Hanwha SolarOne Reports 4Q 2012, Full Year 2012 Results

Hanwha SolarOne Co., Ltd., a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic (PV) cells and modules in China, reported its unaudited financial results for the quarter ended Dec. 31, 2012.

For the fourth quarter 2012, total net revenues were RMB836.7 million (US$134.3 million), a decrease of 13.4% from 3Q12, and a decrease of 14.5% from 4Q11. PV module shipments, including module processing services, were 198.9 MW, a decrease of 17.0% from 239.5 MW in 3Q12, and an increase of 5.2% from 189.1 MW in 4Q11.

Gross loss was RMB261.8 million (US$42.0 million), compared with gross loss of RMB56.1 million in 3Q12 and gross loss of RMB604.6 million in 4Q11. Gross margin decreased to negative 31.3%, compared with negative 5.8% in 3Q12, due to both the lower ASP and the non-cash charges from inventory write-down and provisions for advance payments associated with long-term supply contracts. Gross margin in 4Q11 was negative 61.8%. Gross margin excluding the aforementioned provisions would have been negative 2.6% in 4Q12.

Operating loss increased by 149.1% to RMB625.8 million (US$100.4 million) from an operating loss of RMB251.2 million in 3Q12, compared to an operating loss of RMB1, 005.2 million in 4Q11. The increase in operating loss in 4Q12 from 3Q12 was primarily due to the significantly higher gross loss and non-cash charge from provisions for doubtful debt of accounts and advance payments on the company’s purchase commitment under long-term supply contracts. Operating margin decreased to negative 74.8% from negative 26.0% in 3Q12, compared with negative 102.8% in 4Q11.

For the full year 2012, total net revenues were RMB3, 678.4 million (US$590.4 million), representing a decrease of 42.7% from RMB6,416.5 million in 2011. PV module shipments, including module processing services, reached 829.8 MW, representing a decrease of 1.7% from 844.4 MW in 2011.

Gross loss in 2012 was RMB325.5 million (US$52.2 million), compared with a gross loss of RMB217.1 million in 2011. Gross margin was negative 8.8%, compared with negative 3.4% in 2011. Operating loss for 2012 was RMB1,180.6 million (US$189.5 million), compared with an operating loss of RMB1,096.4 million in 2011. Operating margin was negative 32.1%, compared with negative 17.1% in 2011.

“The year 2012 will be remembered as one of tremendous challenge and change for the solar industry, with significant industry overcapacity and regulatory changes in key markets leading to a slowdown in demand, accompanied by rapidly decelerating prices,” Ki-Joon Hong, chairman and CEO of Hanwha SolarOne, commented. “Almost all companies, including ours, found it virtually impossible to record profitability in such an operating environment.

“In spite of the degrading operating environment we faced, our company made significant progress in a number of areas; including bringing greater balance between our OEM model and branded one, diversifying our sales base into new emerging growth markets, improving our non-poly processing cost structure to be competitive with industry leaders, instituted operational efficiencies at our manufacturing sites, including enhanced automation, better quality, improved product features and new product introductions, and secured financing from a variety of sources both within and outside mainland China,” Hong added.

“Our volumes in the fourth quarter did not reflect the improving demand environment of late, as we chose to sacrifice sales at loss making prices and our profitability was impacted by a number of non-cash charges,” Hong continued. “However, we are well on track to achieving 50% improvement in first quarter 2013 shipment volume and over 50% for the full year. We have good visibility in South Africa and Japan for the first half of this year in particular, and continue to see growing opportunities in China, the US, the Middle East and other emerging markets of importance. Our funding for 2013 is proceeding as planned. Industry prices seem to have stabilized, and we see good opportunities to exploit synergies with our sister company Hanwha Q.CELLS, including a sizeable module tolling business. Profitability will remain challenging for most, if not all of 2013, but we feel confident that we are making good progress on the return to a path of profitability, aided by forecasted improvements in the operating environment and securing the company to challenge for industry leadership longer term.”