The World's #1 Renewable Energy Network for News, Information, and Companies.

China Solar: Big Get Better, Smaller Suffer

Feb 27, 2013

A couple of new items from the battered solar sector hint that the situation may be improving for the largest companies, even as smaller players continue to struggle and face the very real danger of collapse. Of course I'd be remiss if I didn't point out that I've predicted a rebound for this embattled sector once or twice before based on optimistic company statements, and in each instance the rebound I was sensing never came. This time the difference could be that many smaller players have now closed or are tottering on the brink of insolvency, meaning they are losing share to the larger, relatively healthier players with more resources.

That situation is reflected in the latest news from Yingli Green Energy (NYSE: YGE), one of the sector's largest and relatively healthy players, which has just announced some preliminary fourth-quarter forecasts that look quite encouraging. Meantime, the smaller, China-listed Chaori Solar (Shenzhen: 002506) sent out the industry's latest warning signal, with word it may miss an upcoming bond payment.

Let's start with Yingli, as it's one of China's stronger solar panel makers and was actually earning a profit as recently as the second quarter of last year, even as most other players lost money for most or all of 2012 amid a prolonged global downturn. Yingli's preliminary announcement appears to show the company's sliding fortunes may have reached bottom in the third quarter of 2012, as both its sales and margins rebounded strongly in the fourth quarter.

Yingli said its fourth-quarter shipments rose 40 percent from the third quarter, well ahead of its previous guidance for a low teen percentage increase. The 40 percent rise was also much better than the previous 2 quarters, including a third quarter drop of 16.9 percent and a second quarter that saw shipments rise 13.7 percent.

At the same time, Yingli also reported its fourth-quarter gross margins would come in between -8 percent and -8.5 percent, partly due to one-time charges related to excess inventory and idle capacity. While it's never good to have negative margins, the fourth-quarter forecast was still a notable improvement from the -22.7 percent gross margin for the third quarter.

The company didn't comment on its profit situation, but it does appear that it will report another loss for the fourth quarter due to the one-time charges. If that's the case and sales and margins continue to rebound, we could see Yingli emerge as one of the first solar companies to return to profitability in the current quarter.

Shareholders seemed generally encouraged by the preliminary results announcement, bidding up Yingli shares by 2.3 percent after the news came out. A broader rally has seen Yingli's shares more than double from their lows in late November and early December, as investors bet that sunnier days are ahead for the sector as Beijing prepares a broader bailout plan that is likely to benefit the biggest companies like Yingli.

Meantime, the end of last week saw some mixed signals coming from Chaori, which said it might not be able to make a bond interest payment due on March 7 due to a cash shortage. But then a day later a top company executive said Chaori wouldn't miss the interest payment after all, thanks to intervention by the local government. This kind of intervention has become relatively common as local governments try to prevent companies from failing, though this is one of the first times a government has intervened to help a company with its bond payments.

Industry watchers will recall that former sector leader Suntech (NYSE: STP) also faces a much bigger bond-related headache in March, when nearly $600 million worth of its bonds will come due for repayment. Suntech hired UBS in October to help it renegotiate the debt with holders of the bonds, but we haven't heard any results yet of the negotiations. At the end of the day I do expect we'll see Suntech reach a deal with the bondholders, though if it doesn't the government could also still come to Suntech's rescue the way it did with Chaori.

Bottom line: Yingli's preliminary fourth quarter results show the company may return to profitability in the current quarter, while smaller solar players like Chaori will continue to face a cash shortage.

This blog was originally published on Young's China Business Blog and was republished with permission.

Lead image: Shark approaching bait via Shutterstock

The information and views expressed in this blog post are solely those of the author and not necessarily those of or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university. He also writes daily on his blog, Young’s China B...


Volume 18, Issue 4


To register for our free
e-Newsletters, subscribe today:



Successfully Integrating Solar: A Proactive Approach

•      What does the increasing solar penetrati...

Grid-connected and Off-grid Photovoltaics

This training covers all aspects of planning, installation, maintenance,...

Solar Power International

Join DCE Solar and EXOSUN at Solar Power International September 15 - 17...


It's Story Time!

Telling a great – and relevant – story can be a powerful sal...

4 Reasons why solar is soaring in our schools

As a child, if someone told you that the same sun that lights up our pla...

SPI 2015 is right around the corner! - Come check out Lumos Solar a...

Solar Power International 2015 is right around the corner! Lumos Solar w...


Tweet the Editors! @jennrunyon


Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now