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Before markets opened today, ReneSola Ltd. (SOL - Analyst Report) reported fourth quarter and fiscal 2011 results. In the reported quarter, the company clocked adjusted loss per American Depositary Share (ADS) of 43 cents per share, falling behind the Zacks Consensus Estimate of 27 cents of loss per ADS. Numbers however were better than the year-ago quarterly loss of 69 cents.

Fiscal 2011 earnings of 0.4 cents per ADS however came below the Zacks Consensus Estimate of 14 cents.  Earnings in the reported fiscal were way below $1.93 per ADS reported by the company in fiscal 2010.

Operational Results

In the reported quarter, ReneSola’s revenues of $187.7 million plummeted 51.4% from $386.4 million in the fourth quarter of 2010 and dipped 0.7% from $189.1 million in the sequentially preceding quarter. Revenues were relatively unchanged quarter-over-quarter, with a decrease in the average selling price ("ASP") of solar wafers and modules, offset by an increase in solar module shipments. Revenue in the reported quarter however comfortably beat the Zacks Consensus Estimate of $179 million.

Fiscal 2011 revenue of $985.3 million beat the Zacks Consensus Estimate of $928 million. However, the top line came in below the fiscal 2010 revenue of $1,205.6 million. The decrease in revenues was due to a significant decline in the ASPs of solar wafers and modules.

In the reported quarter, ReneSola’s product shipments were 339.9 MW versus 328.5 MW in the third quarter of 2011 and 349.4 MW in the year-ago quarter. In the reported quarter, solar wafer and module shipments were 245.4 MW and 94.5 MW, respectively.

The sequential increase in solar product shipments was the result of strong demand for the company's solar modules from Europe, particularly Germany, due to pent-up demand.

ReneSola digested a gross loss of $43.4 million compared with $7.7 million of gross loss in the third quarter of 2011 and $119.3 million of gross profit in the year-ago quarter. The sequential rise in gross loss was primarily due to declines in solar wafer and module ASPs, as well as an inventory write-down of approximately $26.2 million to reflect the significant drop in prices for polysilicon, solar wafers and solar modules in 2011.

Overall, ReneSola recorded a net loss of $36.7 million compared with a net income of $61.0 million in the year-ago quarter.

Financial Condition

ReneSola at fiscal-end 2011 had cash and cash equivalents plus restricted cash of $437.4 million, compared with $450.3 million at the end of the third quarter of 2011. Total debt was $715.6 million, compared with $691.4 million at the end of the third quarter of 2011. Short-term borrowings were $570.9 million, up from $523.5 million at the end of the third quarter of 2011. Capital expenditures were $34.1 million in the reported quarter and $135.3 million for the full year 2011.


ReneSola, for the first quarter of 2012, expects total solar wafer and module shipments to be in the range of 400 MW–420 MW, and revenues to be in the range of $180 million–$190 million. For fiscal 2012, ReneSola expects total solar wafer and module shipments to be in the range of 1.8 GW to 2.0 GW.

Our Take

Based out of China, ReneSola is a leading global manufacturer of solar wafers and producer of solar power products. Capitalizing on proprietary technologies, economies of scale, high production quality, and technological innovations and know-how, ReneSola leverages its in-house virgin polysilicon and solar cell and module production capabilities to provide its customers with solar wafer products and processing services. The company possesses a global network of suppliers and customers.

However, ReneSola’s fortunes have been impacted by the industry-wide oversupply glut leading to sharply falling Average Selling Prices, tepid module demand in Europe, and rising competition in the market. Given the industry-wide high inventory level, we advise investors not to take any position in the long-term Underperform recommended stock ReneSola.

In the near term, we would advise investors to focus on Zacks #2 Rank (Buy) stocks like China Sunergy Co. Ltd. and Canadian Solar Inc. (CSIQ - Analyst Report).

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