Chinese solar manufacturers have started a flood of earnings reports, and so far they aren't pretty, not that we should be surprised. Today I'll highlight one of China's leaders, Trina Solar (NYSE: TSL ) , but check back tomorrow for my take on LDK Solar (NYSE: LDK ) , JA Solar (Nasdaq: JASO ) , Suntech Power (NYSE: STP ) , and more.
Trina updated guidance a few weeks ago, so many of the numbers weren't a huge surprise. Shipments were down 6.6% quarter over quarter to 370.1 megawatts and revenue fell 16.8% over the same period to $481.9 million. In-house margins were reasonable at 18.3%, but overall margins fell to 10.8%.
Trina provides some of the best information about costs in the industry, and a look at its sale prices and costs show just how dramatically the industry is changing. In the table below, I show how nonsilicon manufacturing costs, polysilicon costs, and average sales prices have changed over the past year.
|
|
Q3 2010
|
Q4 2010
|
Q1 2011
|
Q2 2011
|
Q3 2011
|
| Non-Si Cost |
$0.73 |
$0.74 |
$0.73 |
$0.73 |
$0.65 |
| Si Cost |
$0.35 |
$0.42 |
$0.43 |
$0.43 |
$0.37 |
| Total Module Cost |
$1.08 |
$1.16 |
$1.16 |
$1.16 |
$1.08 |
| Average Sale Price |
$1.73 |
$1.82 |
$1.71 |
$1.46 |
$1.25 |
Source: Trina Solar investor relations.
As you can see, sale prices have fallen off a cliff and until this quarter costs weren't keeping pace. But Trina did take steps to lower nonsilicon costs an impressive $0.08 per watt this quarter.
It is important to note that the polysilicon prices quoted above are in-house blended costs and wouldn't benefit from the dramatic drop in polysilicon prices recently.
A little perspective
You can look at these results in a number of ways depending on your perspective. Falling sale prices will bring down the overall cost to install solar, which is good for the industry as a whole, even though it hurts manufacturers right now. I also see the numbers coming out of China as a sign that U.S.-based manufacturers are staying a step ahead. SunPower's (Nasdaq: SPWR ) 11.4% gross margin and First Solar's (Nasdaq: FSLR ) 37.7% gross margin look much better in light of a 10.8% margin at Trina Solar, one of China's leaders.
The rough quarter will continue and a shakeout is still coming, but I stick to my conviction that SunPower and First Solar are going to be two of the long-term winners.
Interested in reading more about Trina Solar? Click here to add it to My Watchlist to find all of our Foolish analysis on this stock.
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