Yingli narrow losses with increased margins
Yingli Green Energy has announced its 1st quarter financial results and despite posting a net loss of RMB 341.8 million (US$55.0 million) has seen improving margins begin to take effect. The company stated that Asian, African and South American markets improved more than anticipated in the second quarter.
"I'm pleased with the improvement in our gross margin in the first quarter of 2014, which is attributable to the slight increase in average selling price of PV modules and our on-going efforts on cost reduction, and I have confidence in our ability to drive additional improvement moving forward," said Mr. Liansheng Miao, Chairman and CEO of Yingli Green Energy. "In the first quarter, we witnessed a continued evolution of end demand diversification with exceptional demand from Japan and other emerging markets coupled with steady growth from U.S. and stabilization in Europe, while module shipments in MW shrunk primarily due to the traditional seasonality and a slightly delay in delivery for projects in Algeria. The proportion of shipments to markets outside China, U.S. and Europe doubled and accounted for 35% of our total shipments in the first quarter of 2014, compared with 16% in the fourth quarter of 2013."
Although total net revenues in the first quarter at RMB 2,686.8 million (US$432.2 million) were down compared to RMB 3,711.1 million in the fourth quarter of 2013, they were almost identical to the RMB 2,679.3 million in the corresponding quarter of 2013.
"Since the beginning of the second quarter, we have seen substantial upside in demand from China as well as emerging markets such as South America, Southeast Asia and Africa, we expect this trend to continue towards the second half of 2014. Based on our current order backlog and estimation of market prospects, we expect our shipments in the upcoming quarters will pick up from the first quarter and we are confident to achieve shipment guidance of 4.0GW to 4.2GW for fiscal year 2014," Mr. Miao added.
This is a stronger position than the company feared when it issued guidance warnings earlier in the year. The company expected problems due to the ongoing trade issues with the USA and other regions. Yingli has made it clear it intends to challenge the recent rulings from the USA attempting to block an expected loop hole using Taiwanese manufacturers. It would appear Yingli's involvement in the World Cup has had a greater impact in newer markets than expected.
The company has also benefited from the longer term plan of moving away from purely manufacturing to developing business interests along the clue chain.
"In addition to module business, the Company has continued to make steady progress in the execution of our downstream strategy to transform ourselves from a pure PV manufacturer to a renewable energy solutions provider," explains Miao. "We have approximately 1GW of downstream project pipeline across China.
"In the first quarter, we commenced the construction of two ground-mounted PV projects in Hebei Province, which are expected to complete in the third quarter of 2014. We also began to construct 110 MW of utility scale projects and 20 MW of distributed generation projects located in Hebei, Guangxi and Sichuan province in June of 2014. Based on the current project development status and the expectation of progress of project pipelines, we expect to develop approximately 400MW to 600MW of PV projects by the end of 2014."
Total net revenues for 2014 included PV module shipments (including 6.1 MW shipments for PV systems to the Company's own downstream power plants in China) of 630.8MW in the first quarter of 2014. This was a decrease of 32.9% from the fourth quarter of 2013 showing how much the changing business model and margins helped Yingli produce the results is has.
The decrease of PV module shipments was primarily due to a soft demand in China market as the result of a traditional seasonality and a slightly delayed PV module shipment schedule for projects in Algeria. In the first quarter of 2014, the average selling price of PV modules improved slightly from that in the fourth quarter of 2013 as the Company optimized its geographic distribution for sales of PV modules.
Based on current market and operating conditions, estimated production capacity and forecasted customer demand, the Company reiterates its PV module shipment target to be in the estimated range of 4.0GW to 4.2GW (including 400-600MW shipment for PV systems) for fiscal year 2014, which represents an increase of 23.7% to 29.9% compared to fiscal year 2013.
