Yingli Green to increase shipments to low-margin China

Thu May 30, 2013 12:53pm EDT

(Reuters) - Yingli Green Energy Holding (YGE.N) said it expects to ship more panels to China, where prices are among the lowest globally, as it bets against its peers on a recovery in the world's largest solar market.

The company's rising exposure to the China, which led to a bigger-than-expected first-quarter loss, is in stark contrast to its peers who have been fleeing the low-margin market for more lucrative markets such as Japan and South Africa.

Yingli shares were down 4.6 percent at $3.12 in volatile trading on the New York Stock Exchange on Thursday.

Yingli has already secured 70 percent of its targeted full-year shipments in China by bidding for utility-scale projects, and expects strong demand in the coming quarters in the country.

The company, which became the world's largest solar panel supplier last year, expects to ship 33 percent of its panels to China in the current quarter, up from 13 percent in the first quarter.

The company's shipments slipped 6 percent in the quarter ending March 31, primarily due to seasonal weakness in China.

"All of the Chinese manufacturers are being hurt because of a reliance on lower-margin Chinese sales," said Raymond James analyst Alex Morris.

Solar companies have been battered by a relentless fall in panel prices caused by rapid capacity expansion in China and withdrawal of subsidies in Europe.

But smaller rival Hanwha SolarOne Co Ltd (HSOL.O) benefited from sales to Japan and South Africa, where its panels fetched the highest price in the first quarter.

Japan generated 33 percent of Hanwha SolarOne's first-quarter panel revenue, up from 20 percent in the fourth quarter. South Africa accounted for more than a fifth of its first-quarter panel revenue.

Japan has emerged as a promising solar market after it introduced a feed-in-tariff scheme last July to help spread the use of clean energy in the wake of the March 2011 Fukushima nuclear disaster.

Hanwha SolarOne shares jumped as much as 16 percent to a 15-month high of $2.20 in early trading on Thursday on the Nasdaq, before reversing course to trade down about 2 percent.

Both Yingli and Hanwha said they expect margins to remain positive in the current quarter, after reporting positive first-quarter margins, signaling that a five-year decline in solar panel prices was easing.

Solar companies have been battered by the relentless fall in panel prices caused by rapid capacity expansion in China and withdrawal of subsidies in Europe.

Yingli said it expects gross margin to more than double to between 9 and 11 percent in the second quarter from first-quarter levels.

Yingli and Hanwha SolarOne also forecast higher shipments for the second quarter as they look to sell more in emerging markets and cut exposure to Europe, where duties on China-made panels will be imposed on a trial basis from June 6.

Hanwha SolarOne forecast second-quarter panel shipment of 330 megawatts (MW) to 350 MW, up from 289.1 MW in the first quarter. The company has cut its dependence on Europe to less than 30 percent of total shipments from more than 70 percent.

Yingli, which expects second-quarter shipments to rise in the low-to-mid teen percentage from the first quarter, expects Europe to account for 35 percent of shipments. The region generated more than 50 percent of first-quarter shipments.

Yingli's adjusted profit was 62 cents per American Depositary Share. Analysts, on average, had expected a loss of 42 cents, according to Thomson Reuters I/B/E/S. [ID:nPnCN22979]

(Reporting By Swetha Gopinath and Kanika Sikka in Bangalore; Editing by Joyjeet Das)