces Third Quarter 2008 Results

Third Quarter Revenues Increased 197.4% Year-Over-Year; Third Quarter Net Income Increased 153.5% Year-Over-Year

JIASHAN, China, Nov. 18 /PRNewswire-FirstCall/ -- ReneSola Ltd ('ReneSola' or the 'Company'), a leading global manufacturer of solar wafers, today announced its unaudited financial results for the third quarter of 2008.

Financial and Business Highlights

-- Third quarter 2008 net revenues were US$215.8 million, an increase of 197.4% from US$72.5 million in the third quarter of 2007, and an increase of 25.5% from US$171.9 million in the second quarter of 2008.
-- Third quarter 2008 gross margin was 21.2% compared to 22.4% in the second quarter of 2008.
-- Third quarter 2008 net income was US$32.4 million, an increase of 153.5% from US$12.8 million in the third quarter of 2007, and an increase of 38.9% from US$23.3 million in the second quarter of 2008.
-- Third quarter 2008 basic and diluted earnings per share were US$0.24 and US$0.23, respectively, and basic and diluted earnings per ADS were US$0.48 and US$0.46, respectively. Each ADS represents two shares.
-- Third quarter production output was 102.1 MW, an increase of 23.8% from 82.5 MW in the second quarter of 2008, exceeding previously issued guidance released in the second quarter of 2008 and at the high-end of our revised guidance issued on November 3, 2008.
-- Silicon consumption rate decreased to 6.1 grams per watt in the third quarter of 2008 from 6.24 grams per watt in the second quarter of 2008.
-- Commissioned 90 MW of multicrystalline ingot and wafer capacity and 35 MW of monocrystalline ingot and wafer capacity on schedule.
-- Secured additional credit lines with two of China's leading banks providing the Company with an aggregate of RMB2.8 billion in new and existing credit facilities. The Company had US$125.2 million in cash, cash equivalents and restricted cash on its balance sheet as of September 30, 2008.
-- Development of wholly-owned Sichuan polysilicon project progressing on-schedule.
Note: For ease of comparison, pro forma results are shown throughout this statement for the second quarter of 2008, reflecting the contribution of the Company's polysilicon production joint venture in Henan province, China under the equity accounting method, which was adopted with effect from June 28, 2008.

Three months Three months Three months
ended 9/30/07 ended 6/30/08 ended 9/30/08
(Pro forma)
Net revenue (US$000) 72,540 171,889 215,754
Gross profit (US$000) 15,775 38,426 45,809
Gross margin (%) 21.7 22.4 21.2
Operating profit (US$000) 13,432 30,535 36,888
Foreign exchange loss (US$000) (569) (797) (1,192)
Profit for the period (US$000) 12,775 23,309 32,385
Production output (MW) 36.0 82.5 102.1

'We enjoyed an outstanding third quarter with continued significant growth driven by strong market demand for our quality wafer products, further reductions in our silicon consumption rate and the successful implementation of our expansion strategy,' said Mr. Xianshou Li, ReneSola's chief executive officer. 'Our third quarter expansion and ramp-up in wafer production capacity was smooth and keeps us on track to reach our 2008 full year capacity expansion target of 645 megawatts in annualized ingot production capacity.'

Mr. Li continued, 'The third quarter momentum continued through the first month of the fourth quarter and we saw strong results for October. However, since the beginning of November, we have seen downstream industry demand from Chinese customers being negatively impacted by various factors as a result of the global financial crisis.'

'Whilst we may benefit from a lack of direct exposure to many of the negative factors, we recognize the challenges that the industry faces in the near term. Spot polysilicon prices have declined significantly in recent weeks. Although this will translate to a lower cost base for our wafer production, we are experiencing pressure on wafer ASPs. The combination of these factors is likely to have a negative impact on our operating and financial results for the fourth quarter of 2008 into the first quarter of 2009.'

'Looking ahead, we are confident the current challenges in the industry are temporary and that the mid- to long-term prospects remain strong, particularly as lower raw material costs and ASPs should increase demand and lessen the industry's reliance on government subsidies. While the Company's cash position remains healthy and funding availability is further strengthened by the additional credit facilities from two of China's largest banks, we will continue to focus on streamlining our operations through strict cost controls while working to achieve further technological improvements as we position our company for continuing long-term success. The incremental supply from our upstream polysilicon manufacturing, combined with an expected increase in tolling production, and our continuing efforts in achieving productivity gains and diversifying our customer base, will help to alleviate the pressure on our business.'

Financial Results for the Third Quarter

Net Revenues
Net revenues for the third quarter of 2008 were US$215.8 million, an increase of 25.5% sequentially and 197.4% year-over-year. The increase in third quarter revenues was primarily attributable to an increase in output from the expanded production capacity and an increase in wafer ASPs.

Gross Profit
Gross profit for the third quarter of 2008 was US$45.8 million, a 19.2% increase sequentially and 190.4% year-over-year. The gross margin for the third quarter of 2008 was 21.2% compared to 22.4% in the second quarter of 2008. The decrease in gross margin was primarily attributable to an increase in feedstock costs, higher non-material related production costs due to higher inflation and a write-down of approximately $5.3 million on the value of certain raw materials. This was partially offset by a further reduction in the silicon consumption rate to 6.1 grams per watt from 6.24 grams per watt in the second quarter of 2008 and increases in wafer ASPs.

Operating Profit
Operating profit for the third quarter of 2008 was US$36.9 million, an increase of 20.8% sequentially and 174.6% year-over-year. The operating margin was 17.1% in the third quarter of 2008 compared to 17.8% in the second quarter of 2008. Total operating expenses in the third quarter of 2008 increased to US$8.9 million from US$7.9 million in the second quarter of 2008.

Earnings before Income Tax, Minority Interest and Equity in Earnings of Investee
Earnings before income tax, minority interest and equity in earnings of investee for the third quarter of 2008 were US$32.7 million, a 20.3% increase sequentially and 174.4% year-over-year. Finance costs increased by 19.0% sequentially, reflecting higher interest rates. Finance costs as a percentage of net revenue decreased from 1.6% in the second quarter of 2008 to 1.5% in the third quarter of 2008.