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

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Nov. 28 2016, Updated 11:05 a.m. ET

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. Its future success largely depends on the ability to expand its manufacturing capacity and output.

According to company filings, Trina Solar’s modules, solar cells, wafers, and ingots annualized manufacturing capacity stood at 6.0 GW (gigawatts), 5.0 GW, 1.8 GW, and 2.3 GW, respectively, at the end of 3Q16. The company maintained its manufacturing capacity at 2Q16 levels.

Moving ahead, TSL expects its manufacturing capacity to remain at existing levels at the end 4Q16.

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Financial position

Trina Solar’s interest expenses have consistently been on the rise over the last two years. For 3Q16, interest expenses were $28.6 million compared to $26.0 million in 2Q16 and $13.5 million in 3Q15.

According to company filings, the rise in interest expenses on a YoY (year-over-year) basis is mainly due to more borrowing. The sequential rise is due to less interest expense being capitalized in the third quarter of 2016.

As of September 30, 2016, Trina Solar had an interest coverage ratio[1. the number of times interest payments can be made with current earnings] of about 1.9, which fell from 2.9 as of March 31, 2016. The ratio is higher than Canadian Solar’s (CSIQ) at 1.4, Yingli Solar’s (YGE) at 1.2, and JA Solar’s (JASO) at 1.6 for 3Q16.

As of September 30, 2016, Trina Solar had about $1.1 billion and $649.0 million in short-term and long-term borrowings, respectively. It had about $1.2 billion and $635.0 million in short-term and long-term borrowings, respectively, at the end of 2Q16.

At the end of 3Q16, Trina Solar had about $625.2 million in cash and cash equivalents on its balance sheet. That figure compares to about $648.0 million at the end of 2Q16.

Analyst expectations

Following Trina Solar’s (TSL) 3Q16 results, analysts revised down the company’s gross profit estimates for 4Q16. For the upcoming quarter, analysts now estimate that TSL will report a gross profit of about $106.0 million against the previous estimate of $126.0 million.

They also expect TSL’s gross margin to be around 14.6% compared to 16.9% in 3Q16.

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