Trina Solar Limited (TSL)

Q3 2011 Earnings Conference Call

November 21, 2011, 17:00 p.m. ET


Thomas Young - Senior Director, IR

Jifan Gao - Chairman and CEO

Terry Wang - CFO

Mark Kingsley - CCO

Gary Yu - SVP, Operations


Jesse Peschel - Jefferies

Sanjay Shrestha - Lazard Capital Markets

Kelly Dougherty - Macquarie

Vishal Shah - Deutsche Bank

James Medvedeff - Cowen & Corporation

Paul Clegg - Mizuho Securities

Dan Ries - Collins Stewart

Adam Krop - Ardour Capital Investments

Mahesh Sanganeria - RBC Capital Markets

Tim Arcuri - Citigroup

Ahmar Zaman - Piper Jaffray

Satya Kumar - Credit Suisse

Amy Song - Goldman Sachs

Gordon Johnson - Axiom Capital Management

Mark Bachman - Avian Securities



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Good afternoon, ladies and gentlemen. My name is Martina and I will be your conference operator today. At this time I’d like to welcome everyone to the Trina Solar Third Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)

I’d now like to turn the call over to Thomas Young, Senior Director, Investor Relations. You may begin your conference.

Thomas Young

Thank you, operator, and good day to all. And welcome to Trina Solar’s third quarter 2011 earnings conference call. This is Thomas Young, Trina Solar’s Senior Director of Investor Relations. With us today are Trina Solar Chairman and CEO, Jifan Gao; Chief Financial Officer, Terry Wang; Chief Commercial Officer, Mark Kingsley; and Senior Vice President, Operations, Gary Yu.

Before I turn the call over to Mr. Gao, may I remind our listeners that in this call, management’s prepared remarks contain forward-looking statements, which are subject to the risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission. In addition, any projections to the company’s future performance represent management’s estimates as of today, November 21, 2011. Trina Solar assumes no obligation to update these projections in the future as market conditions change.

For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days at the Investor Relations section of our website at

And with that it’s my pleasure to turn the call over to Trina Solar’s Chairman and CEO, Mr. Jifan Gao.

Jifan Gao

Thank you, Thomas, and thank you everyone for joining us today. The third quarter continued to be a challenging time for the solar industry. Those parameter yield credit situation continued to be a significant decline of module price on the margins. In Q3, we are pleased to achieve that in-house gross margin of 18.3%. In particular we also paid increased attention to customer credit list to ensure the quality of our company is cyclical. We are also continue to maintaining a strong balance sheet.

As our industry consolidation business export are still at as one-third affair meant to be able to priced over long-term. China being able to success in this environment will require strong technology innovation, operational efficiency and brand recognition as well as strong financial performance and a safe balance sheet.

Looking at the lenders, investors and customers are now looking at manufacturer’s long-term viability as in terms of the relations. With our attention focused on demand shifts, we’ve delivered an increase in sales to U.S. and China in the third quarter. We believe this package represent the basic potential of solar going forward. We’re also proud to announce the opening of our Asia Pacific headquarters in Singapore to focus on new customers developed in Asia, the Middle East and Africa. With continued declining system cost, we are confident in the long-term growth potential of solar power and expect to see better performance in 2012 as we focus on maintaining advantages by executing our cost reduction roadmap.

The organization to realize more efficient operating management reacting more quickly to mark the changes and develop an expanding opportunities to grow market share in established markets as well as permitting the dealings such as China, Japan, India, South Africa and the Gulf States.

Lastly, I’d like to highlight an achievement China made on the sustainable manufacture front. We are proud to have received the ISO 14064 verification statement from BSI. This tied into our systematic ways that quantify, monitor, handling cost, green cause emissions reductions.

With that I’d like to turn the call to our CFO, Terry Wang to share our third quarter 2011 financial results. Terry?

Terry Wang

Thank you, Mr. Gao, and welcome to everyone today. I’d like to present an overview of our financial results for the third quarter of 2011.

The third quarter presented some headwinds for Trina Solar, having phased with the environment of over capacity and constrained project financing and the ASP declines. However, we believe our business model and long-term strategies will navigate us through these challenging times.

Our total net revenue in the third quarter was $481.9 million, a decrease of 16.8% sequentially and 5.2% year-over-year. Total shipment in the third quarter was 370 megawatts, a decrease of 6.6% sequentially and an increase of 27.4% year-over-year. ASP was approximately $1.25 in the quarter versus $1.46 previously.

Our gross profit was $52 million, a decrease of 47% sequentially, and 67% year-over-year. Gross margin for our in-house wafer production to module production was 18.3%. Our overall gross margin was 10.8% in the third quarter of 2011. We made a non-cash inventory write-down of 19.1 million in the third quarter as a result of notable market price decline, without write-downs our overall gross margin was 14.8%. The sequential decline was primarily due to the decline in module ASPs exceeding declines in manufacturing costs with a significant price decline in polysilicon and wafer in recent weeks. We continuously reviewed and renegotiated the terms of contract to take advantages of falling prices to enjoy lower costs going forward.

On the stock front, we’re also able to buy poly at below $30 per kilo. Our third quarter operating expenses were 75.5 million or 15.7% of net revenue, the increase from 11.3% in the second quarter. The increase was primarily due to accounts receivables provision of 10.3 million combined with a decrease of net revenues. To control and reduce our expense forward, we engage a series of cost saving programs such as this adjustment of the labor headcount to natural attrition and reducing other variable spending including business travel and the consulting costs.

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