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JA Solar Holdings Co. Ltd. (JASO - Analyst Report) announced adjusted loss per American Depositary Share (ADS) of $2.65 in its fourth quarter of 2012, falling short of the Zacks Consensus Estimate of a loss of $1.30. Results also came far below the year-ago adjusted loss per ADS of 60 cents.

Quarterly Performance

JA Solar’s revenues in the reported quarter were $268.1 million, comfortably ahead of the Zacks Consensus Estimate of $241 million. Also, revenues increased 1.8% versus $263.2 million in the third quarter of 2012, and decreased 14.2% versus $312.3 million in the fourth quarter of 2011.

Total shipments in the fourth quarter of 2012 were 500 MW, exceeding the high end of the company's previously provided guidance of 380 MW to 420 MW. Shipments also rose 19.6% versus the 418 MW shipped in the third quarter of 2012, and a 25.6% increase from 398 MW in the fourth quarter of 2011.

Gross loss in the fourth quarter of 2012 was $12.4 million, compared with a gross loss of $15.5 million in the third quarter of 2012 and a gross profit of $1.5 million in the fourth quarter of 2011.

Total operating expenses were $75.8 million, compared with $85.8 million in the third quarter of 2012 and $79.7 million in the fourth quarter of 2011. Total operating expenses in the fourth quarter of 2012 included an accounts receivable provision of $21.5 million, and a long-lived asset impairment of $23.6 million related to the retirement of 300 MW of outdated cell production capacity and 300 MW of outdated module production capacity.

Operating loss in the fourth quarter of 2012 was $88.2 million, compared with an operating loss of $101.3 million in the third quarter of 2012 and an operating loss of $78.3 million in the fourth quarter of 2011. Overall, the company digested a net loss of $102.4 million in the reported quarter.

Financial Condition

JA Solar at the end of the reported quarter had cash and cash equivalents of $486.6 million and total working capital of $193.6 million. Total short-term bank borrowings and convertible notes due 2013 were $269.9 million. Total long-term bank borrowings were $632.2 million, among which $297.0 million were due in one year. The total face value of outstanding convertible notes due 2013 was $116.6 million as of Dec 31, 2012.

Outlook

JA Solar expects its cell and module shipments to be in the range of 410MW and 430MW in the first quarter of 2013. For the full year 2013, the company expects total cell and module shipments to be between 1.7GW and 1.9GW.

Our Take

JA Solar is one of the most cost-efficient solar producers in the world, with a geographically diverse customer base as well as silicon wafer supply agreements in place to feed its production. Positive factors include ongoing expansion programs, improving operating efficiencies, and higher conversion efficiency. JA Solar is steadily expanding its customer base worldwide in several geographic end markets including the U.S., Canada, Italy, Japan, Australia, China and India.

In the fourth quarter of 2012, in an effort to streamline production processes and increase production efficiency, JA Solar retired 300 MW of cell production capacity and 300 MW of module production capacity. As of Dec 31, 2012, JA Solar had an annual wafer production capacity of 1.0 GW, an annual cell production capacity of 2.5 GW and an annual module production capacity of 1.8 GW. JA Solar intends to maintain its annualized wafer, cell, and module capacities in 2013. JA Solar carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other stocks in the solar industry that are currently performing well and have a bright outlook include Canadian Solar Inc. (CSIQ - Analyst Report), Str Holdings Inc. and ReneSola Ltd. (SOL - Analyst Report), all with a Zacks Rank #2 (Buy).

 

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