Hong Kong-based company Xinyi Solar Holdings Ltd (HKG:00968) saw its net profit for the first half (H1) of 2018 decrease by 3.3% to HKD 1.21 billion (USD 154m/EUR 133.3m) after revenues fell by 21.3%.
A significant reduction of EPC revenues hurt the company’s top line even as revenues from the solar glass and solar power generation businesses grew by 27% and 28.8%, respectively. The latter two segments have higher profit margins than the EPC services business, so Xinyi Solar’s profitability in the period improved. Its gross margin jumped to 42.6% from 33.9% a year earlier and net profit margin increased to 29.1% from 23.6%.
The company warned that it expects the profit margin of its solar glass division, which accounted for 58% of H1 2018 gross profit, to come under increasing pressure, especially in the second half of the year. The average selling price (ASP) of anti-reflective coating solar glass has been on the slide for the past months due to increased supply, and the decline has been even more pronounced after China’s announcement at the end of May that it is limiting subsidies for new solar capacity, Xinyi Solar said.
“In response to the rapidly shrinking demand, the Group has adopted a proactive and flexible marketing strategy to speed up inventory turnover.”
In the months ahead, the company expects demand fluctuations, ASP volatilities and the phasing out of inefficient capacities in the solar glass industry. Its directors are optimistic about the potential growth of Xinyi Solar’s solar glass business in the long run as they believe industry consolidation will create more market opportunities in the future.
Xinyi Solar’s H1 sales of solar glass outside China reached a share of 28.1%, almost doubling from 14.6% a year ago, thanks to its production line in Malaysia and strong sales growth in Malaysia, South Korea, North America, India and Thailand.
More details on the company’s performance are available in the table.
| Results in HKD million |
H1 2018 |
H1 2017 |
| Net profit attributable to equity holders |
1,214 |
1,254.9 |
| Operating profit |
1,525.2 |
1,572.3 |
| EBITDA |
1,883.1 |
1,830.8 |
| Revenue |
4,177.4 |
5,309.7 |
| - of which solar glass revenue |
3,107 |
2,447.3 |
| - of which solar farm revenue |
945.8 |
734.5 |
| - of which EPC services revenue |
124.5 |
2,127.9 |
An interim dividend of HKD 0.08 per share will be paid on September 4 to shareholders of record on August 17.
At the end of June, Xinyi Solar’s solar power generation capacity stood at 2,086 MW, of which 1,934 MW were utility-scale ground-mounted solar parks. The company said the sudden policy shift in China will make it difficult to achieve the 2018 installation target of 400 MW and the company has decided to stop setting installation targets amid the uncertain market environment.
As previously announced, Xinyi Solar is to spin off its solar power generation business and list its shares on the Hong Kong bourse.
(HKD 10 = USD 1.27/EUR 1.1)
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