JinkoSolar Announces 1Q:19 Financial Results

(JinkoSolar, 28.Jun.2019) — JinkoSolar Holding Co., Ltd. announced its unaudited financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights

— Total solar module shipments were 3,037 megawatts (“MW”), a decrease of 16.1% from 3,618 (including intragroup solar module shipments) MW in the fourth quarter of 2018 and an increase of 50.7% from 2,015 MW in the first quarter of 2018.

— Total revenues were RMB 5.82 billion (US$867.5 million), a decrease of 24.6% from the fourth quarter of 2018 and an increase of 27.5% from the first quarter of 2018.

— Gross margin was 16.6%, compared with 14.7% in the fourth quarter of 2018, and 14.4% in the first quarter of 2018.

— Income from operations was RMB235.7 million (US$35.1 million), compared with RMB237.4 million in the fourth quarter of 2018 and RMB125.0 million in the first quarter of 2018.

— Net income attributable to the Company’s ordinary shareholders was RMB40.2 million (US$6.0 million) in the first quarter of 2019, compared with RMB114.8 million in the fourth quarter of 2018 and RMB3.6 million in the first quarter of 2018.

— Diluted earnings per American depositary share (“ADS”) were RMB1.016 (US$0.152) in the first quarter of 2019.

— Non-GAAP net income attributable to the Company’s ordinary shareholders in the first quarter of 2019 was RMB33.3 million (US$5.0 million), compared with RMB111.8 million in the fourth quarter of 2018 and RMB11.0 million in the first quarter of 2018.

— Non-GAAP basic and diluted earnings per ADS were RMB0.848 (US$0.128) and RMB0.840 (US$0.124) in the first quarter of 2019, compared with RMB2.852 and RMB2.852 in the fourth quarter of 2018 and RMB0.300 and RMB0.296 in the first quarter of 2018, respectively.

Mr. Kangping Chen, JinkoSolar’s Chief Executive Officer commented, “We started the year strongly as we continue diversifying our global distribution network and expanding our market share in key overseas markets. Module shipments during the first quarter were 3,037 megawatts, an increase of 50.7% year-over-year and a decrease of 16.1% sequentially. Our gross margin was 16.6%, up from 14.7% sequentially and 14.4% year-over-year as we increasingly benefit from a higher proportion of sales being generated by our self-produced high efficiency mono products and further reductions in production cost.”

“We continue to see strong demand from overseas markets and have secured the vast majority of our order book for the rest of the year. The global solar market continues to generate rapid and sustainable growth momentum as grid parity approaches, in particular for our high-efficiency mono products which are continuously in short supply. Our global distribution network allowed us to quickly meet growing demand for our high-efficiency mono products over the past few quarters as the market transitioned. We are accelerating the expansion of our high-efficiency mono production capacity and estimate they will account for over 60% of our total shipments for the year.”

“On the domestic front, policies recently laid out by China’s National Energy Administration are expected to create a strong demand during the second half of the year. China is expected to install 40 GW this year. European markets continue to perform very well following the cancellation of the minimum import price policy, resulting in a surge in demand from price-sensitive projects. We expect European installations to hit 17 GW this year. In the U.S., recent policy changes exempting bifacial solar modules from Section 201 tariffs are expected to further accelerate medium and long-term demand and significantly increase the application of bifacial modules. The U.S. is expected to install 12 GW to 15 GW this year.”

“We successfully raised US$160 million last month in a follow-on offering of ADSs and concurrent private placement of convertible senior notes, which is being deployed to expand our mono wafer and PERC cell capacities. Our new 5 GW mono wafer production facility in Leshan, Sichuan Province began trial production this month and will ramp up to full capacity by the fourth quarter of this year. This new production facility will serve as a benchmark for the industry with its cutting-edge technology and industry-leading cost structure. The additional mono wafer capacity will allow us to significantly increase the proportion of self-produced high-efficiency products and improve overall profitability.”

“This year, we also launched the latest addition to our premium Cheetah products, the “Swan” bifacial module with a new DuPont Clear DuPont™ Tedlar®-based backsheet. This module uses lightweight materials, which alleviate a number of problems during the installation process and lower cost per kilowatt hour of electricity produced for our customers. We believe that demand for bifacial transparent backsheet products will grow rapidly as they become more mainstream going forward.”

“I am pleased with the progress we made during the quarter in reinforcing our competitive strengths and favorably positioning ourselves for the future. We will continue to expand our market share in China and overseas, ramp up production of high-efficiency mono products and leverage our strong brand recognition and reputation for quality to meet global demand.”

First Quarter 2019 Financial Results

Total Revenues

Total revenues in the first quarter of 2019 were RMB5.82 billion (US$867.5 million), a decrease of 24.6% from RMB7.72 billion in the fourth quarter of 2018 and an increase of 27.5% from RMB4.57 billion in the first quarter of 2018. The sequential decrease was mainly attributable to a decrease in the shipment of solar modules in the first quarter of 2019. The year-over-year increase was mainly attributable to an increase in the shipment of solar modules, which was partially offset by a decline in the average selling price of solar modules in the first quarter of 2019.

Gross Profit and Gross Margin

Gross profit in the first quarter of 2019 was RMB964.3 million (US$143.7 million), compared with RMB1.13 billion in the fourth quarter of 2018 and RMB656.1 million in the first quarter of 2018. The sequential decrease was mainly attributable to a decrease in the shipment of solar modules in the first quarter of 2019. The year-over-year increase was mainly attributable to (i) an increase in the shipment of solar modules in the first quarter of 2019, and (ii) a decrease of solar module cost in the first quarter of 2019. The year-over-year increase was partially offset by a decline in the average selling price of solar modules in the first quarter of 2019.

Gross margin was 16.6% in the first quarter of 2019, compared with 14.7% in the fourth quarter of 2018 and 14.4% in the first quarter of 2018. The sequential increase was attributable to a higher proportion of self-produced high-efficiency mono products and further reductions in production cost in the first quarter of 2019. The year-over-year increase was mainly attributable to a decrease in solar module cost in the first quarter of 2019, which was partially offset by a decline in the average selling price of solar modules in the first quarter of 2019.

Income from Operations and Operating Margin

Income from operations in the first quarter of 2019 was RMB235.7 million (US$35.1 million), compared with RMB237.4 million in the fourth quarter of 2018 and RMB125.0 million in the first quarter of 2018. Operating margin in the first quarter of 2019 was 4.0%, compared with 3.1% in the fourth quarter of 2018 and 2.7% in the first quarter of 2018.

Total operating expenses in the first quarter of 2019 were RMB728.6 million (US$108.6 million), a decrease of 18.6% from RMB895.1 million in the fourth quarter of 2018 and an increase of 37.2% from RMB531.1 million in the first quarter of 2018. The sequential decease was mainly due to a decrease in shipping costs associated with a decrease in solar module shipments in the first quarter of 2019. The year-over-year increase was primarily due to an increase in shipping costs in the first quarter of 2019.

Total operating expenses accounted for 12.5% of total revenues in the first quarter of 2019, compared to 11.6% in the fourth quarter of 2018 and 11.6% in the first quarter of 2018. The sequential increase of operating expense as a percentage of total revenue was primarily due to the increase of shipping costs as a percentage of total revenue associated with a significant higher percentage of shipments to overseas markets in the first quarter of 2019.

Interest Expense, Net

Net interest expense in the first quarter of 2019 was RMB96.1 million (US$14.3 million), an increase of 29.8% from RMB74.0 million in the fourth quarter of 2018 and an increase of 12.5% from RMB85.4 million in the first quarter of 2018. The sequential increase was mainly due to (i) an increase in borrowings, and (ii) an increase in interest expense associated with discounted notes receivable. The year-over-year increase was mainly due to (i) an increase in borrowings and (ii) the cessation of interest capitalization on certain completed solar projects.

Exchange Loss 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 RMB62.9 million (US$9.4 million) in the first quarter of 2019, compared to a net exchange loss of RMB35.1 million in the fourth quarter of 2018 and a net exchange loss of RMB90.8 million in the first quarter of 2018. The Company bought foreign exchange forward contracts and foreign exchange options from several banks for the purpose of reducing exchange rate risk exposure. The sequential change was primarily due to the depreciation of the US dollar against the RMB in the first quarter of 2019.

Change in Fair Value of Interest Rate Swap

The Company entered into Interest Rate Swap agreements with several banks for the purpose of reducing interest rate risk exposure associated with the Company’s overseas solar power projects. The Company recorded a loss arising from change in fair value of interest rate swap of RMB30.2 million (US$4.5 million) in the first quarter of 2019, compared to a loss of RMB38.5 million in the fourth quarter of 2018. The loss arising from change in fair value of interest swap was primarily due to a continuous decrease in the long-term interest rates. The Company did not elect to use hedge accounting for any of its derivatives.

Equity in 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 loss of affiliated companies of RMB23.7 million (US$3.5 million) in the first quarter of 2019, compared with a loss of RMB25.1 million in the fourth quarter of 2018 and a loss of RMB5.2 million in the first quarter of 2018. The loss was primarily arising from change in fair value of interest rate swap agreements purchased by Sweihan PV Power Company P.J.S.C due to a continuous decrease in the long-term interest rates. Hedge accounting was not applied for the derivative.

Income Tax Benefit, Net

The Company recorded an income tax benefit of RMB4.3 million (US$0.6 million) in the first quarter of 2019, compared with an income tax benefit of RMB43.5 million in the fourth quarter of 2018 and an income tax benefit  of RMB3.3 million in the first quarter of 2018.

The Company recorded an out-of-period adjustment of RMB4.1 million (US$0.6 million) in the first quarter of 2019 resulting from income tax expense for one of its foreign entities, which should have been recorded in 2018. Neither the originating amount in 2018 nor the out-of-period adjustment amount recorded in 2019 was material to the Company’s consolidated financial statements for the respective periods.

Net Income and Earnings per Share

Net income attributable to the Company’s ordinary shareholders was RMB40.2 million (US$6.0 million) in the first quarter of 2019, compared with RMB114.8 million in the fourth quarter of 2018 and RMB3.6 million in the first quarter of 2018.

Basic and diluted earnings per ordinary share were RMB0.256 (US$0.038) and RMB0.254 (US$0.038), respectively, during the first quarter of 2019. This translates into basic and diluted earnings per ADS of RMB1.024 (US$0.152) and RMB1.016 (US$0.152), respectively.

Non-GAAP net income attributable to the Company’s ordinary shareholders in the first quarter of 2019 was RMB33.3 million (US$5.0 million), compared with RMB111.8 million in the fourth quarter of 2018 and RMB11.0 million in the first quarter of 2018.

Non-GAAP basic and diluted earnings per ordinary share were of RMB0.212 (US$0.032) and RMB0.210 (US$0.031), respectively, during the first quarter of 2019. This translates into non-GAAP basic and diluted earnings per ADS of RMB0.848 (US$0.128) and RMB0.840 (US$0.124), respectively.

Financial Position

As of March 31, 2019, the Company had RMB4.36 billion (US$649.8 million) in cash and cash equivalents and restricted cash, compared with RMB3.48 billion as of December 31, 2018.

As of March 31, 2019, the Company’s accounts receivables due from third parties were RMB5.20 billion (US$774.2 million), compared with RMB5.44 billion as of December 31, 2018.

As of March 31, 2019, the Company’s inventories were RMB6.48 billion (US$965.6 million), compared with RMB5.74 billion as of December 31, 2018.

As of March 31, 2019, the Company’s total interest-bearing debts were RMB12.04 billion (US$1.79 billion), compared with RMB9.71 billion as of December 31, 2018. The increase of interest-bearing debts was mainly due to (i) an increasing in short-term borrowings for working capital purpose and (ii) an increase in long-term borrowings for capital expenditure.

First Quarter 2019 Operational Highlights

Solar Module Shipments

Total solar module shipments in the first quarter of 2019 were 3,037 MW.

Solar Products Production Capacity

As of March 31, 2019, the Company’s in-house annual silicon wafer, solar cell and solar module production capacity was 10.5 GW (including 6.5 GW of mono wafers), 7.0 GW (including 5.4 GW of PERC cells) and 11.0 GW, respectively.

JinkoSolar expects its annual silicon wafer, solar cell and solar module production capacity to reach 15.0 GW (including 11.5 GW of mono wafers), 10.0 GW (including 9.2 GW of PERC cells) and 16.0 GW, respectively, by the end of 2019.

Recent Business Developments

— In January 2019, JinkoSolar renewed its partnership with GRID Alternatives, a national leader in making solar technology and job training accessible to low-income communities.

— In January 2019, JinkoSolar was awarded the “Top Brand PV Europe Seal 2019” award by EuPD Research for the first time in its corporate history.

— In January 2019, JinkoSolar products underwent LeTID testing by Wind Power Systems Quality Test Center, IEE, and CAS.

— In February 2019, JinkoSolar held the opening ceremony for its new state-of-the-art solar panel manufacturing facility at 4660 POW-MIA Memorial Parkway, Jacksonville, Florida.

— In February 2019, JinkoSolar promoted Mr. Gener Miao, the Company’s then Vice President for Global Sales and Marketing, to Chief Marketing Officer.

— In March 2019, JinkoSolar promoted Mr. Zhiqun Xu to Chief Operating Officer.

— In April 2019, JinkoSolar won the 5th All Quality Matters Award for PV Module Energy Yield Simulation (Mono Group) at the Solar Congress 2019 organized by TÜV Rheinland.

— In April 2019, JinkoSolar supplied 100MW of high efficient solar modules for the Srepok 1 and Quang Minh Solar Power Plant Complex, one of the Vietnam’s largest solar power projects up to April 24, 2019.

— In April 2019, JinkoSolar expanded its high efficiency mono wafer production capacity with the construction of a new greenfield 5 GW mono wafer production facility in Leshan, Sichuan Province, China.

— In April 2019, JinkoSolar secured over 10.7 GW in orders for 2019.

— In May 2019, JinkoSolar supplied 250,000 pieces of 345Watt – 1500V monocrystalline standard modules for one of the largest solar power plants in Colombia which was then inaugurated and is located in Cesar Department.

— In May 2019, JinkoSolar officially launched the latest addition to the Company’s range of premium Cheetah products, the “Swan” bifacial module with new DuPont Clear DuPont™ Tedlar®-based backsheet at Intersolar Europe 2019.

— In May 2019, JinkoSolar won the Intersolar Award 2019 in the Photovoltaics category for its Swan bifacial module with transparent backsheet from DuPont.

— In May 2019, JinkoSolar closed the follow-on equity offering of 4,671,875 ADSs, each representing four ordinary shares of the Company, par value US$0.00002 per share, at US$16.00 per ADS, and the concurrent private placement of US$85 million convertible senior notes due 2024.

— In June 2019, JinkoSolar announced that the maximum conversion efficiency of its cheetah size cells and N-type cells reached 24.38% and 24.58%, respectively. Additionally, power generated by JinkoSolar’s 72 version high efficiency monocrystalline module (cell: 158.75*158.75) reached 469.3W. JinkoSolar has made significant breakthroughs in the field of high efficiency and high power of cells and modules, setting a new industry standard for peak performance.

— In June 2019, JinkoSolar ranked as a Top Performer for the 5thconsecutive year in the 2019 PV Module Reliability Scorecard, published by PVEL in partnership with DNV GL.

— In June 2019, JinkoSolar launched seven hero products at 2019 SNEC Shanghai, including Cheetah high efficiency series and Swan bifacial series, leading the industry into a new era featuring high-efficiency Mono for grid parity.

— In June 2019, JinkoSolar supplied Trung Nam Group with 258MW of monocrystalline PERC double glass modules which were installed at one of the largest solar-wind hybrid projects in Vietnam.

— In June 2019, JinkoSolar supplied Power Construction Corporation of China with 351MW of solar modules which were installed at the Hồng Phong solar PV plant in Vietnam, one of the largest PV projects in the Asia Pacific region

Operations and Business Outlook

Second Quarter and Full Year 2019 Guidance

For the second quarter of 2019, the Company estimates total solar module shipments to be in the range of 3.2 GW to 3.3 GW.

For the full year 2019, the Company estimates total solar module shipments to be in the range of 14.0 GW to 15.0GW.

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