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.