Yingli Green Energy
In fact, Yingli's 20% operating margin is where SunPower aspires to be within a few quarters. The company is achieving strong wafer yields and high conversion efficiencies, both of which contribute to the stronger margins. But there was other good news, too: Top-line growth was torrid, as expected, even though the 25% sequential surge was lower than the quarter-on-quarter growth that First Solar and SunPower reported.
There was also a marked improvement in Yingli's working-capital management. The company cut days sales outstanding to 47 days, from 66 in the previous quarter. You know my cash-flow concerns in this space, so any improvement in cash collection is great news.
Left unaddressed in the company's announcement, however, were the company's polysilicon costs. Yingli has been sewing up incremental supply from companies such as DC Chemical, but it can still claim nothing on the order of Suntech Power's
Not all of my concerns were allayed this quarter. Yingli's prepayments to suppliers are up almost 50% since year's end and now equal 27% of total company assets. Compare that with roughly 9% for SunPower, and you'll see why this situation makes me uneasy.
Finally, although Yingli's equity dilution is pretty straightforward (the diluted share count is up 64% in a year), maybe less obvious is the impact of a line item on the income statement called minority interest. Here, we see that 30% of reported profits were directed to minority holders, and that left only 70% of the spoils to ordinary shareholders. Yingli can buy back this equity interest over time, but for now, it presents a significant extra hurdle for creating shareholder value.
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