Trina Solar Announces Third Quarter 2008 Results

By: PR Newswire

CHANGZHOU, China, Nov. 19 /PRNewswire-FirstCall/ -- Trina Solar Limited (NYSE: TSL) ("Trina Solar" or the "Company"), a leading integrated manufacturer of solar photovoltaic products from the production of ingots, wafers and cells to the assembly of PV modules, today announced its financial results for the third quarter 2008.

Third Quarter 2008 Financial Highlights
-- Solar module shipments were 66.36 MW, up 213.7% from 21.15 MW in the third quarter of 2007 and 39.5% from 47.57 MW in the second quarter of 2008
-- Total net revenues increased to $290.7 million, up 252.1% year-over-year and 42.4% sequentially
-- Gross margin was 22.4%, compared to 20.1% in the third quarter of 2007 and 23.2% in the second quarter of 2008
-- Operating margin was 16.1%, compared to 8.4% in the third quarter of 2007 and 14.3% in the second quarter of 2008
-- Net income was $32.1 million, compared to $7.8 million in the third quarter of 2007 and $17.1 million in the second quarter of 2008
-- Net income includes a foreign currency exchange loss of $4.9 million
-- Earnings per fully diluted ADS were $1.17. The effect of the third quarter foreign currency exchange losses was approximately $0.17 per fully diluted ADS

"We are very pleased with our strong performance during the third quarter," said Jifan Gao, Trina Solar's Chairman and CEO. "Despite further rising silicon costs, over the last four reporting quarters we have either met or exceeded our aggressive goals for output, revenues and operating margin. In the third quarter we again demonstrated the ability to leverage on our integrated manufacturing capabilities, enhanced further by significant improvements in operating efficiencies and cost controls as measured by our operating expenses. We are also pleased by the recently announced expansion of our product portfolio via our in-house developed UMG-based module product. This timely offering is expected to address increasing customer demand for lower cost modules, with initial sales expected in fourth quarter of 2008."

Third Quarter 2008 and Recent Business Highlights
-- Expanded capacity to approximately 300 MW for each of ingot, wafer, cell and module production as of September 30, 2008
-- Launched cell Lines 11 through 14, of which lines 11 and 12 were put into commercial production
-- Announced sales agreements with Invictus NV (Belgium), American Capital Energy (US), GreenergyCapital and Enel (Italy), and a sales and marketing collaboration agreement with Spanish Premier League Football Club Espanyol
-- Announced the product launch of an in-house developed UMG-based module product, with sales expected in the current fourth quarter
-- Enhanced the Company's brand recognition and market share by further developing sales channels in developing solar markets, including the US, Belgium, France, South Korea, and Australia
-- Announced the Company's intentions to base its North American operations in the City of San Francisco
-- Announced the Company's intentions to establish warehouse operations in Rotterdam, a key port city in the Netherlands

Third Quarter 2008 Results

Net Revenues
Trina Solar's net revenues in the third quarter of 2008 were $290.7 million, an increase of 42.4% sequentially and 252.1% year-over-year. Total shipments in the third quarter of 2008 increased to 66.36 MW, up from 47.57 MW in the second quarter of 2008 and 21.15 MW in the third quarter of 2007. Average sales price ("ASP") was $4.09 in the third quarter of 2008, compared to $4.03 in the second quarter of 2008 and $3.75 in the third quarter of 2007.

Gross Profit and Margin
Gross profit in the third quarter of 2008 was $65.2 million, an increase of 37.6% sequentially and 292.9% year-over-year. Gross margin was 22.4% in the third quarter of 2008, a decrease from 23.2% in the second quarter of 2008 and an increase from 20.1% in the third quarter of 2007. The sequential decrease in gross margin was predominantly due to higher cost of silicon raw materials while the year-over-year increase was primarily due to higher module ASP and cost efficiencies from an increased degree of vertical integration, including in-house cell production.

Operating Expense, Income and Margin
Operating expenses in the third quarter of 2008 were $18.4 million, or 6.3% of net revenues. This compares to 8.9% in the second quarter, reflecting the fourth straight quarterly improvement as a net revenue percentage. Operating expenses in the third quarter of 2008 included approximately $0.6 million of share-based compensation expenses.

Operating income in the third quarter of 2008 was $46.8 million, an increase of 60.6% sequentially and 575.0% year-over-year.

Operating margin was 16.1% in the third quarter of 2008, compared to 14.3% in the second quarter of 2008 and 8.4% in the third quarter of 2007. The sequential increase was primarily due to lower general and administrative expenses as a percentage of net revenues while the year-over-year increase was primarily due to both lower general and administrative expenses and selling expenses as a percentage of net revenues.

Net Interest Expense
Net Interest expense in the third quarter of 2008 was $7.2 million, compared to $5.1 million in the second quarter of 2008 and $0.6 million in the third quarter of 2007.

Foreign Currency Exchange Loss
Foreign currency exchange loss was $4.9 million in the third quarter of 2008, compared to $6.1 million sequentially. This was primarily due to the devaluation of the Euro against the U.S. Dollar, which resulted in a loss upon the remeasurement of the Company's receivables.

Net Income and EPS
Net income was $32.1 million in the third quarter of 2008, compared to $17.1 million in the second quarter of 2008 and $7.8 million in the third quarter of 2007. Net Income includes a foreign currency exchange loss of $4.9 million.

Net margin was 11.0% in the third quarter of 2008, compared to 8.4% in the second quarter of 2008 and 9.4% in the third quarter of 2007. The effect of the third quarter foreign currency exchange losses, net of tax effect, were approximately $0.17 per fully diluted ADS. Earnings per fully diluted ADS were $1.17.

Senior Convertible Notes Offering
On July 24, 2008, Trina Solar completed a public offering of $138 million of Senior Convertible Notes due 2013. The net proceeds of the offering is being used for the expansion of manufacturing lines for the production of silicon ingots, wafers, solar cells and solar modules, the purchase of raw materials, research and development and other general corporate purposes.

Financial Condition
As of September 30, 2008, the Company had $136.3 million in cash and cash equivalents, excluding the Company's restricted cash balance of $48.5 million. The restricted cash comprises deposits pledged to banks to secure bank borrowings and letter of credit facilities.

As of October 31, 2008, the Company's total approved credit facilities totaled approximately $450 million, of which includes approximately $150 million in available credit.

Fourth Quarter and Fiscal Year 2008 Guidance
For the fourth quarter of 2008, the Company expects to ship between 55 MW and 60 MW of PV modules and currently expects total net revenues to be in the range of $190 million to $210 million. The Company expects gross margin for the fourth quarter will likely be between 13% and 15% and estimates operating margin to range between 5% and 7% of total net revenues.

For the full year of 2008, the Company updates its projections as follows:
Total net revenues to be in the range of $800 million to $850 million, compared to previous guidance of $850 million to $900 million.
Total PV module shipments between 200 MW to 206 MW, compared to previous guidance of 210 MW to 220 MW.
The Company believes gross margin to be in the range of 20% and 22% for the year, compared to previous guidance of 23% and 25%, and estimates operating margin will likely be in the range of 12% to 14% of total net revenues, compared to previous guidance of 15% and 17%.

Business Outlook
Given industry concerns related to changes in the global economic and credit environments, the Company reiterates its confidence in regards to its financial strength and operational strategies for fiscal year 2009.

"We are confident in our ability to successfully navigate our operations and related capital requirements despite recent and significant market environment changes," stated Terry Wang, Chief Financial Officer. "We are fully aware of the risks and volatility of market conditions. After careful examination of various scenarios reflecting market demand, average selling price, and cost reductions of key material inputs, we reiterate expectations to preserve sufficient cash holdings and to maintain positive cashflows from operations initiated in the third quarter, which were over $20 million. These cashflows will drive the funding for future operations and capacity expansions, to be deployed prudently and effectively based on evolving market conditions."

Management Changes

The Company announces recent management changes:
Dr. Suping Chen has joined the Company as Vice President of Manufacturing, East Campus. Mr. Chen previously worked at Samsung Electronics (Suzhou) Semiconductor Co., Ltd. and at Seagate Technology International (Wuxi) Co., Ltd., where he served for over seven years in roles including Senior Product Manager and Operations Director. Dr. Chen, who formed his own management consulting company in 2006, has more than 12 years of IT manufacturing experience in China.

Dr. Qiang Huang has been appointed as Vice President of Technology. He replaces Mr. Ting Cheong Ang, the former Vice President of Technology Development. Dr. Huang served earlier as a Director of Manufacturing Engineering. Before joining our Company, he earlier served as Engineering Manager with Taiwan Semiconductor Manufacturing Co. (TSMC) and as a Senior Manager of Device Integration at ST Microelectronics in Singapore. Dr. Huang has more than eight years of commercial operations experience in semiconductor engineering development and engineering problem solving.

The Company also announces the appointment of Mr. Steven (Yu) Zhu as Vice President of International Procurement and Business Development. The position fills the vacancy created by the departure of Mr. Andrew Klump, the former Vice President of Business Development. Mr. Zhu, who joined the Company in 2005, earlier worked for IBM in the United States for four years as a global training leader and software engineer. Prior to joining the Company, Mr. Zhu also was founder and president of a wireless internet company from 2002 to 2005.