Wednesday, April 1, 2015

Yingli Green Energy Has A Bigger Problem On Its Hands

This article was first published by Seeking Alpha on March 4, 2015, prior to the company’s disappointing fourth quarter results on March 25.

By Sarfaraz A. Khan

Yingli Green Energy (NYSE:YGE) used to be the world's leading manufacturer of solar panels until it was displaced by its Chinese competitor Trina Solar (NYSE:TSL) in 2014. But Yingli retained the second spot, ahead of JinkoSolar (NYSE:JKS), also Chinese, Canadian Solar (NASDAQ:CSIQ) and Japan's Sharp Corp. (OTCPK:SHCAY). While these solar stocks have been under pressure due to the larger macro headwinds, Yingli Green Energy has a much bigger problem on its hand.

The Baoding, China-based Yingli, however, has done a great job in terms of improving its margins and shipments. During the third quarter, the company's total PV shipments clocked in at 903.4MW. This was in line with the company's guidance, and shows improvement from 887.9MW in the second quarter. Meanwhile, Yingli's gross margins came in at a strong 20.9% - this was considerably higher than 15.6% in the second quarter and 13.7% in the same quarter last year.

The higher margins have come on the back of the company's cost reduction efforts. Yingli has reduced its in-house overall cost per watt from $0.52 in the first quarter to $0.48 in the third quarter, led by the drop in non-silicon costs from $0.42 to $0.39 in this period. The overall costs could continue to decline in the coming quarters as the company narrows the gap with the cost leader JinkoSolar.

Moreover, Yingli has managed to significantly lower its operating expenses, despite growing the R&D expenditure. In the third quarter, the company's operating expenses dropped by 17% from the second ….. read full article at Seeking Alpha.