"I am very pleased to close 2009 with a strong fourth quarter," said Mr. Liansheng Miao, Chairman and CEO of Yingli Green Energy, "Our PV module shipments for the fourth quarter increased by 15.7% over the previous quarter, and the fourth quarter gross margin continued to improve, reaching 29.6%, reflecting our continued efforts to balance profitability and market share expansion. Although 2009 was a challenging year for us and the solar industry as a whole, Yingli Green Energy was able to emerge stronger by increasing full year PV module shipments by 86.6% year over year to 525.3 MW. Two main factors contributed to our solid shipment growth. First, by satisfying vigorous demand for our highly bankable and cost-effective products, we have enhanced cooperation with our top existing customers. Second, we were able to attract an influx of orders from new customers with our strong brand, well established reputation and integrated service model."
Mr. Miao continued, "Looking into 2010, in view of the shared anticipation of global industry growth and the robust flow of purchase orders and inquiries that we have already received, we are confident in our ability to achieve our full year PV module shipment guidance of 950 MW to 1 GW. This confidence is further supported by our planned capacity expansion. In spite of the expected cuts in feed-in tariff subsidies in Germany in the middle of the year, which may put pressure on the module price, we expect to experience a sustainable growth in the German market in 2010 by capitalizing on our solid position and extensive customer base in that market. In addition, we are expanding our footprint rapidly in the US, Spain, Italy, China and other emerging markets to further drive our growth.
To back up our shipment target and goal of further market share expansion, we are actively implementing a 300 MW strategic capacity expansion plan of high efficiency mono-crystalline silicon-based, vertically integrated production lines at our Baoding headquarters. Combined with the existing 600 MW production capacity in Baoding and the 100 MW capacity under construction in Hainan Province, this new expansion project is expected to bring our total production capacity to 1 GW by the end of 2010. In this expansion project, we will adopt new technologies developed from our PANDA project, through which we have already developed next-generation PV cells with an average efficiency rate of 18% or higher on pilot production lines. We expect that the average efficiency rate of our next-generation PV cells will reach at least 18.5% on the commercial application lines by the end of this year. With this expansion in place, we will be better positioned than ever to solidify our leadership in the global PV market."
Mr. Miao went on to say, "As a leading solar company, we are not only responsible for our customers but also for our community, environment, and the advancement of science and technology. Attesting to our core values of ‘responsibility, trust and innovation’ during fiscal year 2009, we became the first Chinese company to obtain the SA 8000 social accountability certification, to join PV CYCLE and to receive the TUV Rheinland ‘Power Controlled’ certification. Furthermore, as announced earlier this year, we are proud to be supporting the construction of the State Key Laboratory of PV Technology at our manufacturing base in Baoding. The laboratory will serve as a platform to commercialize cutting-edge PV technologies at our fully vertically integrated production lines."
"Throughout 2009, we focused on promoting our ‘Yingli Solar’ brand. To deepen our relationships with existing customers and reach out to more potential customers, we joined the privileged ranks of official sponsors of the 2010 FIFA World Cup in South Africa. By associating our brand with one of the world’s most popular sporting events, we look forward to better communicating our brand and demonstrating our commitment to making solar energy a clean, enduring and cost-effective energy solution for all humankind," Mr. Miao concluded.
Fourth Quarter 2009 Financial Results
Total Net Revenues
Total net revenues were RMB 2,530.9 million (US$370.8 million) in the fourth quarter of 2009, an increase of 13.7% from RMB 2,225.2 million in the third quarter of 2009 and an increase of 43.7% from RMB 1,761.2 million in the fourth quarter of 2008. The increase from the third quarter of 2009 was primarily due to a 15.7% increase in PV module shipment volume over the previous quarter, a result of the increasingly well-recognized ‘Yingli Solar’ brand, solid and diversified customer base, enhanced sales channels and stronger customer service offerings, as well as the recovery of the solar industry from the global economic recession.
Gross Profit and Gross Margin (1)
Gross profit in the fourth quarter of 2009 was RMB 750.4 million (US$109.9 million), an increase of 50.0% from RMB 500.3 million in the third quarter of 2009 and 187.9% from RMB 260.6 million in the fourth quarter of 2008. Gross margin was 29.6% in the fourth quarter of 2009, up from 22.5% in the third quarter of 2009 and 14.8% in the fourth quarter of 2008. The increase in gross margin was primarily due to the continuous decline in the blended cost of polysilicon, decreasing polysilicon usage per watt, continuous reduction in non-polysilicon cost, and the relatively flattish average selling price in the fourth quarter of 2009.
Operating Expenses
Operating expenses in the fourth quarter of 2009 were RMB 639.3 million (US$93.7 million), compared to RMB 257.5 million in the third quarter of 2009 and RMB 162.8 million in the fourth quarter of 2008. The significant increase in operating expenses from previous quarters was primarily attributable to a non-cash impairment of intangible assets relating to long-term supply agreements of RMB 131.2 million (US$19.2 million) and a non-cash bad debt expense of RMB 184.3 million (US$27.0 million) related to settlements with two particular customers in the fourth quarter.
The impairment of intangible assets relating to long-term supply agreements arose from the purchase price allocation in connection with a series of acquisitions of equity interests in Tianwei Yingli in 2006, 2007 and 2008. As a result of the continuous decrease in the price of polysilicon, the Company has recognized an impairment loss of RMB 131.2 million (US$19.2 million) to reflect the difference between the carrying amount and the fair value of the intangible assets. The impairment of intangible assets and the bad debt expense were non-cash charges and had no impact on the Company’s cash flow.
After excluding the two non-cash charges, operating expenses in the fourth quarter of 2009 were RMB 323.8 million (US$47.4 million), compared to RMB 257.5 million in the third quarter of 2009 and RMB 162.8 million in the fourth quarter of 2008. Operating expenses as a percentage of total net revenues was 12.8% in the fourth quarter of 2009, compared to 11.6% in the previous quarter.
Operating Income and Margin
Operating income in the fourth quarter of 2009 was RMB 111.1 million (US$16.3 million), compared to RMB 242.8 million in the third quarter of 2009 and RMB 97.8 million in the fourth quarter of 2008.
Operating margin was 4.4% in the fourth quarter of 2009, compared to 10.9% in the third quarter of 2009 and 5.6% in the fourth quarter of 2008.
Interest Expense
Interest expense was RMB 80.8 million (US$11.8 million) in the fourth quarter of 2009, compared to RMB 100.6 million in the third quarter of 2009 and RMB 51.7 million (5) in the fourth quarter of 2008.
After excluding non-cash interest expenses, interest expense was RMB 58.7 million (US$8.6 million) in the fourth quarter of 2009, compared to RMB 68.2 million in the third quarter of 2009 and RMB 48.5 million in the fourth quarter of 2008. The weighted average interest rate for the borrowings in the fourth quarter of 2009 was 6.27%, a decrease from 6.66% in the third quarter of 2009, both measured on a basis excluding non-cash interest expenses. The decrease in weighted average interest rate was a result of the Company’s efforts to reduce funding costs.
Foreign Currency Exchange Loss (Gain)
Foreign currency exchange loss was RMB 48.5 million (US$7.1 million) in the fourth quarter of 2009, compared to a foreign currency exchange gain of RMB 71.8 million in the third quarter of 2009 and a foreign currency exchange gain of RMB 68.7 million in the fourth quarter of 2008. The foreign currency exchange loss in the fourth quarter of 2009 was primarily due to the depreciation of the Euro against the Renminbi.
Income Tax Benefit (Expense)
Income tax benefit was RMB 1.1 million (US$0.2 million) in the fourth quarter of 2009, compared to an income tax expense of RMB 31.0 million in the third quarter of 2009 and an income tax benefit of RMB 3.1 million in the fourth quarter of 2008. The income tax benefit in the fourth quarter of 2009 was primarily due to the write-off of defer tax liability as a result of intangible assets impairment, netted off by the income tax expense incurred by Tianwei Yingli and Yingli Energy (China) Company Limited ("Yingli China"), a wholly-owned subsidiary of the Company. Under the PRC Enterprise Income Tax Law and the various implementation rules, Tianwei Yingli was subject to an enterprise income tax rate of 0% in 2008 and 12.5% in 2009, and Yingli China was subject to an enterprise income tax rate of 15% in both 2008 and 2009.
Net Loss (Income)
As a result of the factors discussed above, net loss was RMB44.8 million (US$6.6 million) in the fourth quarter of 2009, compared to net income of RMB 120.8 million in the third quarter of 2009 and RMB 82.0 million (6) in the fourth quarter of 2008. Diluted loss per ordinary share and per ADS was RMB 0.30 (US$0.04) in the fourth quarter of 2009, compared to diluted earnings per ordinary share and per ADS of RMB 0.79 in the third quarter of 2009 and RMB 0.64 in the fourth quarter of 2008.
On an adjusted non-GAAP basis, net income was RMB 137.5 million (US$20.2 million) in the fourth quarter of 2009, compared to RMB 184.2 million in the third quarter of 2009 and RMB 111.4 million in the fourth quarter of 2008. Adjusted non-GAAP diluted earnings per ordinary share and per ADS were RMB 0.89 (US$0.13) in the fourth quarter of 2009, compared to RMB 1.20 in the third quarter of 2009 and RMB 0.86 in the fourth quarter of 2008.
Balance Sheet Analysis
As of December 31, 2009, Yingli Green Energy had RMB 3,631.1 million (US$532.0 million) in cash and restricted cash, compared to RMB 2,657.6 million as of September 30, 2009. The increase in cash was primarily a result of positive operating cash flow resulting from the improved collection of accounts receivables.
Working capital was RMB 1,114.9 million (US$163.3 million) as of December 31, 2009, compared to 3,045.3 million as of September 30, 2009. The decrease in working capital was primarily a result of the reclassification of the Company’s convertible senior notes of RMB 1,291.8 million (US$189.3 million) due in December 2010.
As of the date of this press release, the Company had approximately RMB 9,962 million in authorized lines of credit, of which RMB 5,799 million had been utilized.
Full Year 2009 Results
Total Net Revenues
Total net revenues for the full year 2009 were RMB 7,254.9 million (US$1,062.8 million), compared to RMB 7,553.0 million for the full year 2008. PV module shipment volume for the full year 2009 was 525.3 MW, an increase of 86.6% from 281.5 MW for the full year 2008. The increase in total shipments was primarily due to the Company’s increasingly well-recognized brand, solid and diversified customer base, enhanced sales channels and stronger customer service offerings, and was supported by the completion of an additional 200 MW of total production capacity for each of polysilicon ingots and wafers, PV cells and PV modules in July 2009. The decrease in net revenues despite the 86.6% shipment increase was primarily due to a significant reduction in the average selling price for PV modules, which was caused by the rationalization of profitability across each stage along the solar value chain catalyzed by the recent global financial crisis and the depreciation of the Euro against the Renminbi.
Gross Profit and Margin (4)
Gross profit for the full year 2009 was RMB 1,714.4 million (US$251.2 million), compared to RMB 1,767.2 million for 2008. Gross margin was 23.6% for the full year 2009, compared to 23.4% in 2008.
The slight increase in gross margin for the full year 2009 was primarily a result of our continuous efforts in reducing blended cost of polysilicon and non-polysilicon processing cost, despite of the sharp decrease in the average selling price for PV modules.
Operating Expenses
Operating expenses for the full year 2009 were RMB 1,233.3 million (US$180.7 million), compared to RMB 613.9 million in 2008.
After excluding the two non-cash charges with a total amount of RMB 315.5 million (US$46.2 million) in the fourth quarter, operating expenses were RMB 917.8 million (US$134.5 million) for the full year of 2009, compared to RMB 613.9 million in 2008. Operating expenses as a percentage of net revenues was 12.7% in the full year 2009, compared to 8.1% in 2008. The increase in operating expenses was primarily attributable to the Company’s expanded scale of operations, increased marketing and promotional activities in both existing and emerging solar markets, and increased research and development expenses in connection with the launch of a series of new initiatives, including Project PANDA.
Interest Expense
Interest expense for the full year 2009 was RMB 376.3 million (US$55.1 million), compared to RMB 162.1 million in 2008. The interest expense for the full year 2009 included non-cash interest expenses of RMB 98.1 million (US$14.4 million), compared to RMB 10.4 million in 2008. Such non-cash interest expenses were related to the derivative liabilities bifurcated from the Company’s convertible notes issued in January 2009, the beneficial conversion feature of the convertible notes issued in July 2009, the freestanding warrants issued in connection with a loan facility provided by ADM Capital in April 2009, and the equity component bifurcated from the Company’s convertible notes issued in December 2007.
After excluding the non-cash interest expenses, interest expense was RMB 278.3 million (US$40.8 million), compared to RMB 151.8 million in 2008. The increase in interest expense was consistent with the increase in short-term borrowings from RMB 2,044.2 million as of December 31, 2008 to RMB 3,501.0 million (US$512.9 million) as of December 31, 2009 and the increase in long-term bank borrowings from RMB 663.0 million as of December 31, 2008 to RMB 752.8 million (US$110.3 million) as of December 31, 2009. The weighted average interest rate for these borrowings in 2009 was 7.07%, which slightly increased from 6.93% in 2008.
Foreign Currency Exchange Gain (Loss)
Foreign currency exchange gain was RMB 38.4 million (US$5.6 million) for the full year 2009, compared to a foreign currency exchange loss of RMB 66.3 million for the full year 2008. The foreign currency exchange gain for the full year 2009 was primarily due to the appreciation of the Euro against the Renminbi during the second and third quarters of 2009.
Loss on Debt Extinguishment
Loss on debt extinguishment of RMB 244.7 million (US$35.8 million) was a one-time, non-cash charge recognized in the second quarter of 2009, which was a result of the early full repayment of the US$50 million three-year loan facility provided by ADM Capital in January 2009. The loss represents the difference between the amount repaid and the carrying value of the loan on the date of the debt repayment which had no impact on the Company’s cash flow.
Loss on Derivative Liabilities
Loss on derivative liabilities of RMB 231.3 million (US$33.9 million) was primarily due to changes in the fair value of the derivative liabilities relating to the embedded conversion feature of the US$20 million convertible notes issued to Trustbridge Partners II, L.P. in January 2009 and warrants issued to ADM Capital in connection with the US$50 million loan facility. The loss on derivative liabilities was a one-time, non-cash charge which had no impact on the Company’s cash flow.
Income Tax Expense (Benefit)
Income tax expense was RMB 32.9 million (US$4.8 million) for the full year 2009, compared to an income tax benefit of RMB 5.6 million for the full year 2008. The income tax expense for 2009 was primarily attributable to the net operating income generated by Tianwei Yingli and Yingli China, netted off by the write-off of defer tax liability as a result of intangible assets impairment, while the income tax benefit in 2008 was mainly due to an increase in defer tax assets related to accrued warranty.
Net Loss (Income)
Net loss was RMB 459.2 million (US$67.3 million) and fully diluted loss per ordinary share and per ADS was RMB 3.31 (US$0.48) for the full year 2009.
On an adjusted non-GAAP basis, net income was RMB 364.5 million (US$53.4 million) for the full year 2009. Adjusted non-GAAP fully diluted earnings per ordinary share and per ADS was RMB 2.53 (US$0.37) for the full year 2009.
Business Outlook for Full Year 2010
Based on current market and operating conditions, estimated production capacity and forecasted customer demand, the Company expects its PV module shipment target to be in the estimated range of 950 MW to 1 GW for fiscal year 2010, which represents an increase of 80.8% to 90.4% compared to fiscal year 2009.
In addition, after taking into consideration the Company’s estimated blended cost of polysilicon in 2010, the expected average selling price of PV modules and forecasted exchange rates of the Euro and U.S. Dollar against the Renminbi, the Company currently expects that its gross margin target for fiscal year 2010 to be in the estimated range of 27% to 29%.
Yingli Green Energy Announces 300 MW PANDA Mono-Crystalline Manufacturing Capacity Expansion Project
Yingli Green Energy Holding Company Limited, a leading solar energy company and one of the world’s largest vertically integrated photovoltaic manufacturers, which holds the brand "Yingli Solar," today announced a 300 MW PANDA mono-crystalline silicon-based manufacturing capacity expansion project at its Baoding headquarters. The Company also announced a project loan of RMB 1.5 billion for the financing of this expansion project and a working capital credit facility of RMB 250 million, both granted by the Bank of Communications Co., Ltd., Hebei Branch ("BOCOM").
300 MW PANDA Mono-Crystalline Manufacturing Capacity Expansion at Baoding Headquarters
Yingli Green Energy announced its plan to build PANDA mono-crystalline silicon-based manufacturing lines with annual production capacity of 300 MW in each of mono-crystalline ingots and wafers, cells and modules at its Baoding headquarters, through its wholly owned subsidiary, Yingli Energy (China) Co., Ltd. ("Yingli China"). The new production lines will be designed to produce next-generation high efficiency PV cells based on the technology developed through Project PANDA, a collaboration among Yingli Green Energy, the Energy Research Centre of the Netherlands, a leading solar research center in Europe, and Amtech Systems, Inc., a global supplier of production and automation systems and related supplies for the manufacture of PV cells.
RMB 1.5 Billion Project Loan and RMB 250 Million Working Capital Credit Facility Granted by BOCOM
Yingli Green Energy also announced Yingli China has secured a project loan of RMB 1.5 billion and a working capital credit facility of RMB 250 million from BOCOM. Under the loan agreement, BOCOM has agreed to provide to Yingli China, subject to certain conditions, a five-year project loan of RMB 1.5 billion to support Yingli China’s 300 MW expansion project in Baoding. In addition, BOCOM also granted a working capital credit facility of RMB 250 million to Yingli China.
"Shared anticipation of global PV industry growth, the robust flow of orders and inquiries that we have already received in 2010 and our global growth strategy are the main motivations for this strategic capacity expansion plan," said Mr. Liansheng Miao, Chairman and CEO of Yingli Green Energy. "We believe this expansion will allow us to meet the increasing demand for our bankable, cost-effective products and further drive down costs through increased cell conversion efficiency and the larger scale of manufacturing.
On the Project PANDA pilot line, we have already successfully produced next-generation cells with an average efficiency rate of 18% or higher. Looking ahead, we expect to increase the average efficiency rate to at least 18.5% on the commercial production lines by the end of this year. Combined with the existing 600 MW production capacity in Baoding and the 100 MW capacity under construction in Hainan Province, this new expansion project is expected to bring our total production capacity to 1 GW by the end of 2010. With this expansion in place, we will be better positioned than ever to solidify our leadership in the global PV market."
About Yingli Green Energy
Yingli Green Energy Holding Company Limited, which holds the brand Yingli Solar, is a leading solar energy company and one of the world’s largest vertically integrated photovoltaic manufacturers. Yingli Green Energy’s manufacturing covers the entire photovoltaic value chain, from the production of polysilicon through ingot casting and wafering, to solar cell production and module assembly. As of today, Yingli Green Energy maintains a balanced production capacity of over 600 MW per year.
Two capacity expansion projects of 300 MW and 100 MW are under construction in Baoding and Hainan, respectively, and are expected to bring Yingli Green Energy’s total production capacity to 1 GW by the end of 2010. Yingli Green Energy distributes its photovoltaic modules to a wide range of markets, including Germany, Spain, Italy, Greece, France, South Korea, China and the United States. Headquartered in Baoding, China, Yingli Green Energy has more than 6,000 employees and more than 10 subsidiaries and branch offices worldwide. Yingli Green Energy is publicly listed on the New York Stock Exchange.
