SHANGRAO, China : JinkoSolar Holding Co., Ltd. (“JinkoSolar” or the “Company”) (NYSE: JKS), one of the largest and most innovative solar module manufacturers in the world, today announced its unaudited financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 Business Highlights
- Significant year-over-year growth in revenues and module shipments.
- Demand in European markets remained strong; shipments to China market increased significantly year-over-year and sequentially.
- Product mix was further optimized with the shipments of large-size products increasing to nearly 90% of total shipments.
- The first phase of 16 GW N-type cells reached full capacity with mass production efficiency exceeding 24.8%.
- We have high visibility for the order book of our premium N-type modules.
Second Quarter 2022 Operational and Financial Highlights
- Quarterly shipments were 10,532 MW (10,183 MW for solar modules, and 349 MW for cells and wafers), up 25.5% sequentially, and up 102.4% year-over-year.
- Total revenues were RMB18.84 billion (US$2.81 billion), up 27.6% sequentially and up 137.6% year-over-year. The sequential and year-over-year increases were mainly attributable to an increase in the shipment of solar modules.
- Gross profit was RMB2.77 billion (US$413.8 million), up 24.5% sequentially and up 103.9% year-over-year.
- Gross margin was 14.7%, compared with 15.1% in Q1 2022 and 17.1% in Q2 2021. The sequential change was relatively flat and the year-over-year decrease was mainly due to an increase in the material cost of solar modules.
- Adjusted net income attributable to JinkoSolar Holding Co., Ltd’s ordinary shareholders, which excludes the impact from a change in fair value of the convertible senior notes (the “Notes”) and the share based compensations expenses, was RMB368.4 million (US$55.0 million), compared with RMB328.4 million in Q1 2022 and RMB264.1 million in Q2 2021. Due to the increase in the Company’s stock price in Q2 2022, the Company recognized a loss from a change in fair value of the Notes of RMB536.9 million (US$80.2 million) in Q2 2022.
- Net loss attributable to JinkoSolar Holding Co., Ltd’s ordinary shareholders was RMB623.3 million (US$93.1 million), compared with net income attributable to JinkoSolar Holding Co., Ltd’s ordinary shareholders of RMB28.9 million in Q1 2022 and RMB66.2 million in Q2 2021.
- Basic and diluted losses per ordinary share were RMB3.15 (US$0.47) and RMB3.15 (US$0.47), respectively. This translates into basic and diluted losses per ADS of RMB12.60 (US$1.88) and RMB12.60 (US$1.88), respectively.
Mr. Xiande Li, JinkoSolar’s Chairman of the Board of Directors and Chief Executive Officer, commented, “We had a good quarter despite difficult market conditions. Total module shipments in the second quarter were approximately 10.2GW, up 26.8% sequentially, and total revenues reached US$2.81 billion, up 27.6% sequentially. As polysilicon prices continued to rise, we actively worked to control internal costs through technical advancement and process improvement, partially offsetting the impact of higher upstream costs. Gross margin in the second quarter was 14.7%, remaining relatively flat compared with the first quarter. Excluding the impact of the convertible senior notes and share based compensations expenses, net income in the second quarter was US$55.0 million, improving sequentially.
Driven by the accelerating energy transition in several countries and businesses, as well as the energy crisis caused by the Russia-Ukraine conflict, demand for solar products continued to grow in many markets. In the first half of 2022, Europe imported a total of 42.4GW of PV modules, a year-on-year increase of 137%, and China achieved solar PV installations of 30.9 GW, a year-over-year increase of 136%. Given this better-than-expected growth in demand, released polysilicon production came up short and was further aggravated by annual maintenance programs, and power rationing and anti-pandemic restrictions in certain regions of China. As a result, polysilicon prices rose continuously, reaching a recent high of RMB310/kg, further increasing module prices. Higher module prices negatively affected project yields, causing the demand to deduce to some extent. We believe polysilicon prices will continue to increase and reach their peak in the third quarter. As polysilicon production gradually ramps up in the fourth quarter, polysilicon price increases are expected to moderate, driving a recovery of downstream demand.
Recently，the local government of Sichuan province has imposed province-wide power rationing measures and the production capacity of our manufacturing facilities in Sichuan province has been temporarily affected. We are currently unable to evaluate the extent to which our business operation and financial performance for full year 2022 will be affected by the power rationing measures in Sichuan Province, as it remains uncertain how long the power rationing measures will persist and when our Sichuan manufacturing facilities can resume full production. We are actively monitoring the situation and have implemented various measures to minimize the adverse impact from the power rationing on our business operations and financial performance.
During the second quarter, the proportion of large-size capacity increased sequentially, further improving our integrated structure. At the end of the quarter, our 16 GW of TOPCon cell capacity reached full production with a mass-production efficiency of over 24.8%, and yield rate and integrated cost were in line with our expectations. We recently started production at an additional 8 GW of N-type cell capacity in Hefei and commenced construction of another production project with 11 GW of N-type cell capacity in Haining.
As an industry pioneer embracing the TOPCon technology, we have recently achieved key technology breakthroughs in the currently selected TOPCon technology route that we believe we have created an entry-barrier related to core process and technology with industry-leading mass production efficiency, yield rate and cost levels. Our N-type products continue to be well-received by global customers and, so far, we have high visibility in our orderbook. Compared with P-type products, N-type products command a competitive premium as a result of improved technical parameters and additional power generation gain. We are confident that we will complete our full year N-type shipment goal. In addition, considering the release of new capacity in 2023 and increasing market penetration, we expect the proportion of N-type shipments to further increase.
In view of the current and expected supply chain and market conditions, we have adjusted our capacity expansion pace for mono wafer, cell, and modules for the rest of 2022, and as a result, we are currently expecting the annual production capacity for mono wafers, cells, and modules to reach 60 GW, 55 GW and 65 GW, respectively, by the end of 2022.”
Second Quarter 2022 Financial Results
Total Revenues
Total revenues in the second quarter of 2022 were RMB18.84 billion (US$2.81 billion), an increase of 27.6% from RMB14.76 billion in the first quarter of 2022 and an increase of 137.6% from RMB7.93 billion in the second quarter of 2021. The sequential and year-over-year increases were mainly attributable to an increase in the shipment of solar modules due to the increasing demand of global market.
Gross Profit and Gross Margin
Gross profit in the second quarter of 2022 was RMB2.77 billion (US$413.8 million), compared with RMB2.23 billion in the first quarter of 2022 and RMB1.36 billion in the second quarter of 2021.
Gross margin was 14.7% in the second quarter of 2022, compared with 15.1% in the first quarter of 2022 and 17.1% in the second quarter of 2021. The sequential change was relatively flat and the year-over-year decrease was mainly due to an increase in the material cost of solar modules.
(Loss) /Income from Operations and Operating Margin
Loss from operations in the second quarter of 2022 was RMB 289.1 million (US$43.2 million), compared with income from operations of RMB40.8 million in the first quarter of 2022 and RMB356.4 million in the second quarter of 2021. The sequential and year-over-year decreases were mainly due to an increase in disposal and impairment loss on property, plant and equipment.
Operating loss margin was 1.5% in the second quarter of 2022, compared with operating profit margin of 0.3% in the first quarter of 2022 and 4.5% in the second quarter of 2021.
Total operating expenses in the second quarter of 2022 were RMB3.06 billion (US$457.0 million), an increase of 40.0% from RMB2.19 billion in the first quarter of 2022 and an increase of 205.2% from RMB1.00 billion in the second quarter of 2021. The sequential and year-over-year increases were mainly attributable to (i) an increase in shipping costs for solar modules (ii) an increase in disposal and impairment loss on property, plant and equipment, and (iii) an increase in share based compensations expenses in the second quarter of 2022.
Total operating expenses accounted for 16.2% of total revenues in the second quarter of 2022, compared to 14.8% in the first quarter of 2022 and 12.6% in the second quarter of 2021.
Interest Expenses, Net
Net interest expenses in the second quarter of 2022 were RMB88.0 million (US$13.1 million), a decrease of 45.7% from RMB162.2 million in the first quarter of 2022 and a decrease of 44.1% from RMB157.5 million in the second quarter of 2021. The sequential and year-over-year decreases were mainly due to a decrease in the Company’s interest-bearing debts and an increase in interest income of bank deposits.
Subsidy Income
Subsidy income in the second quarter of 2022 was RMB464.8 million (US$69.4 million), compared with RMB305.3 million in the first quarter of 2022 and RMB162.2 million in the second quarter of 2021. The sequential and year over year increases were mainly attributable to an increase in the cash receipt of subsidies from local governments in China which are non-recurring, not refundable and with no conditions.
Exchange Gain/Loss and Change in Fair Value of Foreign Exchange Derivatives
The Company recorded a net exchange gain (including change in fair value of foreign exchange derivatives) of RMB225.7 million (US$33.7 million) in the second quarter of 2022, compared to a net exchange gain of RMB76.4 million in the first quarter of 2022 and a net exchange loss of RMB4.4 million in the second quarter of 2021. The sequential and year-over-year changes were mainly attributable to the exchange rate fluctuation of the US dollars against the RMB in the second quarter of 2022.
Change in Fair Value of Convertible Senior Notes and Call Option
The Company issued US$85.0 million of 4.5% convertible senior notes due 2024 in May 2019 and has elected to measure the Notes at fair value derived by valuation model, i.e. Binomial Model.
The Company recognized a loss from a change in fair value of the Notes of RMB536.9 million (US$80.2 million) in the second quarter of 2022, compared to a loss of RMB104.9 million in the first quarter of 2022 and RMB335.7 million in the second quarter of 2021. The change was primarily due to an increase in the Company’s stock price in the second quarter of 2022.
Equity in Earnings/ (Loss) of Affiliated Companies
The Company indirectly holds a 20% equity interest in Sweihan PV Power Company P.J.S.C, a developer and operator of solar power projects in Dubai, and accounts for its investment using the equity method. The Company recorded equity in loss of affiliated companies of RMB0.1 million in the second quarter of 2022, compared with earnings of RMB6.4 million in the first quarter of 2022 and loss of RMB0.3 million in the second quarter of 2021. The fluctuation of equity in loss of affiliated companies primarily arose from the net loss incurred by an affiliate company. The affiliated company terminated its interest swap arrangements in the first quarter of 2022. Hedge accounting was not applied for the derivative.
Income Tax Expense/ (Benefit)
The Company recorded an income tax expense of RMB118.1 million (US$17.6 million) in the second quarter of 2022, compared with an income tax expense of RMB71.0 million in the first quarter of 2022 and an income tax benefit of RMB6.9 million in the second quarter of 2021. The sequential increase in income tax expense was mainly due to higher profit (excluding the impact of a loss from change in fair value of the Notes of RMB536.9 million in the second quarter of 2022, compared with a loss of RMB104.9 million in the first quarter of 2022) generated compared to the first quarter of 2022.
Non-Controlling Interests
Net income attributable to non-controlling interests amounted to RMB276.8 million (US$41.3 million) in the second quarter of 2022, compared with RMB75.3 million in the first quarter of 2022 and RMB100.7 million in the second quarter of 2021. The sequential increase was mainly attributable to the increase of net income of the Company’s major subsidiary, Jinko Solar Co., Ltd (“Jiangxi Jinko”), and year-over-year increase was mainly attributable to the increase of non-controlling interests after Jiangxi Jinko completed its initial public offering (“IPO”) and started trading on Shanghai Stock Exchange’s Sci-Tech innovation board on January 26, 2022. After the IPO, the Company holds approximately 58.62% equity interest in Jiangxi Jinko. Ownership of non-controlling interests in Jiangxi Jinko increased from 26.72% to 41.38% due to the IPO.
Net Income/ (loss) and Earnings per Share
Excluding the impact from a change in fair value of the Notes and the share based compensations expenses ,the adjusted net income attributable to JinkoSolar Holding Co., Ltd’s ordinary shareholders was RMB368.4 million (US$55.0 million), compared with RMB328.4 million in the first quarter of 2022 and RMB264.1 million in the second quarter of 2021.Net loss attributable to the Company’s ordinary shareholders was RMB 623.3 million (US$93.1 million) in the second quarter of 2022, compared with net income attributable to the Company’s ordinary shareholders of RMB28.9 million in the first quarter of 2022 and net income attributable to the Company’s ordinary shareholders of RMB66.2 million in the second quarter of 2021.
Basic and diluted losses per ordinary share were RMB3.15 (US$0.47) and RMB3.15(US$0.47), respectively, during the second quarter of 2022, compared to basic and diluted earnings per ordinary share were RMB0.15 and RMB0.15, respectively, in the first quarter of 2022, and basic and diluted earnings per ordinary share were RMB0.35 and RMB0.35, respectively, in the second quarter of 2021. As each ADS represents four ordinary shares, this translates into basic and diluted losses per ADS of RMB 12.60(US$1.88) and RMB12.60(US$1.88), respectively in the second quarter of 2022; basic and diluted earnings per ADS were RMB0.60 and RMB0.60, respectively, in the first quarter of 2022; and basic and diluted earnings per ADS were RMB1.39 and RMB1.38, respectively, in the second quarter of 2021.
Financial Position
As of June 30, 2022, the Company had RMB14.39 billion (US$2.15 billion) in cash and cash equivalents and restricted cash, compared with RMB16.87 billion as of March 31, 2022.
As of June 30, 2022, the Company’s accounts receivables due from third parties were RMB11.13 billion (US$1.66 billion), compared with RMB8.56 billion as of March 31, 2022.
As of June 30, 2022, the Company’s inventories were RMB18.50 billion (US$2.76 billion), compared with RMB15.95 billion as of March 31, 2022.
As of June 30, 2022, the Company’s total interest-bearing debts were RMB25.70 billion (US$3.84 billion), compared with RMB27.46 billion as of March 31, 2022.
Second Quarter 2022 Operational Highlights
Solar Module, Cell and Wafer Shipments
Total shipments were 10,532 MW in the second quarter of 2022, including 10,183 MW for solar module shipments and 349 MW for cell and wafer shipments.
Solar Products Production Capacity
As of June 30, 2022, the Company’s annual production capacity for mono wafer, solar cell and solar module was 43.0 GW, 42.0 GW and 50.0 GW, respectively.
Operations and Business Outlook Highlights
With continuous investments in R&D and technological innovation, we expect to continuously improve the mass production efficiency of N-type cells and integrated cost of N-type products by the end of 2022.
With more N-type production capacity being released in 2023 and the penetration ratio of N-type products increasing across the industry, we expect the proportion of N-type shipments in our total shipments to further increase.
Third Quarter and Full Year 2022 Guidance
The Company’s business outlook is based on management’s current views and estimates with respect to market conditions, production capacity, the Company’s order book and the global economic environment. This outlook is subject to uncertainty on final customer demand and sale schedules. Management’s views and estimates are subject to change without notice.
For the third quarter of 2022, the Company expects its total shipments to be in the range of 9.0 GW to 10.0 GW.
For full year 2022, the Company estimates its total shipments (including solar modules, cells and wafers) to be in the range of 35.0 GW to 40.0 GW.
Solar Products Production Capacity
JinkoSolar expects its annual production capacity for mono wafer, solar cell and solar module to reach 60.0 GW, 55.0 GW and 65.0 GW, respectively, by the end of 2022.
About JinkoSolar Holding Co., Ltd.
JinkoSolar (NYSE: JKS) is one of the largest and most innovative solar module manufacturers in the world. JinkoSolar distributes its solar products and sells its solutions and services to a diversified international utility, commercial and residential customer base in China, the United States, Japan, Germany, the United Kingdom, Chile, South Africa, India, Mexico, Brazil, the United Arab Emirates, Italy, Spain, France, Belgium, and other countries and regions. JinkoSolar has built a vertically integrated solar product value chain, with an integrated annual capacity of 43.0 GW for mono wafers, 42.0 GW for solar cells, and 50.0 GW for solar modules, as of June 30, 2022.
JinkoSolar has 13 productions facilities globally, 21 overseas subsidiaries in Japan, South Korea, Vietnam, India, Turkey, Germany, Italy, Switzerland, the United States, Mexico, Brazil, Chile, Australia, Canada, Malaysia, UAE, and Denmark, and global sales teams in China, the United States, Canada, Germany, Switzerland, Italy, Japan, Australia, Korea, India, Turkey, Chile, Brazil, Mexico and Hong Kong, as of June 30, 2022.
