Trina Solar Ltd. (TSL:US), the world’s fourth-largest solar-panel maker, gained after the company said it will develop power projects to boost revenue following its fourth consecutive quarterly loss.
Trina’s American depository receipts rose 7 percent to $5.18 at the close in New York. The ADRs have fallen 22 percent this year. One ADR is equivalent to 50 ordinary shares.
A global oversupply of panels and slowing demand in Europe have driven down prices 37 percent in the past year and contributed to losses (TSL:US) for Trina, according to data compiled by Bloomberg. Trina seeks to spur demand for its products by developing power plants that will use them, a strategy implemented by competitors including First Solar Inc. (FSLR:US), the largest U.S. solar company.
“Eventually, we think that’s going to be a big value for us,” Chief Financial Officer Terry Wang said on a conference call with analysts today. “This is going to be a long-term strategy.” The Changzhou, China-based company didn’t provide a time table or disclose how it would finance the projects.
Trina reported a second-quarter net loss of $92.1 million, or $1.30 an ADR, from net income of $11.8 million, or 17 cents, a year earlier, according to a statement today. Analysts had expected a loss of $1.03 an ADR, the average of seven estimates (TSL:US) compiled by Bloomberg. Second-quarter sales fell 40 percent to $346.1 million from a year earlier.
“It’s very difficult to see how Trina could turn profitable at any point in the next two years,” Pavel Molchanov an analyst at Raymond James & Associates in Houston, said in a phone interview today. Project development “is an evolving strategy. It’s understandably difficult for a company like Trina to jump into this arena when there are existing players in the market that have an advantage.”
Trina reduced its forecast for 2012 shipments by as much as 17 percent as its inventories and short-term debt both doubled, according to the statement.
The company expects to ship 1.75 gigawatts to 1.8 gigawatts in photovoltaic panels this year, compared with a May forecast of 2 gigawatts to 2.1 gigawatts. Second-quarter shipments were 419 megawatts, in line with the company’s estimates.
Trina’s inventories increased to $463.3 million, from $226.3 million a year earlier, and short-term debt climbed to $733.7 million from $343 million, which Trina is using “for working capital purposes, to maintain its cash level and as a portion of its long-term borrowings became due,” according to the statement.
The company’s debt burden would be more worrisome if it didn’t receive so much support from the Chinese government, Molchanov said.
“I’m not worried about Trina running out” of money, he said. “If it were an American company, I would be. I don’t see the Chinese banks pulling the plug.”
China Development Bank has offered $47.3 billion since 2010 to support the country’s wind and solar manufacturers, a credit line that’s only been partially tapped, according to London- based researcher Bloomberg New Energy Finance.
“It probably makes more sense for China this time around to subsidize downstream -- there’s more employment in installation than in manufacturing,” Aaron Chew, an analyst in at Maxim Group LLC in New York, said today by telephone.
Trina reached a manufacturing cost, excluding polysilicon, of 52 cents a watt compared with 58 cents in the previous quarter. It expects production costs to fall in the current quarter.
The company also announced today that it hired Mark Mendenhall as regional president of the Americas. He previously developed solar plants as president and general manager for SunEdison, which is owned by MEMC Electronic Materials Inc. (WFR:US), the second-largest U.S. polysilicon maker, according to the statement.
Suntech Power Holdings Co. is the largest solar manufacturer, followed by First Solar and Yingli Green Energy Holding Co. Hemlock Semiconductor Corp. is the biggest U.S. polysilicon producer.
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