JinkoSolar Holding Co., Ltd. one of the largest and most innovative solar module manufacturers in the world, today announced its unaudited financial results for the third quarter ended September 30, 2020.
Strategic Business Updates
- Technological transformation towards high-efficiency product portfolio now complete:
– Mono wafer production capacity has been fully ramped up to 20GW
– Mono based high efficiency products expected to account for nearly 100% of solar module shipments in 2020, compared to 74% in 2019
- Next-generation high-efficiency Tiger Pro Modules well received by the market with secured orders exceeding 2 GW as of the end of October
- Industry consolidation accelerating at the backdrop of a challenging macroeconomic environment. Market share of JinkoSolar projected to further step up to approximately 15% for full year 2020, compared to approximately 12% in 2019
- Successfully maintained stable margin performance despite recent supply shortage of major raw materials, thanks to stringent cost control and resilient supply management
- Further policy tailwinds from major economies such as China and the US underpins strong future solar demand outlook
- Principal operating subsidiary Jinko Solar Co., Ltd raised approximately US$458 million in preparation for its listing on the STAR market
Third Quarter 2020 Operational and Financial Highlights
- Quarterly shipments were 5,117MW, up 53.8% year over year
- Total revenues were US$1.29 billion, up 17.2 % year over year
- Gross profit was US$220.2 million, up 8.2% year over year [1]
- Gross margin of 17.0%, compared with 17.9% in Q2 2020 and 18.5%[2] in Q3 2019
- Income from operations of US$80.4 million, up 27.9 % year over year[3]
- Non-GAAP net income of US$47.3 million, up 6.7% year over year
- Net income of US$1.0 million, due to US$46.1 million loss of change in fair value of convertible senior notes and call option, given the sharp rise in stock price for the third quarter.
| [1] Calculation of year over year growth was based on total revenue excluding the reversal benefit of anti-dumping (AD) and countervailing duty (CVD) |
| [2] Gross margin excluding the reversal benefit of anti-dumping (AD) and countervailing duty (CVD) |
| [3] Calculation of year over year growth was based on income from operations excluding the reversal benefit of anti-dumping (AD) and countervailing duty (CVD) |
Mr. Kangping Chen, JinkoSolar’s Chief Executive Officer, commented, “JinkoSolar delivered solid results for the quarter with total revenue, total solar module shipments and gross margin all within our guidance range. Module shipments reached a new high of 5,117 MW, an increase of 14.5% sequentially and 53.8% year-over-year. Total revenue during the quarter were US$1.29 billion, an increase of 3.8% sequentially and 17.2% year-over-year, while gross profit was US$220.2 million. For the full year 2020, we expect total solar module shipments to be in the range of 18.5 GW to 19 GW. By the end of 2020, we expect our in-house annual monocrystalline silicon wafer, solar cell and module production capacity to reach 20 GW, 11 GW and 30 GW, respectively.”
“Even though we faced some pressures this quarter due to the shortage of raw materials which increased production costs, coupled with the impact of US dollar fluctuations and higher logistics and transportation costs, we have approached these issues proactively in a few ways. We managed to ensure the stable supply of core raw materials and auxiliary materials through long-term purchase agreements, strategic cooperation, and our R&D team identified and applied substitute materials to help ease supply chain volatility.”
“With the approach of grid parity, leading companies will become more competitively positioned and benefit the most from technological advancement, sophisticated R&D, well-established distribution channels and cost reductions in the PV industry. In this scenario, the industry stands to gain from the positive effect of top players continuously striving for technical innovation and product iterations, which will further promote the growth of the supply chain.”
“We strongly believe that the PV industry has ushered in a golden age, together with strong support from government policies to adopt renewable energy, promote grid transformation and green investments. In the U.S., solar demand is expected to more than double over the next five years under the Biden administration. In Europe, the EU has officially announced plans to increase the GHG reduction target from 40% to at least 60% below 1990 levels by 2030. In China, we are expecting the next 14Th Five-Year Energy Plan to focus on non-fossil energy sources with higher proportions of renewable energy, construction plans for large-scale energy storage and grid transformation, and the introduction of supporting policies.”
“Solar power has had the largest cost reduction in recent years, and we believe there is more room for growth next year. We are well positioned to capitalize on the accelerating global demand for clean energy and the expected rapid growth in shipments in 2021. We are constantly evaluating all our production lines to increase production capacity and ensure appropriate integrated production level accordingly to continue to offer high quality products and reinforce our leading position in the global PV industry.”
Third Quarter 2020 Financial Results
Total Revenues
Total revenues in the third quarter of 2020 were RMB8.77 billion (US$1.29 billion), an increase of 3.8% from RMB8.45 billion in the second quarter of 2020 and an increase of 17.2% from RMB7.48 billion in the third quarter of 2019. The sequential increase was mainly attributable to an increase in the shipment of solar modules partially offset by a decline in the average selling price of solar modules. The year-over-year increase was mainly attributable to the increase in shipment of solar modules.
Gross Profit and Gross Margin
Gross profit in the third quarter of 2020 was RMB1.49 billion (US$220.2 million), compared with RMB1.51 billion in the second quarter of 2020 and RMB1.59 billion in the third quarter of 2019 (or RMB1.38 billion if excluding the impact from the Countervailing Duty (“CVD”) and Anti-dumping Duty (“ADD”) reversal benefit). The sequential decrease was mainly attributable to a decline in the average selling price of solar modules. The year-over-year increase (excluding the impact from CVD and ADD reversal benefit in the third quarter of 2019) was mainly attributable to (i) an increase in the shipment of solar modules, (ii) an increase in self-produced production volume that is increasingly shifting toward integrated mono-based high-efficiency products capacity, and (iii) the continued reduction of integrated production costs resulting from the Company’s industry-leading integrated cost structure.
Gross margin was 17.0% in the third quarter of 2020, compared with 17.9% in the second quarter of 2020 and 21.3% in the third quarter of 2019 (or 18.5% if excluding the impact from the CVD and ADD reversal benefit).The sequential and year-over-year decrease was mainly attributable to a decline in the average selling price of solar modules due to the intensified global market competition of solar modules.
Income from Operations and Operating Margin
Income from operations in the third quarter of 2020 was RMB546.0 million (US$80.4 million), compared with RMB434.7 million in the second quarter of 2020 and RMB638.8 million in the third quarter of 2019 (or RMB426.8 million if excluding the impact from CVD and ADD reversal benefit).
Operating margin was 6.2% in the third quarter of 2020, compared with 5.1% in the second quarter of 2020 and 8.5% in the third quarter of 2019 (or 5.7% if excluding the impact from CVD and ADD reversal benefit).
Total operating expenses in the third quarter of 2020 were RMB948.9 million (US$139.8 million), a decrease of 12.0% from RMB1.08 billion in the second quarter of 2020 and a decrease of 0.6% from RMB955.0 million in the third quarter of 2019. The sequential decrease was mainly attributable to a decrease in warranty cost.
Total operating expenses accounted for 10.8% of total revenues in the third quarter of 2020, compared to 12.8% in the second quarter of 2020 and 12.8% in the third quarter of 2019.
Interest Expense, Net
Net interest expense in the third quarter of 2020 was RMB129.2 million (US$19.0 million), an increase of 21.6% from RMB106.2 million in the second quarter of 2020 and an increase of 36.2% from RMB94.9 million in the third quarter of 2019. The sequential and year-over-year increases were mainly due to an increase in interest expense with the increase of interest-bearing debts.
Exchange Loss/(Gain) and Change in Fair Value of Foreign Exchange Derivatives
The Company recorded a net exchange loss (including change in fair value of foreign exchange derivatives) of RMB63.9 million (US$9.4 million) in the third quarter of 2020, compared to a net exchange gain of RMB69.7 million in the second quarter of 2020 and a net exchange loss of RMB130.7 million in the third quarter of 2019. The net exchange loss was mainly due to the depreciation of the U.S. dollars against the RMB in the third quarter of 2020.
Change in Fair Value of Convertible Senior Notes and Call Option
The Company issued US$85.0 million of 4.5% convertible senior notes due 2024 (the “Notes”) in May 2019 and has elected to measure the Notes at fair value. The Company recognized a loss from a change in fair value of the Notes of RMB593.7 million (US$87.4 million) in the third quarter of 2020, compared to a loss of RMB89.2 million in the second quarter of 2020. The change was primarily due to an increase in the Company’s stock price in the third quarter of 2020.
Concurrent with the issuance of the Notes in May 2019, the Company entered into a call option transaction with an affiliate of Credit Suisse Securities (USA) LLC. The Company accounted for the call option transaction as freestanding derivative assets in its consolidated balance sheets, which is marked to market during each reporting period. The Company recorded a gain from a change in fair value of the call option of RMB280.7 million (US$41.3 million) in the third quarter of 2020, compared to a gain of RMB38.0 million in the second quarter of 2020. The change was primarily due to an increase in the Company’s stock price in the third quarter of 2020.
Equity in Gain/(Loss) of Affiliated Companies
The Company indirectly holds a 20% equity interest in Sweihan PV Power Company P.J.S.C, a developer and operator of solar power projects in Dubai, and accounts for its investment using the equity method. The Company also holds a 30% equity interest in Jiangsu Jinko-Tiansheng Co., Ltd, which processes and assembles PV modules as an OEM manufacturer, and accounts for its investments using the equity method. The Company recorded equity in gain of affiliated companies of RMB24.7 million (US$3.6 million) in the third quarter of 2020, compared with a gain of RMB4.2 million in the second quarter of 2020 and a loss of RMB28.3 million in the third quarter of 2019. The gain primarily arose from revenue generated from operations in the third quarter of 2020.
Income Tax Expenses
The Company recorded an income tax expense of RMB69.2 million (US$10.2 million) in the third quarter of 2020, compared with an income tax expense of RMB22.8 million in the second quarter of 2020 and an income tax expense of RMB117.2 million in the third quarter of 2019. The sequential increase was mainly due to additional 2019 income tax deduction for R&D costs approved by the local tax bureau in the second quarter of 2020. The year-over-year change was mainly due to lower profit generated in the third quarter of 2020 compared to the third quarter of 2019.
Net Income and Earnings/(loss) per Share
Net income attributable to the Company’s ordinary shareholders was RMB6.9 million (US$1.0 million) in the third quarter of 2020, compared with RMB318.0 million in the second quarter of 2020 and RMB 363.6 million in the third quarter of 2019.
Basic earnings per ordinary share and diluted loss per ordinary share were RMB0.04 (US$0.01) and RMB1.55 (US$0.23), respectively, during the third quarter of 2020. This translates into basic earnings per ADS and diluted loss per ADS of RMB0.16 (US$0.02) and RMB6.20 (US$0.91), respectively.
Non-GAAP net income attributable to the Company’s ordinary shareholders in the third quarter of 2020 was RMB321.4 million (US$47.3 million), compared with RMB376.1 million in the second quarter of 2020 and RMB 301.2 million in the third quarter of 2019.
Non-GAAP basic and diluted earnings per ordinary share were RMB1.81 (US$0.27), during the third quarter of 2020. This translates into non-GAAP basic and diluted earnings per ADS of RMB7.22 (US$1.06).
Financial Position
As of September 30, 2020, the Company had RMB6.40 billion (US$943.3 million) in cash and cash equivalents and restricted cash, compared with RMB6.85 billion as of June 30, 2020.
As of September 30, 2020, the Company’s accounts receivables due from third parties were RMB5.15 billion (US$758.1 million), compared with RMB5.90 billion as of June 30, 2020.
As of September 30, 2020, the Company’s inventories were RMB7.72 billion (US$1.14 billion), compared with RMB6.89 billion as of June 30, 2020.
As of September 30, 2020, the Company’s total interest-bearing debts were RMB17.21 billion (US$2.53 billion), of which RMB874.1 million (US$128.7 million) was related to the Company’s overseas downstream solar projects, compared with RMB16.5 billion, of which RMB908.6 million was related to the Company’s overseas downstream solar projects as of June 30, 2020.
Third Quarter 2020 Operational Highlights
Solar Module Shipments
Total solar module shipments in the third quarter of 2020 were 5,117 MW.
Solar Products Production Capacity
As of September 30, 2020, the Company’s in-house annual mono wafer[4], solar cell and solar module production capacity was 20 GW, 11GW (10.2 GW for PERC cells and 800 MW for N type cells) and 25 GW, respectively.
| Note: |
| In addition to the mono wafer, our multi wafer production capacity was 3.5 GW as of September 30, 2020[4] |
Operations and Business Outlook
We are expecting significant increase in demand next year and bottleneck of raw materials in the third and fourth quarter this year is expected to gradually improve.
Fourth Quarter and Full Year 2020 Guidance
The Company’s business outlook is based on management’s current views and estimates with respect to market conditions, production capacity, the Company’s order book and the global economic environment. This outlook is subject to uncertainty on final customer demand and sale schedules. Management’s views and estimates are subject to change without notice.
For the fourth quarter of 2020, the Company expects total solar module shipments to be in the range of 5.5 GW to 6.0 GW. Total revenue for the fourth quarter is expected to be in the range of US$1.31 billion to US$1.43 billion. Gross margin for the fourth quarter is expected to be between 13% and 15%.
For full year 2020, the Company estimates total solar module shipments to be in the range of 18.5 GW to 19 GW.
Solar Products Production Capacity
JinkoSolar expects its annual mono wafer, solar cell and solar module production capacity to reach 20 GW, 11 GW (including 800 MW N-type cells) and 30 GW, respectively, by the end of 2020.
Recent Business Developments
- In August 2020, JinkoSolar signed a contract with Shanghai Electric to supply approximately 1 GW of solar modules for Phase V of the Dubai Electricity and Water Authority Solar Park.
- In August 2020, JinkoSolar was ranked as a top solar brand in debt financed projects and named a most “bankable” PV manufacturer by Bloomberg New Energy Finance.
- In September 2020, JinkoSolar was ranked as a top manufacturer in Silicon Valley Toxics Coalition’s latest Solar Scorecard.
- In September 2020, JinkoSolar announced that it had supplied Trung Nam Group with 611MW of Tiger bifacial transparent backsheet modules, which were installed at the Thuan Nam solar power plant project in Vietnam.
- In September 2020, JinkoSolar announced intention to cooperate with ENEOS Corporation, Japan’s largest oil refiner, on the provision of solar modules for a Virtual Power Plant project.
- In September 2020, JinkoSolar was invited as a speaker to The Climate Week NYC, which is the biggest climate summit in 2020, organized by the Climate Group and hosted in association with the United Nations and the City of New York.
- In September 2020, JinkoSolar’s board of directors approved a strategic plan to access China’s capital markets through its principal operating subsidiary Jinko Solar Co., Ltd.
- In October 2020, JinkoSolar signed a Module Supply Agreement for the Kozani project in the north of Greece, which had been developed by juwi Hellas Renewable Energy Sources S.A.
