Yingli Green Energy Holding (YGE.N) posted a sharp fall in third-quarter loss due to robust demand from solar power plants in China and said it expects the country to account for nearly half of its shipments in the current quarter.
Lower production costs and firm solar panel prices boosted Yingli's margins in the quarter, but it was not enough to prevent a ninth consecutive quarterly loss for Yingli.
The company's U.S.-listed shares, bid higher in the days before it reported results, fell 12 percent in morning trading. The stock has tripled this year amid a broader rally in solar stocks.
"Given the recent run up in the stock, there seems to be a bit of profit taking on these numbers," Ardour Capital Investments analyst Adam Krop said.
"They didn't really blow out the numbers like the Street expected them to," he said.
The company's third quarter revenue beat analysts' estimates by about 6 percent -- the lowest margin in four quarters.
"Given the year-to-date gain in the stock, it's becoming increasingly difficult to impress the market with upside surprises," Raymond James analyst Pavel Molchanov said.
Solar panel prices have stabilized over the past two quarters after a four-year downturn, when prices fell more than 75 percent due to rapid capacity expansion in China and a withdrawal of subsidies in Europe.
While the low prices have exacted a heavy toll on loss-making solar companies, Yingli said its third-quarter results were aided by stable prices and by innovations that have made its manufacturing cheaper and more efficient.
In contrast, smaller China-based rival Hanwha SolarOne Co Ltd HSOL.O posted a bigger quarterly loss as costs remained high, sending its shares down about 12 percent.
FOCUS ON CHINA
Yingli, unlike its rivals, is focusing heavily on China as it bets on volume growth in what is projected to be the largest solar market in the world this year.
The company, which was the world's largest solar panel supplier last year, said China is expected to account for 47 percent of shipments in the current quarter, up from 38 percent in the third quarter.
Yingli said it is building a pipeline of 400 megawatt (MW) to 500MW worth of projects -- most of which is in China, where developers are speeding up the construction of solar plants ahead of an expected change in the country's feed-in-tariffs.
Yingli said it had already completed 80 MW worth of projects in China out of the targeted 120 MW-130 MW for this year.
Selling prices in China, however, are weaker than in high-margin markets such as Japan and companies are also struggling with delayed payments.
Analyst Krop said Yingli's account receivables was a concern, indicating that some customers were struggling to make payments on time.
The company's accounts receivables were $811 million as of September30, compared with $722.6 as of June 30.
HIGHER MARGINS, SHIPMENTS
Yingli said it expects gross margin to improve to 14-16 percent in the fourth quarter. Margin rose to 13.7 percent in the third quarter, from negative 22.7 percent a year earlier.
It expects fourth-quarter panel shipments to rise in the mid- to high-single digit percentage range from the third quarter.
Yingli plans to expand its internal manufacturing capacity to 3 gigawatt (GW) and have total capacity of 4 GW in 2014, helped by access to the plants of other companies, an executive said on a conference call.
Yingli has about 2.45 GW of manufacturing capacity now.
Yingli's third-quarter revenue rose nearly 68 percent to $596.3 million, beating analysts' estimates of $563.1 million, according to Thomson Reuters I/B/E/S.
Net loss fell to $38.5 million, or 25 cents per American Depositary Share (ADS), from $161.9 million, or 98 cents per ADS, a year earlier.
Hanwha SolarOne, on the other hand, said its loss widened to $75.2 million, or 89 cents per ADS, in the third quarter, from $51.3 million, or 61 cents per ADS.
Hanwha SolarOne's U.S.-listed shares were down 12 percent at $4.45 in mid-day trading on the Nasdaq. Yingli's shares were down 9 percent at $6.32 on the New York Stock Exchange.
(Reporting by Swetha Gopinath and Garima Goel in Bangalore; Editing by Savio D'Souza and Robin Paxton)