Solarfun Reports 2007 Full-Year and Fourth Quarter ResultsThursday March 27 11:04 PM2007 ANNUAL RESULTS * Net revenue was RMB 2.395 billion (US$ 328.3 million), up 280% from 2006 * Total PV module shipments as reported were 78.4 MW, up 310% from 19.1 MW in 2006 (Note: Full year shipments were actually 80.6 MW. However, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.) * The average selling price was $3.74 for 2007 * Gross profit reached RMB 397.8 million (US$54.5 million), rising over 116% from 2006 * Gross margins reached 16.6% for the full year 2007, showing continuing improvement beginning in 2Q07 * Net income was RMB 148.0 million (US$20.3 million), rising 40% from 2006 * Earnings per basic ADS were RMB 3.081 (US$ 0.42), down from RMB 4.76(US$0.60) in 2006. There was a 132% increase in basic shares outstanding as a result of the Company's initial public offering in December 2006 Mr. Yonghua Lu, Chairman of Solarfun commented, "The year 2007 was a period of significant progress for the Company and I believe established a foundation for further growth in the burgeoning PV industry. Our financial results met our expectations and showed progress in key measures such as revenue and profit growth. They are also a reflection of our increased scale, vertical integration, broadened customer base, and successful ability to secure supply of key raw materials to meet our growth objectives." "Specifically, we expanded manufacturing capacity to a year-end level of 240 MW, acquired and began production of ingots at our 52 %-owned ingot manufacturing facility - Jiangsu Yangguang Solar Technology Co. Ltd., increased our customer base more than six-fold, and signed five significant supply contracts totaling $1.4 billion, four of which were with suppliers outside of China." "We also achieved a few other significant milestones over the past year. We significantly strengthened our senior management team with a group of executives with relevant industry experience and global expertise and improved our internal management structure and discipline to keep pace with our rapid growth. Additionally, we believe that the increased share ownership of Good Energies provides us with access to significant additional industry expertise and will contribute to the long-term success of our business," concluded Chairman Lu. FOURTH QUARTER 2007 HIGHLIGHTS * Net revenue was RMB 987.8 million (US$ 135.4 million), a 304% increase over 4Q06 and a 31% increase from the 3Q07 * PV module shipments as reported totaled 28.1 MW, which was nearly three times higher than 4Q06 and continued successive quarter-over-quarter shipment increases. Module shipments were 27.3 MW in 3Q07 (Note: 4Q07 shipments were actually 30 MW. However, as mentioned above, due to certain conditions which require future deliveries of products in order to secure payment for the shipments made in 4Q07, we have deferred revenue recognition until the future deliveries have been made and the cash has been collected.) * The average selling price ("ASP") was $3.85, which rose from $3.66 in 3Q07 * Gross profit rose 45.3 % from 3Q07 to RMB 174.5 million (US$ 23.9 million) * Gross margin reached 17.7%, the third consecutive quarter-over-quarter increase. * Operating expenses as a percent of sales were 8.3%, which was a decrease from 12.4% in 4Q06, but a rise from 7.0% in 3Q07. * Exchange losses of RMB 3.3 million (US $ 0.5 million) were up from RMB 2.2 million in 4Q06 and RMB 0.70 million in 3Q07. * Net income was RMB 66.4 million (US$ 9.1 million), a rise of 101% over 4Q06. * Earnings per basic ADS were RMB 1.38 (US$ 0.19), an increase of 4.2% from RMB 1.32 (US$ 0.18 in 3Q07. Harold Hoskens, CEO of Solarfun, noted "The fourth quarter concluded an outstanding year for the Company with sequential momentum in shipments, ASP's and gross margins. We had a non-recurring trend of increased G&A expenses during the quarter, due largely to a ramp-up in our infrastructure costs, including the consolidation of Yangguang, legal expenses associated with becoming a public company, including SOX compliance and audit fees, as well as a larger management infrastructure and non-cash items such as stock-based compensation." FINANCIAL POSITION As of December 31, 2007 the Company had cash and cash equivalents of RMB 273 million (US$ 37.4 million) and working capital of RMB 959.8 million (US$ 131.6 million). Total bank borrowings were RMB 980 million (US$ 134.3 million). Note that on January 29, 2008 the Company placed US $172.5 million of Convertible Senior Notes due 2018. Net accounts receivable decreased to RMB 430.69 million (US$ 59 million) due to continued focus on cash management practices. Days sales outstanding (DSO's) improved to 51 days from 62 days in 3Q07. MANAGEMENT CHANGES On January 3, 2008 the Company announced the appointment of Harold Hoskens as CEO beginning on February 25, 2008. Mr. Hoskens joins Solarfun from TPO Displays Corporation, Chunan, Taiwan, where he recently served as Deputy CEO. Harold began his career with Royal Philips in 1988, and moved to the Royal Philips' Mobile Display Systems (MDS) division in Hong Kong, serving as CEO beginning in 2003. Mr Lu continues to serve as Chairman and will remain actively involved in areas of strategic importance to Solarfun. BUSINESS OUTLOOK FIRST QUARTER 2008 Based on current operating trends and other conditions, Solarfun is providing first quarter 2008 and full year 2008 guidance as follows: * Although the first quarter is not yet concluded, management believes that shipments for 1Q08 will continue to improve. Volumes are expected to be at least 35 MW. ASP's should remain strong and relatively constant. * The Company was affected by the winter weather in China in February and continues to be affected by the relatively tight supply and increasing costs of polysilicon. Therefore, management would expect these factors to have some downward pressure on gross margins for the first quarter of 2008. FULL YEAR 2008 * Based on existing sales and pricing, contracted supply agreements, and other expected business and industry conditions, management provided the following guidance for the full year 2008: The Company has sales contracts totaling over 160 MW (a level that is over double last year's 78.4MW) and expects prices to be flat or slightly higher from the $3.74 recorded for the full year 2007. Solarfun has secured supply of polysilicon on a contracted basis slightly exceeding its contracted sales volume. * Capacity will increase from 240 MW to 360 MW by mid-year 2008. * Management has seen a continued tightness of polysilicon supply and escalating prices on the spot market. With these conditions expected to exist throughout most or all of 2008, management believes some continued negative impact on gross margins from the level achieved in 2007. CEO Harold Hoskens concluded, "2008 is a mix of opportunities and challenges. We believe Solarfun is well-positioned to continue to gain market share, expand scale, improve our manufacturing efficiencies, penetrate new markets, and develop and expand our supply chain in both China and elsewhere. Our management team, Board of Directors, and key shareholders are determined and committed to building shareholder value over the long term " Conference Call: Management will host a conference call to discuss the results at 8:00 am U.S. Eastern Time (8:00 pm Shanghai time) on March 27, 2008. The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: +1 877 847 0047
- International dial-in number: +852 3006 8101
- China Toll Free Number: 800 876 5011
Passcode: Solarfun
A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.solarfun.com.cn. A replay of the webcast will be available for one month. A telephone replay of the call will be available for twenty-four hours after the conclusion of the conference call. The dial-in details for the replay are as follows:
- U.S. Toll Free Number: +1 877 847 0047
- International dial-in number: +852 3006 8101
Passcode: 280293
FINANCIAL STATEMENTS:
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
December 31 December 31 December 31
2006 2007 2007
(Unaudited) (Unaudited) (Unaudited)
RMB RMB US$
ASSETS
Current assets
Cash and cash equivalents 1,137,792 272,928 37,415
Restricted cash 33,822 42,253 5,792
Accounts receivable, net 147,834 430,692 59,043
Inventories, net 372,504 728,480 99,866
Advance to suppliers 238,178 640,118 87,752
Other current assets 75,525 218,917 30,011
Deferred tax assets 3,400 3,026 415
Amount due from related parties 153 920 126
Amount due from shareholders 578 - -
----------- ----------- -----------
Total current assets 2,009,786 2,337,334 320,420
----------- ----------- -----------
Non-current assets
Fixed assets - net 207,449 702,884 96,357
Intangible assets - net 12,897 94,282 12,925
Deferred tax assets - 4,767 653
Long-term deferred expenses - 209,946 28,781
Long-term investment 300 300 41
----------- ----------- -----------
Total non-current assets 220,646 1,012,179 138,757
----------- ----------- -----------
TOTAL ASSETS 2,230,432 3,349,513 459,177
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Short-term bank borrowings 379,900 980,002 134,346
Long-term bank borrowings, current
portion 16,000 - -
Accounts payable 51,452 141,709 19,426
Notes payable 14,020 - -
Accrued expenses and other
liabilities 33,619 135,395 18,562
Customer deposits 17 27,628 3,788
Amount due to related parties 32,058 92,739 12,713
----------- ----------- -----------
Total current liabilities 527,066 1,377,473 188,835
----------- ----------- -----------
Non-current liabilities
Long-term bank borrowings, non-
current portion 15,000 - -
Deferred tax liability - 9,038 1,239
----------- ----------- -----------
Total non-current liabilities 15,000 9,038 1,239
----------- ----------- -----------
Commitments and contingencies
Minority interests 10,151 100,420 13,766
----------- ----------- -----------
Shareholders' equity
Ordinary shares
(par value US$0.0001 per share;
400,000,000 shares authorized;
239,994,754 shares and
241,954,744 issued and
outstanding at December 31, 2006
and 2007, respectively 193 194 27
Additional paid-in capital 1,565,524 1,601,853 219,594
Statutory reserves 16,024 37,548 5,147
Retained earnings 96,474 222,987 30,569
----------- ----------- -----------
Total shareholders' equity 1,678,215 1,862,582 255,337
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,230,432 3,349,513 459,177
=========== =========== ===========
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
For the three months ended
December 31 September 30, December 31
2006 2007 2007
(Unaudited) (Unaudited) (Unaudited)
RMB RMB RMB
Net revenue
Photovoltaic modules 244,163 752,613 804,164
Photovoltaic cells 558 1,227 50,025
Photovoltaic cells processing (53) - -
PV modules processing - - 5,876
Others - - 127,706
----------- ------------- -----------
Total net revenue 244,668 753,840 987,771
----------- ------------- -----------
Cost of revenue
Photovoltaic modules (178,626) (632,643) (653,667)
Photovoltaic cells (435) (1,072) (47,476)
Photovoltaic cells processing (40) - -
PV modules processing - - (2,014)
Others - - (110,110)
----------- ------------- -----------
Total cost of revenue (179,101) (633,715) (813,267)
----------- ------------- -----------
Gross profit 65,567 120,125 174,504
----------- ------------- -----------
Operating expenses
Selling expenses (5,860) (20,158) (23,167)
G&A expenses (20,629) (28,971) (50,153)
R&D expenses (3,800) (3,277) (8,506)
----------- ------------- -----------
Total operating expenses (30,289) (52,406) (81,826)
----------- ------------- -----------
Operating profit 35,278 67,719 92,678
Interest expenses (4,547) (6,683) (11,293)
Interest income 834 4,333 (1,805)
Exchange losses (2,223) (698) (3,307)
Other income 416 5,806 (7,552)
Other expenses (362) (6,957) (2,032)
Value of embedded foreign
currency derivative 919 - -
Government grant 212 700 1,369
----------- ------------- -----------
Net income (loss) before income
tax and minority interest 30,527 64,220 68,058
----------- ------------- -----------
Income tax benefit / (expenses) 2,559 (1,331) (3,814)
Minority interest (35) 686 2,199
----------- ------------- -----------
Net income (loss) 33,051 63,575 66,443
=========== ============= ===========
Net income attributable to
ordinary shareholders 29,500 63,575 66,443
=========== ============= ===========
Net income/ (loss) per share
Basic 0.2602 0.2649 0.2759
Diluted 0.1760 0.2649 0.2759
Shares used in computation
Basic 113,370,310 240,024,754 240,807,142
Diluted 187,820,841 240,024,754 240,807,142
Net income/ (loss) per ADS
Basic 1.3010 1.3243 1.3796
Diluted 0.8799 1.3243 1.3796
ADSs used in computation
Basic 22,674,062 48,004,951 48,161,428
Diluted 37,564,168 48,004,951 48,161,428
For the years ended
December 31 December 31 December 31
2006 2007 2007
(Unaudited) (Unaudited) (Unaudited)
RMB RMB USD
Net revenue
Photovoltaic modules 604,317 2,209,514 302,897
Photovoltaic cells 7,182 52,019 7,131
Photovoltaic cells processing 19,408 - -
PV modules processing - 5,876 806
Others - 127,726 17,510
----------- ----------- -----------
Total net revenue 630,907 2,395,135 328,344
----------- ----------- -----------
Cost of revenue
Photovoltaic modules (434,493) (1,835,886) (251,677)
Photovoltaic cells (5,983) (49,332) (6,763)
Photovoltaic cells processing (6,054) - -
PV modules processing - (2,014) (276)
Others - (110,123) (15,097)
----------- ----------- -----------
Total cost of revenue (446,530) (1,997,355) (273,813)
----------- ----------- -----------
Gross profit 184,377 397,780 54,531
----------- ----------- -----------
Operating expenses
Selling expenses (11,883) (62,777) (8,606)
G&A expenses (52,214) (113,756) (15,595)
R&D expenses (6,523) (27,440) (3,761)
----------- ----------- -----------
Total operating expenses (70,620) (203,973) (27,962)
----------- ----------- -----------
Operating profit 113,757 193,807 26,569
Interest expenses (8,402) (25,978) (3,561)
Interest income 1,326 16,244 2,227
Exchange losses (4,346) (25,628) (3,513)
Other income 902 1,505 206
Other expenses (836) (9,670) (1,326)
Value of embedded foreign currency
derivative (163) - -
Government grant 852 2,089 286
----------- ----------- -----------
Net income (loss) before income
tax and minority interest 103,090 152,369 20,888
----------- ----------- -----------
Income tax benefit / (expenses) 3,132 (7,458) (1,022)
Minority interest (301) 3,124 428
----------- ----------- -----------
Net income (loss) 105,921 148,035 20,294
=========== =========== ===========
Net income attributable to
ordinary shareholders 98,695 148,035 20,294
=========== =========== ===========
Net income/ (loss) per share
Basic 0.9524 0.6163 0.0845
Diluted 0.7454 0.6163 0.0845
Shares used in computation
Basic 103,631,832 240,199,520 240,199,520
Diluted 142,108,460 240,199,520 240,199,520
Net income/ (loss) per ADS
Basic 4.7618 3.0815 0.4224
Diluted 3.7268 3.0815 0.4224
ADSs used in computation
Basic 20,726,366 48,039,904 48,039,904
Diluted 28,421,692 48,039,904 48,039,904
The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2007, which was RMB7.2946 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on December 31, 2007, or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts. Safe Harbor Statement This news release contains forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995, such as the Company's business outlook for 2008, including first quarter and full year 2008 estimates for net revenue, PV product shipments, raw materials and product prices, PV cell production capacity and gross margins. Forward-looking statements involve inherent risks and uncertainties and actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Solarfun disclaims any obligation to update or correct this information. About Solarfun Solarfun Power Holdings Co, Ltd. manufactures both PV cells and PV modules, provides PV cell processing services to convert silicon wafers into PV cells, and supplies solar system integration services in China. Solarfun produces both monocrystalline and multicrystalline silicon cells and modules, and manufactures 100% of its modules with in-house produced PV cells. Solarfun sells its products both through third-party distributors, OEM manufacturers and directly to system integrators. Solarfun was founded in 2004 and its products have been certified to TUV and UL safety and quality standards. SOLF-G http://www.solarfun.com.cn Contact: Solarfun Power Holdings Co., Ltd. Paul Combs, 86- 21-6307-0222 Vice President of Strategic Planning IR@solarfun.com.cn or Christensen Peter Homstad, 480-614-3026 phomstad@ChristensenIR.com |
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