Xinyi Solar's net profit down 20% in 2018

Solar panels installed at a mountain hut in Lenzerheide. Author: SteFou!. License: Creative Commons, Attribution 2.0 Generic

Chinese photovoltaic (PV) glass maker Xinyi Solar Holdings Ltd (HKG:00968) saw its 2018 net profit drop 20.1% year-on-year as the improved results of its solar power generation business could not fully offset the weaker result of the PV glass division.

Net profit fell to HKD 1.86 billion (USD 237.3m/EUR 208.6m) from HKD 2.33 billion in 2017.

The company has three business segments -- PV glass, solar farms, and engineering, procurement and construction (EPS) services. The solar glass unit’s performance was hit by lower sales volumes and a drop in the average selling price (ASP) of solar glass. Between the first and second halves of the year, ASPs fell by more than 20%.

On a more positive note, thanks to a production line in Malaysia, Xinyi Solar expanded its reach in overseas markets like Malaysia, North America, South Korea, India and Singapore. Sales outside China reached 25% of solar glass sales in 2018, as compared to 20.9% in 2017.

Total solar glass revenues contracted by 3.2% to HKD 5.56 billion in 2018.

The company's solar farms business, in contrast, reported 30.3% higher revenues, reaching HKD 1.92 billion in 2018. This was mainly due to a rise in capacity to 2.28 GW at the end of the year from 1.75 GW at the end of 2017. The company noted that it, as other solar power producers in China, has experienced delays in receiving subsidy payments. As of December 31, 2018, it had outstanding receivables for sales of electricity of HKD 87.3 million and a tariff adjustment (subsidy) receivable of HKD 2.18 billion.

The EPC service segment brought just HKD 188.9 million of revenues, down by 91.8% on the year, as it carried out residential and commercial projects of about 16 MW, as compared to roughly 300 MW of projects, including utility-scale solar parks, a year earlier.

Results in HKD million	2018	2017
Revenue	7,671.6	9,527
Gross margin (in %)	38.6	35.7
- Solar glass gross margin (in %)	26.2	30.2
- Solar farms gross margin (in %)	75.0	74.8
EBITDA	3,209.5	3,517.4
Operating profit	2,443.5	2,914
Profit to equity holders of the company	1,863.1	2,332

Notwithstanding the impact of China's 531 policy change on operating performance in the near term, Xinyi Solar said its directors are optimistic about the growth potential of the solar glass and solar farm businesses in the long run. "Capitalising on its expertise in solar glass manufacturing and solid experience in solar farm development, the Group is well prepared for the advent of solar market parity," it said.

(HKD 10 = USD 1.27/EUR 1.12)

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