JA Solar Holdings Company Ltd. (JASO) announced second-quarter 2012 results. Adjusted loss per American Depositary Share (“ADS”) was 37 cents, wider than the Zacks Consensus Estimate of a loss of 14 cents. Results also came far below the year-ago adjusted earnings per ADS of 22 cents.
Quarterly Performance
JA Solar’s revenues in the reported quarter were $284.4 million, missing the Zacks Consensus Estimate of $292 million. Though revenues increased 12.8% from $252.2 million in the first quarter of 2012, it decreased 32.3% from $420.1 million in the second quarter of 2011.
Total shipments in the second quarter of 2012 were 418 MW, almost in line with the low end of the company's previously provided guidance range of 420 MW to 440 MW. This represents a 14.2% increase from 366 MW in the first quarter of 2012 and a 4.2% increase from 401 MW in the second quarter of 2011.
Gross profit in the second quarter of 2012 was $13.6 million, compared with a gross profit of $5.2 million in the first quarter of 2012 and a gross loss of $11.3 million in the second quarter of 2011. Gross margin was 4.8% in the second quarter of 2012, compared with 2.1% in the first quarter of 2012 and negative 2.7% in the second quarter of 2011.
Total operating expenses in the second quarter of 2012 were $38.1 million, compared with $30.3 million in the first quarter of 2012 and $20.5 million in the second quarter of 2011. The increase in total operating expenses, quarter over quarter, was primarily due to a prepayment impairment of $3.4 million and an increase in freight costs and other export-related expenses of $3.6 million.
Operating loss in the second quarter of 2012 was $24.5 million, compared with an operating loss of $25.0 million in the first quarter of 2012 and an operating loss of $31.8 million in the second quarter of 2011. Operating margin was negative 8.6% in the second quarter of 2012, compared with a negative operating margin of 9.9% in the first quarter of 2012 and a negative operating margin of 7.6% in the second quarter of 2011.
Net loss, including a foreign exchange loss of $11.0 million and tax expenses of $18.9 million, was $72.1 million, compared with net loss of $39.5 million in the first quarter of 2012.
Financial Condition
JA Solar at the end of the reported quarter had cash and cash equivalents of $589.1 million and total working capital of $316.6 million. Total short-term bank borrowings and convertible notes due 2013 were $374.1 million. Total long-term bank borrowings were $682.3 million, among which $247.3 million were due in one year. The total face value of outstanding convertible notes due 2013 was $219.7 million as of June 30, 2012.
Outlook
JA Solar expects its cell and module shipments to be in the range of 350 MW and 370 MW in the third quarter of 2012. For the full year 2012, the company revised its total cell and module shipment forecast to a range of 1.5 GW and 1.8 GW versus an earlier range of 1.8 GW and 2.0 GW. The revised estimates reflect the company's prioritization of maintaining a healthy financial position over short-term shipment gains.
Our Take
JA Solar is one of the most cost-efficient solar producers with a geographically diversified customer base. However, the loss incurred by JA Solar this quarter reflects industry-wide high inventory levels, rising competition, and the oversupply of solar cells in the market. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock. This is in line with its peers like ReneSola Ltd. (SOL) and Suntech Power Holdings Co. Ltd. (STP).
JA SOLAR HOLDGS (JASO): Free Stock Analysis Report
RENESOLA LT-ADR (SOL): Free Stock Analysis Report
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