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ReneSola Posts Wider Loss

Zacks Equity Research

ReneSola Ltd. (SOL)  reported adjusted loss per American Depositary Share (ADS) of 77 cents per share in the third quarter of 2012, missing the Zacks Consensus Estimate of 34 cents of loss per ADS. Numbers also were way short of the year-ago quarterly loss of 25 cents per share.

Operational Results

In the reported quarter, ReneSola’s revenues of $218.2 million rose 15.4% from $189.1 million in the year-ago quarter and fell 6.4% from $233 million in the sequentially preceding quarter. The sequential fall was due to a decrease in the average selling prices ("ASPs") of solar wafers and modules. Reported quarterly revenue however missed the Zacks Consensus Estimate of $219 million.

Total solar product shipments in the third quarter of 2012 were 532.8 megawatts, an increase of 5.8% from 503.7 megawatts in the second quarter of 2012. The sequential increase in solar product shipments was mainly the result of an increase in the demand of the company's high-efficiency solar wafers from Asia-Pacific customers.

In the reported quarter, ReneSola delivered 145.3 MW of solar modules, of which 101.7 MW were Virtus modules, down slightly quarter over quarter due to seasonality. Gross margin for the solar module business was approximately 1.0%.

Overall, ReneSola recorded a net loss of $78.6 million compared with a net loss of $8.2 million in the year-ago quarter.

Financial Condition

As of September 30, 2012, ReneSola had cash and cash equivalents plus restricted cash of $335.2 million, compared with $394.2 million at the end of the second quarter of 2012. Long-term borrowings were $134.5 million, compared with $130.2 million at the end of the second quarter of 2012. Short-term borrowings were $715.8 million, an increase from $691.1 million at the end of the second quarter of 2012.


ReneSola, for the fourth quarter of 2012, expects total solar wafer and module shipments in the range of 635 MW–675 MW. Of this module shipments are expected in the range of 250 MW–270 MW. Revenue for the fourth quarter is expected in the range of $240 million to $260 million.

For full year 2012, the company's outlook is unchanged, with total solar wafer and module shipments expected to be close to 2.2 GW.

Our Take

Based out of China, ReneSola is a leading global manufacturer of solar wafers and a producer of solar power products. Capitalizing on proprietary technologies, economies of scale, high production quality, technological innovations and know-how, and its in-house virgin polysilicon and solar cell and module production capabilities, ReneSola provides its customers with solar wafer products and processing services. The company possesses a global network of suppliers and customers.

ReneSola recently introduced the high-efficiency second generation Virtus II wafers which utilize a new in-house proprietary Virtus A++ manufacturing process, alleviating the need for crystalline seeds. The Virtus II modules’ use of the Virtus A++ manufacturing process produces high-efficiency Virtus A++ wafers with lower light-induced degradation and lower processing cost. The Virtus II products are currently in full production, with average efficiencies of 15.7%. Additionally, the company's newly launched microinverter, Micro Replus, successfully completed its initial testing phase in the United States, Australia and Europe. ReneSola has also begun research on small-scale storage systems, with the aim of providing these products to the market by the middle of next year.

Going forward, ReneSola expects to continue to reduce its solar module manufacturing costs through improvements in its manufacturing methods and reduction in material costs. In the fourth quarter, the company expects its total solar module production cost to decrease to approximately 57 cents per watt and its shipments to increase to a range of 250 MW to 270 MW.

However, ReneSola’s fortunes have been impacted by the industry-wide oversupply glut leading to sharply falling Average Selling Prices, tepid module demand in Europe, and rising competition in the market. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

In the near term we would advise investors to focus on its Zacks #2 Rank (Buy) peer Enphase Energy, Inc. (ENPH).

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