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.
