Trina Solar (NYSE:TSL) has a Troubled Third Quarter with Future Outlook Even Bleak

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By Thomas Copeland on November 24, 2014 Economy

Third quarter results has been posted by Trina Solar Ltd (NYSE:TSL), a Chinese solar PV manufacturer, on Monday before the opening of markets. The results were quite similar to the first quarter and $0.14 diluted earnings per American Depositary Share (ADS) has been reported by the company. This is just a penny lower than the consensus estimates given by Thomson Reuters. Quarterly revenue of the company increased over the period by 18.8 percent to $616.8 million, despite the increase the revenue remained quite less than the consensus estimate of $645.68 million.

Moreover in the third quarter, shipments of modules increased to 1,064 megawatts registering almost 13 percent rise successively. While gross margin, which was 15.4 percent in the first quarter, was reported as 16.7 percent in this quarter resulting in the increase of gross profit by 28 percent. A gradual increase has also been seen from 3 percent to 5.8 percent in the operating margin. Whereas, there was a substantial jump of 217.2 percent in the net income which stood at $26.9 million without considering variations in exchange rates.

Earnings per ADS reported by Trina (NYSE:TSL) summed up to $0.34, which has been amended not to include unrealized exchange rate losses. 50 ordinary shares are equivalent to one ADS. In October, secondary offerings of ADS took place and Trina was able to generate $318.9 million. The firm also raised $222.7 million through a previous offering as well as selling convertible notes in June.

The Chief Executive Officer of the company commented that Trina (NYSE:TSL) has been able to fulfill and even did better to achieve performance and financial objectives despite of the fact that Europe was experiencing frail demand and foreign exchange was volatile. The gross margin came out to be considerably higher than management estimated. Competitive advantage of the firm’s module business had been made stronger in the third quarter. Positive results had been ensured by cutting the costs associated with module manufacturing and giving importance to technology innovation. The CEO pledged to maintain synergy between their module and associated businesses with the hope to carry the momentum in the fourth quarter and next year.

In the last quarter, PV modules between 1,045 to 1,095 megawatts are expected to be shipped including 40 to 60 megawatts for downstream PV ventures. Gross margin of 14.5 percent to 15.5 percent is estimated by the company in the fourth quarter.

Module shipment estimates for the current year has been reduced by Trina (NYSE:TSL) in the limit of 3,610 to 3,660 megawatts inclusive of 340 to 360 megawatts delivered to downstream projects owned by the company. Whereas, the initial estimates were between 3,600 to 3,800 megawatts. So this reduction will have big impact on its share value on Monday particularly while considering an expected lower gross margin in the fourth quarter.

In the premarket trading on Monday, shares of Trina (NYSE:TSL) dropped by almost 5.5 percent and valued at $10.33 against the range of $8.67 to $18.77 for the year.