Yingli Green Energy Reports Second Quarter 2016 Results

Yingli Green Energy Holding Company Limited (NYSE: YGE) (“Yingli Green Energy” or the “Company”), one of the world’s leading solar panel manufacturers, known as “Yingli Solar,” today announced its unaudited consolidated financial results for the quarter ended June 30, 2016.

Second Quarter 2016 Consolidated Financial and Operating Summary

• Total net revenues were RMB2,524.1 million (US$379.8 million), compared to RMB2,351.1 millionin the first quarter of 2016.
• Total photovoltaic (“PV”) module shipments¹ were 662.0MW, compared to 508.1MW in the first quarter of 2016.
• Gross profit and gross margin were RMB460.1 million (US$69.2 million) and 18.2% respectively, compared to RMB469.3 million and 20% in the first quarter of 2016. Gross margin on sales of PV modules was 18.1%.
• Operating income was RMB158.3 million (US$23.8 million), compared to RMB186.4 million in the first quarter of 2016.
• On a non-GAAP² basis, earnings before interest, tax expenses, depreciation and amortization (“EBITDA”) were RMB469.5 million (US$70.6 million).
• Net income³ was RMB71.8 million (US$10.8 million) and earnings per American Depositary Share⁴ (each representing ten ordinary shares of the Company, the “ADS”) was RMB4.0 (US$0.6). On an adjusted non-GAAP basis, adjusted net income was RMB106.8 million (US$16.1 million), and adjusted income per ADS was RMB5.9 (US$0.9).

“We are delighted to report another solid quarter with a net profit of RMB71.8 million in the second quarter of 2016. Our total PV module shipments, including shipments to our own downstream PV projects, reached 662.0MW in the second quarter, representing an increase of approximately 30% from the first quarter of 2016,” commented Mr. Liansheng Miao, Chairman and Chief Executive Officer of Yingli Green Energy.

“In the second quarter, we maintained a positive momentum and our overall gross margin was 18.2% even though the average selling price of our PV modules was lower in the quarter than the first quarter of 2016 mainly as a result of higher proportion of shipments to China, where the selling price of PV modules generally is lower than that in other markets.”

“We saw robust demand from China in the second quarter of 2016 as PV projects that were operational before June 30, 2016 are entitled to a higher feed-in tariff, and we increased our PV module shipments to China by more than 100% from the first quarter of 2016 by leveraging our cooperative relationships with certain large clients such as state-owned enterprises controlled by central and local governments in China as well as influential privately owned enterprises with strong financial background. Internationally, Japan continued to be the most important international market for us and our shipments to Japan accounted for more than 20% of our total PV module shipments in the second quarter of 2016, which was the seventh straight quarter that our shipments to Japan exceeded 120 MW. As the extension of ITC policy, the U.S. continued to see a stable demand and continued to be important international market for us. We continued to supply PV modules for utility scale projects in western U.S. in the second quarter of 2016.”

“Looking forward to the second half of 2016, we expect to face various challenges, such as the downward trend of average selling price of PV module as a result of increasing competition in various markets and higher anti-dumping and countervailing duty tariff in U.S. To deal with such challenges, we will continue to make every effort to reduce production cost, control operating expenses, and adjust our marketing strategies as necessary in order to keep a positive momentum and maintain a healthy operation,” Mr. Miao concluded.

Total Net Revenues

Total net revenues were RMB2,524.1 million (US$379.8 million) in the second quarter of 2016, compared to RMB2,351.1 million in the first quarter of 2016 and RMB2,716.1 million in the second quarter of 2015. Total PV module shipments (including 50.9 MW of shipments to the Company’s own downstream projects) were 662.0 MW in the second quarter of 2016, compared to 508.1 MW in the first quarter of 2016 and 727.9MW in the second quarter of 2015.

The increase in total net revenues in the second quarter of 2016 compared to the first quarter of 2016 was mainly due to the increase of PV module shipments, which was partially offset by the lower average selling price of the Company’s PV modules in the quarter mainly as a result of the higher proportion of shipments to China, where the selling price of PV modules generally is lower than that in other markets..

Gross Profit and Gross Margin

Gross profit was RMB460.1 million (US$69.2 million) in the second quarter of 2016, compared toRMB469.3 million in the first quarter of 2016 and RMB171.0 million in the second quarter of 2015.

Gross margin was 18.2% in the second quarter of 2016, compared to 20.0% in the first quarter of 2016 and 6.3% in the second quarter of 2015. Gross margin on sales of PV modules was 18.1% in the second quarter of 2016, compared to19.7% in the first quarter of 2016 and 7.9% in the second quarter of 2015.

The slight decrease in gross profit and gross margin from the first quarter of 2016 to the second quarter of 2016 was mainly due to the lower average selling price of the Company’s PV modules in the second quarter of 2016 compared to the first quarter of 2016 primarily as a result of higher proportion of shipments to China in the second quarter of 2016, where the selling price of PV modules generally is lower than that in other markets.

Operating Expenses

Operating expenses were RMB301.9 million (US$45.4 million) in the second quarter of 2016, compared to RMB282.8 million in the first quarter of 2016 and RMB349.3 million in the second quarter of 2015. Operating expenses as a percentage of total net revenues was 12.0% in the second quarter of 2016, compared to 12.0% in the first quarter of 2016 and 12.9% in the second quarter of 2015.

The slight increase of operating expenses from the first quarter to the second quarter of 2016 was mainly due to the additional provision for reserve for inventory purchase commitments ofRMB34.6 million as a result of a foreign exchange re-measurement due to change in the foreign exchange rate between the Renminbi and U.S. dollars and the increase of research and development expenses as a result of the increased research and development activities, which was partially offset by the decrease in general and administrative expenses and selling expenses in the second quarter of 2016 mainly as a result of decreased shipping costs due to more shipments to China, as well as reversal of bad debt provision due to receipt of fully reserved accounts receivables.

Operating Income (Loss) and Margin

Operating income was RMB158.3 million (US$23.8 million) in the second quarter of 2016, compared to RMB186.4 million in the first quarter of 2016 and operating loss of RMB178.3 million in the second quarter of 2015.

Operating margin was 6.3% in the second quarter of 2016, compared to 7.9% in the first quarter of 2016 and negative 6.6% in the second quarter of 2015.

EBITDA

On a non-GAAP basis, earnings before interest, tax expenses, depreciation and amortization (“EBITDA”) were RMB469.5 million (US$70.6 million) in the second quarter of 2016, compared toRMB482.0 million in the first quarter of 2016 and RMB198.8 million in the second quarter of 2015.

Interest Expense

Interest expense was RMB158.6 million (US$23.9 million) in the second quarter of 2016, decreased from RMB176.1 million in the first quarter of 2016 and RMB242.1 million in the second quarter of 2015, primarily because the Company’s subsidiaries entered into written agreements with some of the lending banks in the second quarter of 2016 which extended their borrowings from such banks and reduced the interest rates on such borrowings. The Company’s average interest rate decreased to 5.09% in the second quarter of 2016 from 6.30% in the first quarter of 2016 and 6.75% in the second quarter of 2015.

Foreign Currency Exchange Gain (Loss)

Foreign currency exchange gain was RMB27.0 million (US$4.1 million) in the second quarter of 2016, compared to foreign currency exchange gain of RMB55.5 million in the first quarter of 2016 and foreign currency exchange loss of RMB10.3 million in the second quarter of 2015. The decrease of foreign currency exchange gain from the first quarter of 2016 to the second quarter of 2016 was mainly because Japanese Yen and Euro appreciated against Renminbi and Renminbi appreciated against US dollar in the first quarter of 2016. Japanese Yen and Euro generally continued to appreciate against Renminbi, which generated foreign exchange gain and the Company had a balance of net asset denominated in Japanese Yen and Euro, while Renminbi depreciated against US dollar in the second quarter of 2016, which resulted in foreign exchange loss that mitigated gains and the Company had a balance of net liability denominated in US dollar.

Income Tax Expense

Income tax expense was RMB1.1 million (US$0.2 million) in the second quarter of 2016, compared to RMB13.9 million in the first quarter of 2016 and RMB232.6 million in the second quarter of 2015.

Net Income (Loss)

Net income was RMB71.8 million (US$10.8 million) in the second quarter of 2016, compared to net income of RMB79.6 million in the first quarter of 2016 and net loss of RMB598.1 million in the second quarter of 2015. Net margin was 2.8% in the second quarter of 2016, compared to 3.4% in the first quarter of 2016 and negative 22.0% in the second quarter of 2015. Earnings per ADS was RMB4.0 (US$0.6 ) in the second quarter of 2016, compared to earnings per ADS ofRMB4.4 in the first quarter of 2016 and loss per ADS of RMB32.9 in the second quarter of 2015.

On an adjusted non-GAAP basis, adjusted net income was RMB106.8 million (US$16.1 million) in the second quarter of 2016, compared to adjusted net income of RMB73.3 million in the first quarter of 2016 and adjusted net loss of RMB596.9 million in the second quarter of 2015. Adjusted earnings per ADS was RMB5.9 (US$0.9) in the second quarter of 2016, compared adjusted earnings per ADS of RMB4.0 in the first quarter of 2016 and adjusted loss per ADS ofRMB32.8 in the second quarter of 2015.

Balance Sheet Analysis

As of June 30, 2016, the Company had RMB596.5 million (US$89.8 million) in cash and cash equivalents, slightly increased from RMB548.4 million as of March 31, 2016.

As of June 30, 2016, the Company had RMB258.1 million (US$38.8 million) in restricted cash, decreased from RMB342.7 million as of March 31, 2016.

As of June 30, 2016, the Company’s accounts receivable had increased to RMB3,073.2 million(US$462.4 million) from RMB2,727.9 million as of March 31, 2016. The increase of accounts receivable from the first quarter of 2016 to the second quarter of 2016 was mainly due to the increase of PV module shipments. Days sales outstanding were 110 days in the second quarter of 2016, compared to 104 days in the first quarter of 2016.

As of June 30, 2016, the Company’s accounts payable had decreased to RMB 3,111.9 million(US$468.2 million) from RMB3,466.6 million as of March 31, 2016. Days payable outstanding were 136 days in the second quarter of 2016, compared to 166 days in the first quarter of 2016. Accounts payable and days payable outstanding decreased from the first quarter of 2016 to the second quarter of 2016 mainly because the Company continued to pay off some of its over-due accounts payables in the second quarter of 2016.

As of June 30, 2016, the Company’s inventory had increased to RMB1,530.2 million (US$230.2 million) from RMB1,416.2 million as of March 31, 2016. Inventory turnover days were 67 days in the second quarter of 2016, compared to 68 days in the first quarter of 2016.

Updates on Debt Repayment and Alternative Financing Plans

As of the date of this press release, the Company’s subsidiaries had medium-term notes, or MTNs, of RMB2,057.0 million outstanding, including RMB357.0 million of the MTNs issued in 2010 (the “2010 MTNs”), which became due on October 13, 2015; RMB1.4 billion of the MTNs issued in 2011 (the “2011 MTNs”), which became due on May 12, 2016; and RMB300.0 million of the MTNs issued in 2012 (the “2012 MTNs”), which will become due on May 3, 2017. As the Company previously announced on June 29, 2016, the lead underwriter of the 2010 MTNs and 2011 MTNs had announced resolutions passed by holders of the MTNs after meetings between the Company’s subsidiaries and the MTN holders. The Company has continued its negotiation with the holders of the 2010 MTNs and 2011 MTNs about revisions to the repayment schedules of the MTNs. In addition to making efforts to improve its financial performance, the Company continues to discuss with different funding sources about alternative financing plans, such as 1) introduction of strategic investors to invest into the Company or its subsidiaries, 2) introduction of new creditors to grant new borrowings to the Company or its subsidiaries, and 3) sales of certain long-lived assets including land use rights to obtain additional funds. As of the date of this press release, the Company has not reached any agreement with the holders of the MTNs or any other party with respect to any concrete financing plan or plan for repayment of the MTNs yet.

As of the date of this press release, the Company and its subsidiaries had approximatelyRMB2,129 million in unutilized short-term lines of credit and approximately RMB2,307 million in committed long-term facilities. The Company’s subsidiaries had successfully renewed or extended over half of their loans from major lending banks and also reduced the interest rates of some of these loans. Given the Company’s continued need for short-term financing, the Company’s subsidiaries have been negotiating with their lending banks for the extension of their remaining loans, including a loan with outstanding amount of RMB99.1 million overdue as of the date of this press release. The Company and its subsidiaries are exploring financing options to continue to manage the Company and its subsidiaries’ liquidity and to enhance their financial flexibility.

Business Outlook for Third Quarter 2016

Based on current market conditions, the Company’s current operating conditions, estimated production capacity and forecasted customer demand, the Company expects its PV module shipments to be in the estimated range of 300MW to 400MW for the quarter ending September 30, 2016. The Company also expects its gross margin in the third quart of 2016 to be in the estimated range of 12.5% to 14%.