Hanwha Solarone Co (NASDAQ:HSOL)

FOURTH QUARTER 2012 Results

• Total net revenues were RMB836.7 million (US$134.3 million), a decrease of 13.4% from 3Q12, and a decrease of 14.5% from 4Q11.
• Gross loss was RMB261.8 million (US$42.0 million), compared with gross loss of RMB56.1 million in 3Q12 and gross loss ofRMB604.6 million in 4Q11.
• Net loss attributable to shareholders on a non-GAAP basis[1] was RMB650.6 million (US$104.4 million), compared with net loss of RMB301.9 million in 3Q12 and net loss of RMB862.3 million in 4Q11.
• Net loss per basic ADS on a non-GAAP basis was RMB7.70 (US$1.24), compared with net loss per basic ADS on a non-GAAP basis of RMB3.57 in 3Q12 and net loss per ADS on a non-GAAP basis of RMB10.22 in 4Q11. 
• Net loss attributable to shareholders on a GAAP basis was RMB670.4 million (US$107.6 million), compared with net loss attributable to shareholders on a GAAP basis of RMB322.1 million in 3Q12.  The Company recorded a non-cash gain of RMB1.4 million (US$0.2 million) from the change in fair value of the convertible feature of the Company's convertible bonds as compared to a non-cash gain of RMB1.2 million in 3Q12.  Net loss attributable to shareholders on a GAAP basis in 4Q11 was RMB832.9 million, including a non-cash gain of RMB33.2 million from the change in fair value of the convertible feature of the Company's convertible bonds.  As explained in prior quarters, the fluctuations in the fair value of the convertible feature of the Company's convertible bonds are primarily due to changes in the Company's ADS price, over which the Company has no direct control, and does not reflect the operating performance of the Company. 
• Net loss per basic ADS on a GAAP basis was RMB7.93 (US$1.27), compared with net loss per basic ADS on a GAAP basis of RMB3.81 in 3Q12 and net loss per basic ADS on a GAAP basis of RMB9.88 in 4Q11.

Mr. Ki-Joon HONG, Chairman and CEO of Hanwha SolarOne, commented, "The year 2012 will be remembered as one of tremendous challenge and change for the solar industry, with significant industry overcapacity and regulatory changes in key markets leading to a slowdown in demand, accompanied by rapidly decelerating prices. Almost all companies, including ours, found it virtually impossible to record profitability in such an operating environment. In spite of the degrading operating environment we faced, our company made significant progress in a number of areas; including  bringing greater balance between our OEM model  and branded one, diversifying our sales base into new emerging growth markets, improving our non-poly processing cost structure to be competitive with industry leaders, instituted operational efficiencies at our manufacturing sites including enhanced automation, better quality, improved product features and new product introductions,  and secured financing from a variety of sources both within and outside mainland China."

Chairman HONG continued " Our volumes in the fourth quarter did not reflect the improving demand environment of late as we chose to sacrifice sales at loss making prices and our profitability was impacted by a number of non-cash charges. However, we are well on track to achieving 50% improvement in first quarter 2013 shipment volume and over 50% for the full year. We have good visibility inSouth Africa and Japan for the first half of this year in particular, and continue to see growing opportunities in China, the US, the Middle East and other emerging markets of importance. Our funding for 2013 is proceeding as planned. Industry prices seem to have stabilized, and we see good opportunities to exploit synergies with our sister company Hanwha Q.CELLS, including a sizeable module tolling business. Profitability will remain challenging for most, if not all of 2013, but we feel confident that we are making good progress on the return to a path of profitability, aided by forecasted improvements in the operating environment and securing the company to challenge for industry leadership longer term."

BUSINESS OUTLOOK

• The Company provides the following guidance based on current operating trends and market conditions.

For the first quarter 2013 the Company expects:

• Module shipments 300MW or above.

For the full year 2013, the Company expects:

• Module shipments between 1.3-1.5GW of which about 30-35% will be for PV module processing services.
• Capital expenditures of $50 million depending on demand and other market conditions.

SHANGHAI, January 14, 2013 /PRNewswire/ -- Hanwha SolarOne Co., Ltd. ("SolarOne" or the "Company") (Nasdaq: HSOL), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic ("PV") cells and modules inChina, today announced that its wholly-owned subsidiary, Hanwha SolarOne Hong Kong Limited, has entered into a subscription agreement with Samsung Securities (Asia) Ltd. and Kookmin Bank Hong Kong Ltd. to issue three-yearUS$100 million floating rate notes (the "Notes") outside the United States. The notes will be guaranteed by Hanwha Chemical Corporation (the holding company of the company's largest shareholder). The notes will mature on January 15, 2016 with payment of principle to be made at maturity. The interest rate floats with the three-month LIBOR. The proceeds from the issuance will be used for general working capital purposes.

Mr. Jay SEO, Chief Financial Officer of Hanwha SolarOne, commented, "we are pleased to continue to have access to necessary capital to grow our business and manage our way through the current industry downturn. We believe our strong presence in the market, along with the backing of our parent, allows us to source capital both in mainlandChina and offshore. This new facility, combined with the recent US$475 million credit agreement with the Bank ofBeijing to fund project development, gives us a solid foundation in required financial resources as we enter the year 2013."

SHANGHAI, December 27, 2012 /PRNewswire/ -- Hanwha SolarOne Co., Ltd. ("SolarOne" or the "Company") (Nasdaq: HSOL), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic ("PV") cells and modules in China, today announced it has reached an agreement with the Bank of Beijing for access to up to RMB 3.0 Billion (approximately US$475 million) of credit over the next twelve-month period. Drawdown of specific amount is subject to approval procedures of the Bank of Beijing, including review of specific project information, as applicable.

Mr. Jay SEO, Chief Financial Officer of Hanwha SolarOne, commented, "This new credit facility provides us with access to the additional financial resources necessary to manage and grow our business to exploit downstream project opportunities in China and abroad. Additionally, we are pleased to have broadened our banking relationships within China to include another leading financial institution, the Bank of Beijing."

Third QUARTER 2012

• Total net revenues were RMB966.1 million (US$153.7 million), a decrease of 9.9% from 2Q12, and a decrease of 32.8% from 3Q11.
• Net loss attributable to shareholders on a non-GAAP basis was RMB301.9 million (US$48.0 million), compared with a net loss of RMB245.9 million in 2Q12 and a net loss of RMB295.7 million in 3Q11.
• Net loss per basic ADS on a non-GAAP basis was RMB3.57 (US$0.57), compared with a net loss per basic ADS on a non-GAAP basis of RMB2.91 in 2Q12 and a net loss per ADS on a non-GAAP basis of RMB3.51 in 3Q11.

Mr. Ki-Joon HONG, Chairman and CEO of Hanwha SolarOne commented, "In spite of a difficult operating environment, we achieved some good progress in shipment and production costs during the third quarter even though we suffered from continued ASP decline. Our shipment volumes grew nicely quarter-to-quarter, our production costs continued to decline and now are reaching our year-end target, and we are increasingly seeing synergies with our parent company, particularly in downstream activities. We also anticipate opportunities resulting from the cooperation with Q CELLS, which was recently acquired by our parent company. We remain optimistic that our presence in large new growth markets such as China, Japan and the US, will provide incremental volume potential in 2013. Challenging industry conditions remain: overcapacity, a spike in manufacturer's inventories, declining prices, and regulatory issues pertaining to duties in the US and possibly Europe. In spite of these, we continue to move forward with our long-term goals, in concert with support from our largest shareholder. We believe we have established the brand, a competitive cost structure, balance sheet and a management team to enter the next growth stage of the industry."

BUSINESS OUTLOOK

The Company provides the following guidance based on current operating trends and market conditions.

For the full year 2012, the Company expects:

• Module shipments reduced from the previous forecast (900 MW to 1 GW) to a range of 825 to 850 MW.
• Capital expenditures of US$100 million (Reduced from US$150 million), depending on demand and other market conditions.
• Processing costs (excluding silicon costs) to be approximately US$0.50 per watt by the end of 2012.

Second Quarter 2012 Results

• Total net revenues were RMB1,071.7 million (US$168.7 million), an increase of 33.3% from 1Q12, and a decrease of 40.4% from 2Q11.
• Net loss per basic ADS on a non-GAAP basis was RMB2.91 (US$0.46), compared with a net loss per basic ADS on a non-GAAP basis of RMB3.20 in 1Q12 and a net loss per ADS on a non-GAAP basis of RMB0.77 in 2Q11.

Fourth Quarter 2011 Results

• Total net revenues were RMB978.3 million (US$155.4 million), a decrease of 31.9% from 3Q11, and a decrease of 53.8% from 4Q10.
• Net loss per basic ADS on a GAAP basis was RMB9.88 (US$1.57), compared with net loss per basic ADS on a GAAP basis of RMB2.11 in 3Q11 and a net income per basic ADS on a GAAP basis of RMB5.02 in 4Q10.

Mr. Ki-Joon HONG, Chairman and CEO of Hanwha SolarOne, commented, "The year 2011 was a period of adjustment and consolidation for the industry. Excess capacity throughout the solar value chain, combined with incentive reductions in key markets, drove selling prices down at a rate faster than input costs, resulting in pressure on profitability. We believe the Company continued to make progress in a number of areas, including growing synergies with our largest shareholder Hanwha. We continued to invest in branding, technology, management systems and people. We also made progress in reducing non-poly processing costs in spite of reduced utilization, penetrated new important growth markets including the US and China, and increased shipments nearly 20%. Hanwha remains unwavering in its support for the solar market overall and for our Company. The business environment will remain challenging for much, if not all, of 2012. Our balance sheet is strong and our access to additional capital remains in place. Looking forward, we believe that lower prices will drive additional demand, the industry will consolidate at an accelerated pace, and we will exit this downturn in a strong competitive position."

Second Quarter 2011 Results

• Total net revenues were RMB1,791.2 million (US$277.1 million), a decrease of 18.4% from 1Q11 and an increase of 2.2% from 2Q10.
• Net loss per basic ADS on a non-GAAP basis(1) was RMB0.77 (US$0.12), compared with net income per basic ADS on a non-GAAP basis of RMB1.84 in 1Q11 and RMB4.00 in 2Q10(US$0.61)

Mr. Ki-Joon HONG, Chairman and CEO of Hanwha SolarOne, commented, "We were not insulated from the difficult operating environment during the second quarter. Regulatory changes in Italy, rapidly falling module prices, industry overcapacity and large channel inventories all negatively affected our second quarter results. We consciously reduced our manufacturing activities for a period of time to control expenses, manage working capital, and prevent the build-up of high cost inventory. We did not retreat from our aggressive posture towards the future. We moved forward with our capacity expansion plan, invested in management systems and personnel and made good progress in branding initiatives and research and development. We expect that demand will improve for the remainder of the year."

BUSINESS OUTLOOK

The Company provides the following guidance based on current operating trends and market conditions.

For the full year 2011, the Company expects:

• Module shipments to be at the lower end of the previously announced range of 1GW to 1.2GW, of which about 20 to 25% will be for PV module processing services.
• Capital expenditures to be approximately US$400 million.

We have financed our operations primarily through cash flows from operations and also through bank loans and related-party loans and proceeds from our initial public offering, the convertible bond offering in January 2008, the continuous ADS offerings from July 2008 to August 2008 and from September 2009 to November 2009 and our ADS offering in November 2010. We believe our working capital is sufficient for our present requirements.

Our capital expenditures were RMB1,169.0 million, RMB324.7 million and RMB670.8 million (US$101.6 million) in 2008, 2009 and 2010, respectively, all of which related primarily to the purchases of manufacturing equipment and facility construction costs. Based on the current market conditions, we expect to incur capital expenditures of US$450.0 million for 2011, which will be used primarily for purchasing manufacturing equipment and building production facilities in Nantong, Qidong and Lianyungang, Jiangsu Province. We plan to fund the balance of our capital expenditure requirements for 2011 with cash from operations, additional bank borrowings, and other forms of financing, if necessary.

Fourth Quarter Results:

• Total net revenues were RMB2,112.7 million (US$320.1 million), a decrease of 3.3% from 3Q10, but an increase of 68.7% from 4Q09.
• Gross profit decreased 13.6% to RMB428.7 million (US$64.9 million) from RMB496.4 million in 3Q10, but increased 82.0% from RMB235.6 million in 4Q09.  
• Net income per basic ADS on a non-GAAP basis was RMB1.82 (US$0.28), a decrease of 60.6% from RMB4.62 in 3Q10, but an increase of 9.0% from RMB1.67 in 4Q09.

Dr. Peter Xie, President and CEO of Hanwha SolarOne, commented, " We concluded the year 2010 with another profitable quarter, a stronger balance sheet, and diversified our shipments towards new longer term growth markets. For the full year, our revenues nearly doubled to over $1 billion, our shipments rose 155%, and we returned to a healthy level of profitability. We enter 2011 with a high degree of enthusiasm and confidence: our capabilities and brand is strengthened with our strategic partnership with Hanwha, we have good visibility of orders into mid-year, new technology initiatives are progressing towards completion, and significant new capacity will come on stream soon enhancing our ability to meet customer demand and to improve our cost structure."

Preliminary Results

• Total net revenues are expected to be between USD325 to 330 million.
• Gross margins are expected to be approximately 20%.

Dr. Peter Xie, President and CEO of the Company, commented, "We are pleased with our operating performance during the 2010 fiscal year and expect continued growth throughout 2011.  We have good order visibility and expect to regain our momentum in shipment growth quarter-to-quarter.  We also expect to benefit from relatively stable pricing as well as improved availability of purchased wafers and cells, which we believe will help to meet incremental demand."

"In the second half of 2011, we plan to increase our production capacity with heightened vertical integration, allowing us to improve our cost structure.  We also plan to continue to make significant headway in our geographic diversification, growing beyond Germany to reach key overseas markets including China, Italy and the U.S."

THIRD QUARTER 2010 HIGHLIGHTS

• Total net revenues were RMB 2,185.7 million (US$326.7 million), an increase of 24.7% from 2Q10 and an increase of 121.5% from 3Q09.
  
• Net income per basic ADS on a non-GAAP basis was RMB 4.62 (US$0.69), an increase of 15.6% from RMB 4.00 in 2Q10 and an increase of 266.0% from RMB 1.26 in 3Q09.  

• On a non-GAAP basis, net income attributable to shareholders was RMB 273.7 million (US$40.9 million), compared with RMB 231.7 million in 2Q10 and RMB 68.2 million in 3Q09.
• Net income per basic ADS, on a non-GAAP basis, was RMB 4.62 (US$0.69) in 3Q10, compared with RMB 4.00 in 2Q10 and net loss per basic ADS of RMB 1.26 in 3Q09.

Peter Xie, President of Solarfun, commented, "We are pleased with the results we achieved in the third quarter, particularly our record shipments and revenues as well as our increased gross margin, operating cost control and continued strong return on equity. In the first nine months of 2010, we have achieved non-GAAP earnings per basic ADS of US$1.70. We continue to see healthy market demand in the fourth quarter and beyond, and with increased scale and further vertical integration in 2011, we believe we will continue to be well-positioned for further profitable growth"

BUSINESS OUTLOOK

The Company provides the following guidance based on current operating trends and market conditions.

For 4Q10, the Company expects:

• Total module shipments to be 205 MW to 215 MW, of which about 25% to 30% will be for PV module processing services.

• ASP excluding PV module processing services to increase slightly from 3Q10, assuming that the average Euro/US dollar exchange rate stays at approximately 1.35 during 4Q10.

For the fourth quarter of 2010, the Company expects a slight decline in module shipments compared with the previous quarter.   This does not reflect the strength of market demand nor the Company's competitive position.  The decline in the forecast module shipments is due to the following reasons:

• As previously announced, the Company will be converting some of its existing cell lines into high-efficiency cell capacity with the installation of selective emitter technology.   This will cause some temporary loss of internal cell capacity in the fourth quarter.

• The Company has made a conscious business decision to balance customer needs with corporate profitability goals and will therefore reduce its purchase of externally sourced cells, which are more expensive than internally sourced cells.

Peter Xie, President of Solarfun, commented, "We are very pleased with our strong performance in the first quarter of 2010. Quarterly revenues for the first time in the Company's history exceeded $200 million, and net income per diluted ADS on a non-GAAP basis reached US$0.40, a substantial increase of over 63.9% compared to the fourth quarter of 2009. The strong performance was attributable to our ability to take advantage of favorable industry demand while keeping a keen focus on cost control and risk management.

To keep up our momentum, we plan to ramp up our internal cell capacity to 500MW by July, and our module capacity to 900MW by August of this year. This progress, along with our ongoing efforts to reduce our manufacturing costs and increase our cell efficiencies while expanding our R&D efforts, makes us optimistic about our future."

For 2Q10, the Company expects:

• Total module shipments to be 160MW to 170MW, of which approximately 35% will be for PV module processing services.
• ASP for PV module shipments to stay flat in constant currency but decline by approximately 6.5% from 1Q10 on the assumption that the Euro/US dollar exchange rate stays at approximately 1.25 for the rest of the quarter.

For 2010 full year shipment, the Company is raising its guidance from 600MW to 650MW   based on strong demand from customers for 2010.  Module processing services is expected to represent approximately 20-30% of the total shipments.