Yingli Solar’s gross margins
Yingli (or Yingli Solar) (YGE) reported a gross profit of about $56.0 million and a gross margin of 16.0% in 3Q15. For 3Q16, analysts expect Yingli Solar to report a gross profit of about $31.0 million with a gross margin of about 12.4%, which is in line with the company’s 3Q16 gross margin guidance.
However, according to YGE’s preliminary financial results, the company now expects its overall gross margins to be lower than its 3Q16 guidance. Lower gross margins imply lower profitability from the company’s ongoing operations.
For 3Q16, YGE had a gross margin guidance of 12.5%–14.0%. According to preliminary financial results announced on November 28, 2016, YGE now expects its overall gross margin for 3Q16 to be 5.0%–6.0%. Gross margin from the sale of PV modules is expected to be 6.0%–7.0%.
The expected fall in gross margins is primarily due to an inventory provision that’s anticipated to be recorded in 3Q16. It’s also due to a rise in unit manufacturing costs due to a lower utilization rate of the company’s production capacity.
Lower solar (TAN) module ASPs (average selling prices) and aggressive PPA (power purchasing agreement) pricing continue to impact gross margins of upstream solar companies. These companies include YGE, First Solar (FSLR), SunPower (SPWR), Trina Solar (TSL), and Canadian Solar (CSIQ).
Net income estimates
Yingli Solar reported a net loss of about $504.0 million in 3Q15 and a net income of about $11.0 million in 2Q16. For 3Q16, analysts expect the company to report a net loss of about $25.0 million. The anticipated fall is primarily due to the expected fall in Yingli’s 3Q16 revenue and gross margins.
In the final part of this series, we’ll see what you should look for in Yingli Solar’s 3Q16 earnings results.