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Trina Solar Points to Bad Quarter for Chinese Solar

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Trina Solar's (NYSE: TSL  ) earnings report this morning may have brought up more questions than it answered. Increasing shipments were good, but the company has anemic margins and hasn't come even close to making strides toward profitability.

The company shipped 415 MW of solar modules in the fourth quarter, a 9% increase from a quarter earlier. But highlighting how fast prices are falling, net revenues were up only 1.6%. The big problem is that gross margin was just 1.9%, up from 0.8% in the third quarter. A huge spike in demand from China couldn't pull the company to a higher margin, and the bottom line was a disaster as a result.  

Net loss jumped 52% to $87.2 million, or $1.23 per share. That's nearly a third of the company's market cap right now, and for all of 2012 the company lost an amount almost equal to what the entire company is worth on the market. This loss helped push debt up to $1.29 billion, up from $1.04 billion a year ago despite little capacity expansion over that time. The company is throwing good money after bad, sinking into an abyss of debt.  

Same story, different day
The results from Trina were the first major release from a Chinese solar firm, but deteriorating financials are a general trend we will see throughout earnings season. Yingli Green Energy (NYSE: YGE  ) said earlier this week that shipments rose more than expected, but the company still lost money on everything it sold. JA Solar (NASDAQ: JASO  ) said it will also have higher shipments than expected, although we haven't heard how margins will be.

It doesn't look like a good quarter for Chinese solar, despite the increase in demand from China. These stocks are all in for a long road ahead, and I'd avoid them at all costs.

Making money in solar
Most companies across solar are losing money hand over fist, but First Solar has remained profitable and is worth keeping an eye on. If you're looking for continuing updates and guidance on the company whenever news breaks, we've created a brand-new report that details every must-know side of this stock. To get started, just click here now.

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Comments from our Foolish Readers

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  • Report this Comment On February 27, 2013, at 6:43 AM, solarium wrote:

    Why you are dumping JASO and YGE before knowing the earnings result? This is just speculative article to say that this will be bad quarter for all solar as if they were the same company. What happened with the pumping articles that were telling to the world that Chinese market is growing 40%, the world demand is growing, the Chinese government is giving more than 2 billions of credit to Chinese companies, etc?

  • Report this Comment On February 27, 2013, at 12:20 PM, TMFFlushDraw wrote:

    YGE already said their margins will be negative, ie. big losses.

    These companies are basically the same company. Margins may vary slightly but they make a commodity product, have similar equipment, and have similar cost structures.

    I've never pumped Chinese solar companies, only delivered the news out of China. Additional subsidies aren't good for these companies, they only prolong a needed contraction in the industry.

    FYI, SPWR is the only company I have or would invest in in solar right now.

    Travis Hoium

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Related Tickers

9/23/2016 4:03 PM
TSL $10.32 Down -0.11 -1.05%
Trina Solar CAPS Rating: **
FSLR $37.06 Up +1.64 +4.63%
First Solar CAPS Rating: ***
JASO $6.02 Up +0.05 +0.84%
JA Solar Holdings CAPS Rating: **
YGE $3.89 Up +0.19 +5.14%
Yingli Green Energ… CAPS Rating: *