Canadian Solar Posts Impressive First Quarter Results

Ontario, Canada headquartered Canadian Solar has delivered an impressive set of numbers or the Jan-March quarter in 2020. The firm, which has a presence in manufacturing with 10 GW of Module and 9 GW of Cell manufacturing capacity, besides solar projects, announced results yesterday.  Whole YOY comparisons looked impressive, the firms numbers do indicate  a slowdown, when seen quarter on quarter (QOQ).

Key Highlights

• Total module shipments increased 41% year-over-year to 2.2 GW, in line with first quarter 2020 guidance of 2.15 GW to 2.25 GW.
• Net revenue increased 70% year-over-year to $826 million, exceeding first quarter 2020 guidance of $780 million to $810 million.
• Gross profit increased 108% year-over-year to $223 million. Gross margin increased 480 basis points year-over-year to 27.0%, in line with first quarter 2020 guidance of 26% to 28%.
• Net income attributable to Canadian Solar was $110.6 million, or $1.84 per diluted share, compared to a net loss of $17.2 million or $0.29 per diluted share in the first quarter of 2019.
• As of March 31, 2020, the Company’s portfolio of utility-scale solar power plants in operation was 956 MWp with an estimated total resale value of approximately $830 million to Canadian Solar.

Total module shipments in the first quarter of 2020 were 2,214 MW, compared to 2,474 MW in the fourth quarter of 2019, and 1,575 MW in the first quarter of 2019. Of the totals, 253 MW were shipped to the Company’s utility-scale solar power projects in the first quarter of 2020, compared to 295 MW in the fourth quarter of 2019, and 52 MW in the first quarter of 2019.

Gross profit in the first quarter of 2020 was $223 million, compared to $230 million in the fourth quarter of 2019, and $107 million in the first quarter of 2019. Gross margin in the first quarter of 2020 was 27.0%, compared to 25.0% in the fourth quarter of 2019, and 22.2% in the first quarter of 2019. The gross margin improvement was primarily due to an increased contribution of higher margin project sales.

Income from operations in the first quarter of 2020 was $113 million, compared to $111 million in the fourth quarter of 2019, and $7 million in the first quarter of 2019. Operating margin was 13.7% in the first quarter of 2020, compared to 12.1% in the fourth quarter of 2019, and 1.4% in the first quarter of 2019.

Dr. Shawn Qu, Founder, and now Chairman and Chief Executive Officer, commented: “We achieved a 70% increase in net revenue and 108% increase in gross profit year-over-year in the first quarter of 2020. While COVID-19’s impact on the demand for our products and services was limited in the first quarter, we remain cautious given the market uncertainty and expected softness in the second half of 2020. As with past periods of volatility, we focus on supporting our employees, customers and partners; restricting discretionary spending; and investing into long-term growth opportunities. The industry’s long-term fundamentals remain strong, with numerous catalysts for revenue and profitability growth. We are particularly excited by the market outlook for our Energy business, as lower equipment ASPs help to improve the profitability of our contracted projects. In addition, the low interest rate environment makes our solar projects even more sought-after as countercyclical investment assets. We will continue to sell and recycle capital to grow our project pipeline, while also growing stable, recurring revenues by retaining partial ownership of selected projects. Our focus remains on improving our return on capital and equity, as we manage the near-term challenges and enhance the Company’s position for sustainable long-term growth.”

Yan Zhuang, previously Acting CEO and newly appointed President and Chief Operating Officer, commented, “We delivered another strong quarter, achieving net income of $110.6 million, or $1.84 per diluted share, in the first quarter of 2020. In our Energy business, we completed solar power plant sales in Japan and Italy and reinforced our market leadership by reinvesting in our project pipeline. In our Module and System Solutions (“MSS”) business, we expanded our long-term partnerships with a new 1.2 GW multi-year module supply agreement with Lightsource BP. We continue to make significant progress in creating bankable and competitive solar plus energy storage solutions, leveraging our unique position as one of the world’s largest solar energy solutions providers. Taken together, our global brand, established sales and partnership networks, financial strength and proven ability to successfully adapt to market changes through technological and business model innovation, give Canadian Solar a powerful competitive advantage.”

Dr. Huifeng Chang, Senior Vice President and Chief Financial Officer, added, “During the first quarter of 2020, we continued to strengthen our balance sheet and improve our liquidity position, which gives our partners and customers added confidence during the current market uncertainty. We reduced total debt and maintained unrestricted cash at a healthy level. Our inventory level increased in the first quarter primarily due to our strategic decision to increase module inventory in the U.S. to qualify for the investment tax credit and applicable tax credit percentage. Additionally, in light of the current macroeconomic weakness, we suspended our share repurchase program to maximize liquidity. We will continue to monitor the macroeconomic situation and take contingency measures to preserve cash and minimize risk.”