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Hanwha SolarOne Co Ltd. (HSOL)

Q1 2012 Earnings Conference Call

May 30, 2012 08:00 AM ET


Paul Combs – Vice President, Investor Relations

Ki-Joon Hong – Chairman & CEO

Jung Pyo Seo – Chief Financial Officer

Hee Cheul Kim – President

D.K. Kim – Chief Strategy Officer


Philip Shen - Roth Capital

Min Xu – Jeffries & Co

Marina Shvartsman - Macquarie

Caleb Dorfman, Siemens & Co

Kelly Dougherty – Macquarie


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» Hanwha SolarOne's CEO Discusses Q4 2011 and FY 2011 Results - Earnings Call Transcript
» Hanwha's CEO Discusses Q3 2011- Earnings Call Transcript
» Hanwha SolarOne's CEO Discusses Q2 2011 Results - Earnings Call Transcript

Good morning. My name is Lushey, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2012 earnings conference call. All lines have been placed on mute to prevent any background noise. After speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I will now turn the call over to Mr. Paul Combs. Sir, you may begin your conference.

Paul Combs

Okay. Thank you and good morning everyone, welcome to our call. Joining me today from my IR team is Myung Shim. Our speakers will be our Chairman and CEO, Ki-Joon Hong; our President, Charles Kim; our CFO, Jay Seo; and D.K. Kim, our Chief Strategy Officer.

Chairman Hong will open with some brief comments on our recent progress and industry conditions. Jay will follow with some highlights from the first quarter. Charles will then take a few minutes to discuss the few critical initiatives for the company, followed by D.K., who will conclude with a few comments on our strategy and technology. We will then be happy to answer any questions you may have.

I need to remind you of our Safe Harbor policy, which is included in the earnings release and posted in its entirety on slide two of the slide package. I need to state that our comments today will contain forward-looking statements that are subject to risks and uncertainties. Please review our filings with the SEC for a complete rundown of these risks.

Now, it is my pleasure to turn the call over to Chairman Hong.

Ki-Joon Hong

Thank you Paul and good morning everyone. (technical difficulty) follow with more specific details on our business performance and trends going forward. But I want to highlight a few key pointers, achievements for Hanwha SolarOne. First, we had lower retroactive tariffs in the United States by consistently reducing our shipments to that market late last year. This decision has a negative impact on our Q1 shipments volume, but we believe it was in the best interest of the shareholders.

As you may have noticed from other companies, this provision can be quite large, and according to one analyst estimate, it may approach $100 billion for our industry during the first quarter.

Secondly, we have started to make meaningful progress on cost reduction, both in tight control of operating expenses and in reduction in processing costs. We have ambitious plan for further processing cost reduction for the remainder of the year, which we expect to bring us to a level comparable with industry leaders today.

Third and subsequent to the end of the first quarter, we were able to secure additional capital through our $180 million term loan. This demonstrates our ability to source capital beyond the boundary of Mainland China at very competitive rates and for the first time, with a former backing of our large shareholder. This is a clear signal of the strong commitment of Hanwha Group and their continued support over the long term.

The solar industry will face several challenges, including price competition, reduced (inaudible) key markets, tariffs in U.S. and potentially in Europe to match capacity and through consolidation. In spite of all of these, we are gaining to see some optimistic key signs for our company, beginning with the increase in demand during the second quarter, return to grow profitability and further cost improvement. Our balance sheet and the strong support from our largest shareholders provide us with training power during this industry downturn.

We remain confident in our future in our ability to create shareholder value overtime. Now, Jay Seo, our CFO will talk some financial highlights for the first quarter.

Jung Pyo Seo

Thank you Chairman and good morning everyone. My comments are summarized on slide 3 through 7. I would like to remind you that certain quarter-over-quarter comparisons are impacted by the $94.8 million in non-cash charges that we took in Q4 of 2011 as a result of inventory write-downs, provisions for advanced payment associated with long-term supply contracts, and goodwill impairments.

Now, for some further details about the quarter. PV module shipments, including module processing services, were 160.7 megawatts, down 15% from 189.1 megawatts in Q4 2011. While our ASP declined to $0.84 from $1.00 in the second quarter, as Chairman Hong just noted, our decision to avoid retroactive tariffs in the United States penalized our shipments volumes in the near term.

For Q1, the U.S. accounted for only 5% of total shipments versus 33% of the total in the previous quarter. We also reduced ODM volumes during Q1, as we shipped our focus to branded sales, and also due to the financial condition of one of our historically large OEM customers. Our geographic mix reflected the pull-in demand in Germany ahead of incentive reductions, with Germany accounting for 43% of total shipments. We fully improved some 5% of total for the same regions as well as our shift towards the commercial and residential segments there.

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