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Did Trina Solar Meet Analysts’ 2Q16 Earnings Estimates?

PART:
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Part 6
Did Trina Solar Meet Analysts’ 2Q16 Earnings Estimates? PART 6 OF 8

A Look at Trina Solar’s Capacity Expansion and Financial Position

Trina Solar’s capacity expansion

Trina Solar’s (TSL) manufacturing segment produces ingots, wafers, solar (TAN) cells, and PV (photovoltaic) modules. The company derives the majority of its revenue from its manufacturing segment, and its future success largely depends on the ability to expand its manufacturing capacity and output.

A Look at Trina Solar’s Capacity Expansion and Financial Position

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According to the company’s filings, Trina Solar’s annualized manufacturing capacities for modules, solar cells, wafers, and ingots stood at 6.0 GW (gigawatts), 5.0 GW, 1.8 GW, and 2.3 GW, respectively, at the end of 2Q16. The company increased its module and cell manufacturing capacities from 5.6 GW and 4.3 GW, respectively, at the end of 1Q16. However, its manufacturing capacity for wafers and ingots remained the same. TSL expects its manufacturing capacity to remain at existing levels at the end of 4Q16.

Interest expenses

Trina Solar’s interest expenses have consistently been on the rise over the last eight quarters. For 2Q16, interest expenses came in at $26.0 million, compared to $15.5 million in 1Q16 and $13.0 million in 2Q15.

A Look at Trina Solar’s Capacity Expansion and Financial Position

According to the company’s filings, the increase in interest expenses is mainly due to the increase in both short-term and long-term debt.

As of June 30, 2016, Trina Solar had an interest coverage ratio (the number of times interest payments can be made with current earnings) of about 3.2, which is up from 2.9 on March 31, 2016, but down from 4.7 at the end of 2Q15. This is lower than Canadian Solar’s (CSIQ) interest coverage ratio of 3.2 but higher than First Solar’s (FSLR) ratio of 1.2 and JA Solar’s (JASO) ratio of 2.7 for 2Q16.

Financial position

As of June 30, 2016, Trina Solar had about $1,158 million and $635 million of short-term and long-term borrowings on its books, respectively. TSL had about $933 million and $584 million in short-term and long-term borrowings, respectively, at the end of 1Q16.

At the end of 2Q16, Trina Solar had about $648 million in cash and cash equivalents on its balance sheet, compared to $452 million at the end of 1Q16.

Next, we’ll look at Trina Solar’s 2016 and 3Q16 guidance.

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