Late last year, we watched Trina Solar (NYSE: TSL ) tough out a terrible market for solar module manufacturers. As previewed last month, the Chinese solar shop continues to hang in there.
Shipments dropped about 13% sequentially, while net revenue was hit harder by falling average sales prices (ASPs). As with LDK Solar (NYSE: LDK ) , a non-cash inventory writedown crushed margins dramatically, causing Trina to report a modest loss for the quarter.
Larger competitor Suntech Power (NYSE: STP ) isn't sweating here, and I don't see much reason for Trina to do so, either. As promised in its preview, the firm generated a handsome chunk of cash flow in the quarter.
I know it seems like another era now, but if you look back to the summer of 2007, my primary concern was the great chasm between the earnings and cash flows reported by shops like Trina and Yingli Green Energy (NYSE: YGE ) . I never imagined we would see the situation reverse so quickly, but the great deflation that took hold in the fall has actually had several salutary effects.
Aside from the plunging price of polysilicon, module makers have also gotten key concessions on their prepayment terms with silicon suppliers like LDK and ReneSola (NYSE: SOL ) . If you look at Trina's balance sheet, under current assets, you'll see that supplier advances fell by around $27 million sequentially. That was a big source of cash flow for the quarter.
Trina, like First Solar (Nasdaq: FSLR ) , also has to be more lenient with customer payment terms as long as the financing freeze lasts, so the firm's not getting the best of both worlds. Still, I have to say that it's suddenly not looking so bad to be an operator in the middle of the solar supply chain.
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