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spk21: Hello, ladies and gentlemen, and thank you for standing by for JNCO Solar Holding Co. LTD's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After management prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Stella Wang, Jinko Solar's Investor Relations. Please proceed, Stella.
spk04: Thank you, Operator. Thank you, everyone, for joining us today for Jinko Solar's first quarter 2024 earnings conference call. The company's results were released earlier today and available on the company's IR websites at www.jinkosolar.com as well as on your survival services. We have also provided a supplemental presentation for today's earnings call which can also be found on the IR website. On the call today from Zinco Solar, Mr. Lee Sandel, Chairman and CEO of Zinco Solar Holding Company Limited, Mr. Jenna Miao, CMO of Zinco Solar Company Limited, Mr. Pan Li, CFO of Zinco Solar Holding Company Limited, and Mr. Charlie Cao, CFO of Zinco Solar Company Limited. Mr. Li will discuss Zinco Solar's business operations and company highlights, followed by Mr. Miao, who will talk about the sales and the marketing, and then Mr. Pan, who will go through the financials. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Steve Harper provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent It harbors risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in Zinco Solar's public filings with the Securities and Exchange Commission. Zinco Solar does not assume any obligation to update any overlooking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Lee Sander, Chairman and CEO of Zinco Solar Holding. Mr. Lee will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Lee.
spk20: Mr. Lee, I am very pleased to introduce Mr. Lee. Mr. Lee, I am very pleased to introduce Mr. Lee. From last year's 4th quarter, the supply of human resources increased by 70% to nearly 80% in the first quarter, keeping the industry ahead. The price of the first quarter is gradually falling. In the event of a major decline in the opening power of the industry, our opening power is at a leading level in the industry. In addition, there are more than 70% of overseas market exports in the first quarter. Among them, the supply of the European and American markets increased by a major increase in the first quarter by 11.9% compared to the 4th quarter. We are happy to announce that thanks to our advantages of N-type top-count technology, competitive products, global marketing, and manufacturing layout, our module measurements grow 53.3% in OVA to nearly 20 gigawatts in the first quarter.
spk04: ranking first in the industry. The proportion of n-type shipments increased to nearly 80% in the first quarter from approximately 70% in the fourth quarter last year, maintaining our leading position in the industry. Marginal prices continued to fall in the first quarter while the industry average utilization rates declined sharply. We maintained our leading utilization rates at high level Over 70 percent of modules were shipped to overseas markets in the first quarter, while proportion of shipments to Europe and the U.S. significantly increased sequentially. Growth margin was 11.9 percent flat sequentially. Net income was U.S. dollars 84.4 million, up 19.8 times sequentially. Adjusted net income was US$65.1 million, up 1.6% sequentially. 一季度中国光伏新增装机 规模达到45.7个GW,同比增长了35.9%。 一到三月份,组件合计出口61.7个GW,同比增长超过20%。 光伏行业仍然是为数不周保,是较高增数的行业之一。
spk20: We have seen a growth of 25% to 30% in global supply demand in 2024. Since the second quarter, the regulation has eased due to the excessive demand, and the price has continued to drop. On the other hand, due to the influence of the macroeconomic economy, some major factories have increased in price. The demand is good, and the price of glass, rubber, and other materials has been improved. For various reasons, the price of the first and fourth industrial buildings has remained relatively stable at a low level. In the short term, the profit and loss of sustainable enterprises Newly added installations in China reached 45.7 gigawatts in the first quarter,
spk04: an increase of 35.9% year-over-year. Module exports totaled 61.7 gigawatts, an increase of over 20% year-over-year. The PV industry remains one of the few sectors maintaining a high growth rate, and we expect the global PV demand to grow approximately 25% to 30% in 2024. Coming into the second quarter, polysilicon prices continue to decline as supply exceeds demand. On the other hand, macroeconomic conditions push the commodity prices higher, while increasing market demand drove prices of some materials such as glass and film higher. All those factors combined to keep recent model prices relatively stable at a low level. In the short term, the profitability of integrated solar companies is expected to command the pressure. Yet, these distinctions in operating capabilities performance of different companies will have larger difference. We expect that overall production capacity in our industry will shrink with the elimination of weaker players that lack market competitiveness, sustainable production capabilities, and the ability to regularly upgrade and iterate technology. Facing various external challenges, we will focus on enhancing our competitiveness and we are confident to maintain relative advantages compared to our first-tier peers. In the first quarter, faced with a changing market environment, we flexibly adjusted our sales strategies to better balance shipments and profitability. Leveraging our global footprint and competitive products, our order book visibility for 2034 currently exceeds 70%.
spk20: In the context of the industry chain, we continue to introduce new technologies to improve the battery life and power efficiency. On the one hand, There's continued pressure along the industrial chain.
spk04: We continue to deploy new technologies to improve the mass-produced efficiency of top-con cells and module output while reducing costs through initiatives such as optimization of supply chain and production process.
spk20: We are also accelerating the clearing out of our P-type capacity. Our N-type capacity is expected to exceed 90% of total capacity by the end of 2024, and we expect our advanced capacity structure to continue to lead the industry. As a company with the largest overseas one-of-a-kind production capacity in the industry, we not only improve the construction of global industry, but also increase the production capacity of one-of-a-kind engine components in the United States. Another one-of-a-kind engine is expected to increase in the second quarter. With the advantage of global market layout and long-term intense risk response experience, we are confident in responding to the change in the international trade environment and continue to provide high-quality products and services to global customers.
spk04: As a company with the largest overseas integrated capacity in the industry, we continuously work to expand the global industry chain. One gigawatt N-type module capacity in the U.S. has started production, and another one gigawatt is expected to start production in the second quarter this year. This is the advantage of global operation and long accumulated experience in risk management. We are confident to respond to changes in international trade and continue to provide premium products and services to our global clients.
spk20: According to IAEA's latest forecast for lower development costs, in the next five years, solar and solar power generation will add 95% of renewable energy generation. By 2028, the amount of solar and solar power generation will be 25%. The development of solar energy still has a lot of room for growth. At the same time, the cost of light-fueled energy will continue to improve the economy of investment in light-fueled projects and stimulate the rapid growth of light-fueled demand. We hope that light-fueled energy will become the key model for future electricity development. We are confident that we will continue to lead the industry with advanced technology and high-quality products.
spk04: According to the latest predictions by the International Energy Agency , solar PV and wind will account for 95% of global renewable expansion, benefiting from lower generation costs than both fossil and non-fossil fuel alternatives. By 2028, the share of wind and solar PV in global electricity generation will double to 25%. Solar PV still has enormous growth potential. Meanwhile, declining cost of solar plus storage will continue to improve the economics of investing into PV storage projects and stimulate demand growth for storage projects. We are bullish that solar plus storage will become the major model for future growth in electricity generation, and we are confident to continue to lead the industry with advanced technologies and premium high-efficiency products.
spk20: Before I hand over the topic to Jenna, I would like to introduce the industry. It is expected that the battery capacity and efficiency of the N type will reach 26.5% by 2024. It is expected that by 2024, the capacity of high-efficiency batteries and components will reach 120GW, 110GW, and 130GW respectively. In 2024, the second quarter, the power output will be between 24GW and 26GW. In 2024, the total power output will be between 100GW and 110GW.
spk04: Before turning over to Jenna, I would like to go over our guidance for the second quarter and the fall year of 2024. By the end of 2024, we expect the mass produced N-type cell efficiency to reach 26.5%. We expect our annual production capacity for monowafers, solar cells, and solar modules 120, 110, and 130 gigawatts respectively by the end of 2024. We expect module shimmons to be between 24 to 26 gigawatts for the second quarter of 2024, and between 100 and 110 gigawatts for the four-year 2024, with end-type modules accounting for nearly 90% of total module shimmons. Thank you, Miss Yin.
spk16: Public shipments were $21.90 in the first quarter, with module shipments accounting for over 90%, ranking first in the industry again. And with the stressful market crisis in the first quarter, we flexibly adjusted our geographic mix.
spk17: Over 70% of modules were shipped to overseas markets, especially to Asia Pacific and emerging markets. Shipments to the U.S.
spk16: were relatively stable initially, while shipments to Europe increased nearly 20%, evidence of future human-treat reduction. On the demand side, the general trend for global low carbon transformation was unchanged despite problems related to installation and collection in some regions and the policy issues in others. we continue to expect a relatively rapid growth in global demand and interest in the pool.
spk17: Our extensive self-network and the deep-dive routine of local customer service infrastructure will help us to respond to market shifts and adjust the flexible lay-and-time list, constantly satisfying client demand for more reliable, low-cost, and compliant TV products. Looking forward to the full year, Europe and the U.S. to further increase compared to last year. Shifters of competitive high-efficiency NTAP TigerNeo modules accounted for nearly 80% overall, far exceeding the industry average as the value of TigerNeo is increasing recognized by customers. In the European and emerging markets, the TigerNeo penetration rate exceeds 90%. In terms of segment demand from distribution market in China, Europe, and Asia-Pacific was strong during the first quarter. Closely following the market trend, we raised the ratio of distribution to approximately 50% in the quarter. We focused very strongly on building our graduate nation because an outstanding brand is key to gaining the long-term trust of our clients. Recently, we were recognized as a Tier 1 energy storage provider by Bloomberg and Human Energy Finance due to our outstanding products and the capabilities in energy storage, reflecting our commitment to providing safe and reliable energy storage solutions and the recognition by customers for timely delivery and effective deployment capabilities. We received the AAA rating once again in the 2024 Q1 release of PV Tech Module Tech Backability Report, which demonstrates our leadership in manufacturing activity, reliable quality, market share leadership, some financial performance, and technology innovation. With that, I will turn the call over to Pat.
spk19: Thank you, Junar. We are pleased to report that our solo module shipment increased by about 53% in the first quarter. Where solo module price declined, we enhanced the control over cost and expenses, where the profit margin for flat and adjusted incomes likely improved sequentially. At the same time, thanks to our efforts in debt management, our net debt improved sequentially. leveraging our advantages in M-type technology and global sales and manufacturing network. We are very confident in our growth prospects and will continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow, and enhance our resilience to risks. Let me go into more details now. Total revenue. was $3.2 billion down sequentially and slightly down year-over-year. The sequential decrease was mainly attributed to the decrease in the shipments of solar modules, and the year-over-year decreases was mainly attributed to the decrease in the average selling price of solar modules. Gross margin was 11.9% compared with 12.5% in the fourth quarter last year. The decreases were mainly due to the decrease in average selling price of modules. Total operating expenses were $426 million, down 18% sequentially. The sequential decrease was mainly due to the decrease in the shipments of solar modules and the lower expense in relation to the settlement of a dispute with one of our customers. Total operating expenses accounted for 13% of total revenues, compared with 11% in the fourth quarter and 12% in the first quarter of 2023. Net income attributed to Jingguo Solar Holdings' ordinary shareholders was about $84.4 million, up nearly 20 times sequentially, excluding the impact from a change in fair value of the note a change in fair value of long-term investments and the share-based compensation expenses. Adjusting net income was about $65 million, slightly up sequentially. Moving to the balance sheet, at the end of the first quarter, our cash and cash equivalents were $2.44 billion, compared with $2.69 billion in the fourth quarter of 2023, and slightly improved. for 1.48 billion in the first quarter of 23. AR turnover days were 100 days compared with 76 days in the fourth quarter and 95 days in the first quarter of last year. Inventory turnover days were 89 days compared with 57 days in the fourth quarter and 100 days in the first quarter of last year. At the end of the first quarter, total debt was 3.66 billion compared to 4.38 billion in the fourth quarter of 23. Net debt was 1.22 billion compared to 1.63 billion in the fourth quarter of 23, a continuous improvement in our debt structure. This concludes our prepared remarks. We're now happy to take your questions. Rob Prater, please proceed.
spk21: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and then 2. If you are using a speakerphone, please pick up your handset before pressing the keys. Please limit yourself to three questions. The first question comes from Brian Lee. Please go ahead.
spk23: Hey, everyone. Thanks for taking the questions. Appreciate it. I know you guys are not in the practice of providing specific, you know, margin and ASP guidance anymore. But, you know, just given kind of the fluctuations in the pricing environment, can you give us a sense, you know, pricing was down, it seems like, kind of – down to like the low to mid-teens here, ASP per watt, if we back out the wafer and the cell revenue in the quarter, should we expect more ASP degradation in modules embedded in the 2Q guide? And then what's sort of the margin cadence you expect off the – the result here in Q1. Should we expect Q2 to be up, down, flat, and then maybe back half views as well if there's more of a recovery there?
spk14: Hey Brian, this is Charlie. Yeah, back to your question. You know, the module price is down in the recent three quarters, and that's a fact. And we have different regions, different arrangements, long-term versus short-term. If you are talking about Q2, the ASP, on average, it's down a little bit. But the most important thing is we are improving the cost and try our best. At the same time, we are adopting the relatively new technology materials. On top of that, we are ramping up, you know, this year our focus is the Sanjay Chopra factories. We're expecting to be fully operational in the second half year. And for the gross margin and probabilities, we strongly believe in the first half year, this year, it's reaching to the bottom. And for quarter by quarter, we expect the gross margin relatively stable. for the second quarter, which is Q1. And for the second half year, we expect more shipments, particularly in the United States, as well as the European markets. And on top of that, we are in a very good position for the Middle East market, and it helps the gross margin. In addition, the industry is suffering the very great competition, particularly for price. We are expecting the capacities for the Tier 2, Tier 3, and even the capacity which are not able to be technology competitive will be phased out throughout this year. this may help the overall supply versus demand situations, particularly in the second half year.
spk23: Okay, that's helpful. So if I summarize, I guess it sounds like ASPs down a little bit more into 2Q and then margins stable in 2Q off the 1Q level. Are you actually seeing quoting activity or what's the outlook for pricing? I know you said shipment volumes and mix improve in the back half, but how about like-for-like ASPs? Are you actually seeing, you know, you said 70% of your 24%
spk17: is already covered in backlog it sounds like what what's the pricing dynamic you're seeing in the second half versus um q1 and q2 where pricing is still going down yeah for the pricing brand for the pricing we believe it will continue to follow the market which we believe is already reaching the rock bottom right compared to the market prices versus the like the industry even the leading cost structures uh you know it's uh most of The peers or the industry players are under the water right now. So that's why we believe the price is reaching the bottom. However, when we look into the improvement of the cost structure-wise, it definitely does not goes as fast as the price falls in the last five, six, even eight months' time. That's why the market-wise C2O struggle at the beginning of the year, but we believe once the cost structure starts to improve to reach the level of the ASPs and match the level of ASPs, We believe the company or even the whole industry, at least the leading competitive ones, will keep their margin as healthy as possible. Hope that answers your question.
spk23: Yes, absolutely. Very helpful. And then maybe last one from me and I'll jump back in the queue. You also mentioned back half of the year, it sounds like you're positive on U.S. volume trends growing for you. I know this is pretty fresh, the inception of this ADCVD potential investigation that was petitioned last week by some of the U.S. suppliers. I know in the fall last year you guys were deemed to not have been one of the companies dumping or countervailing, and so you weren't subject to any duties. It sounds like this petition is opening that entire case back up potentially. What are your thoughts on the latest trade policy update here, given what happened last week? And then do you anticipate any or are you seeing any customer feedback right now that suggests there's more uncertainty for you as you move through the next few quarters? Just kind of how are you navigating it? Thank you.
spk17: Well, you know, it's still early to see what could be the result of this upcoming ADCVD petition, but definitely from Ginkgo's perspective, we still prefer a fair trade world, which could benefit not only Ginkgo itself, but also the whole industry where we can drive. That's what the whole industry has been doing in the last even two decades, right, to driving the LCOE of the PV energy more and more competitive, which can help the whole world become greener and more environmental-friendly and less carbon footprint. With trade tariffs or the current geopolitical issue, definitely it is a big challenge. It increases a lot of costs. But as a company side, we have no choice but to try our best to adapt to what the market or what the government wants. So that's why we are working very hard with our lawyers, with our customers, trying to find out the best solution in the U.S. market. But right now, honestly speaking, it's still too early to see what could be the pros and cons for that right now. So we will we might need another, let's say, three, even six months to see what could be the upside and downside of that. Thank you.
spk23: Okay, fair enough. Last one, housekeeping for Charlie. I promise I'll pass it on after this. Charlie, what was DNA in the quarter? What was CapEx in the quarter? And then also, could you tell us what the percent of sales in the U.S. this quarter was and what U.S. ASP range was, dollar per watt or cents per watt in the quarter. Thank you.
spk14: The U.S. shipment roughly 8%, 8% of total, you know, Q1 shipments. That's a shipment. And the revenue percentage will be higher because the price is dramatically higher, right, if you look at the Irish market price. And for the total capacity, you know, you always, you know, share about it. Last year, we spent roughly 20 billion RMB on the capacity expansion. And this year, we'll be 50% lower, lower than 10 billion RMB. And last year, we delivered 25 billion operating cash flow. This year, our target operating cash flow will be larger than $10 billion. For Q1, the cap is roughly $3 billion and operating cash is $1.5 billion. Hello?
spk21: Okay, the next question comes from Philip Sheen with Roth MKM. Please go ahead.
spk02: Hi, everyone. Thank you for taking my questions. First one is a follow-up on Brian's question regarding Southeast Asia ADCVD tariffs that could be coming later this year. So I was wondering if you could talk about how you plan on managing the retroactive tariff risk. So I think you guys talked about increasing your shipments to the U.S. market or certainly having a high mix to the U.S. through 2024. Can you share how much of your shipment volume in 2024 could go to the U.S.? And then how do you plan on managing that retroactive risk that could be as early as May or July? Thanks. Thanks.
spk17: Yeah, firstly, for the volume-wise, we still stick to our previous plan that we are not intentionally increase or decrease our shipment to the US because of the recent ADCVD petitions. So that's already within the plan of this year. So it is definitely because you know what happened in the last few years in US to JNCO. This year's total shipment numbers or the ratio of the U.S. market definitely will be higher than last year. That's why we're just saying that. And for this counter-risk of retroactive or the number-wise, we don't have mature solutions right now. That's why we are still, as I just answered Brian's question, we are still talking to the lawyers and the customers to see what could be the best solutions. Right now, at least I'm not aware of any good solutions out there.
spk02: Got it. Thank you, Jenna. How are your contracts structured? Meaning oftentimes there's a change of law provision that may put the risk onto the customer, but does it cover tariffs? And so do you have the provisions in all your U.S. contracts so that the risk is on the customer, Or in this case, do you believe that the risk of retroactive tariffs may fall into your camp?
spk18: Thanks.
spk17: I don't think we can disclose the details of the contract, but definitely customers feel the risk as well. So even there are some, you know, language which give the path, the path risk to the customer end. But definitely the customer side has this... the basic economics of the project financing. If it does go beyond a certain threshold, then definitely the project will not happen as planned. That's why we have to go through all those details with our customers, with their lawyers, and even their financing providers to find out the best mutual solution for all parties. It's not that easy to take one solution for all.
spk02: Okay. Thank you, Jenna. One last question on the U.S. market. What do you think is the amount of channel inventory in the U.S.? We've seen a lot of shipments to the tune of about 5 gigawatts a month coming to the U.S. over the past year. Do you think there's as much as a year and a half of module inventory in the U.S., or do you think it's much lower? Can you help us understand what you see? Thanks.
spk17: We have read the notes saying that there's, let's say, oversupply in the U.S. market. Even some players, either downstream or upstream, try to get more modules before. That's not AD3D, but that's anti-circ, right? So before anti-circ, we read the notes. But from our end, we have not been able to verify that directly from the customers or from some of our peers right now. But definitely, if we look into the numbers available in the market or some market energy report, we have seen a massive number of the modules or solar product has been shipped to U.S. But the grid connection numbers might not support that big number. Definitely, we have the same question as you have right now.
spk02: Okay. Thanks, General. Last question here for me on the fire. that you guys disclosed over the weekend. Can you talk about the impact? Shanxi is supposedly a key part of your margin, right? So you did say that there would be an impact in 24. Can you quantify in any way? When do you think that facility could come back online? How destructive was the fire? Thanks.
spk14: Philip, the impact is still being evaluated. Remember, this year we do two phases. Phase one is 14 gigawatts. Phase two is another 14 gigawatts. And the second phase, phase two, will stick to the original plan. And I expect it to start operation in Q3 for the phase two and fully operational in early Q4 this year. But we are talking about the phase one. Phase one, the file has an impact on the, you know, cell capacity, the 14 gigawatts. And we expect, you know, the cell capacity will be fully operational by the end of this year. And this is our original plan. by the end of the middle year. So it's going to have some kind of impact two quarters, roughly, and estimated at 3 to 5 gigawatts. So the impact is not significant. It's a very, you know, not significant impact for the sale. And so for the operational side, we have adjusted our, you know, productions throughout the global facilities to minimize the impact to our customers. And for the cost side and the, you know, the impact of the operation, we think it's not significant. However, for the losses of the, you know, the file is still evaluating, but the equipment is fully get the insurance from the big insurance companies in China and we're working on it.
spk02: Got it. Thank you very much for the caller. I'll pass it on.
spk21: Thank you. Next question comes from Wade Wu with Jefferies. Please go ahead.
spk05: Hello. Sorry, can you hear me?
spk22: Yes, your line is now on.
spk07: Yeah, this is Alan from Jefferies. So thanks, management, for taking my question. So first of all, we'd like to follow up the question from Philip on basically what is the percentage of the contracts you have signed at least have the language that is passing through the potential liability of the delays in ADCVD. The background of this question is because some of the peers suffered a lot last year when they have procured a high-priced polysilicon and then later on when they failed to deliver the shipment, they even have to pay penalties as per those contracts. I wonder if those language is already there. And it's only a matter of working with your clients to solve the problem. And is there any potential liability in delivering the obligations?
spk18: Yeah, so again, I don't think we can disclose that level of detail.
spk17: But definitely we are, you know, case by case working with the customers on this AD3D risk. as we always do, right? So we've got a lot of support from the customers regarding what has happened in the U.S. market in the last two years' time. So definitely we appreciate the support, and we are carrying that love for the future long-term partnership with most of our customers. That's why we never want to end up with a lost-lost solution. So even if there's a risk, we definitely go ahead with the customer to look into the solutions together. That's why we can maintain our leadership in many markets, right?
spk07: Understood. So the next question is regarding to some of the appears to be one-off income in this quarter. So like the other income is actually has surged quarter by quarter. So I wonder if that's related to a disposal gain in our Xinjiang capacity, and how much of that is related to that?
spk14: In Q1, we have completed a transaction to sell 100% of equity of our Xinjiang facilities. I think roughly 800 million to 900 million net income impact.
spk07: Understood. Also, I recall in the transaction, there's further performance. It's kind of like a performance guarantee. in the next couple of years. Has that been factored into this $800 to $900 million, or that is completely separated?
spk14: We didn't record that. The performance of engaging or variable considerations from the sale of the equity, so we did not account on the bulk. We just recorded the fixed fixed portion for the transaction.
spk07: Understood. I think another thing that is quite impressive compared to a lot of your peers is that you actually do not have any impairment on assets. So wonder if you think you will have any impairment risk going forward in this year or because you have a super majority of your capacities are top corner ready, so you do not foresee any risk going forward from here?
spk14: Yes, you're right. We have very small per capacities, and we accelerated depreciation over five years throughout the last two years, and the net bulk value is not significant.
spk07: That's impressive. And also you have mentioned the cash flow in the first quarter was actually positive. So I wonder if the company has taken initiative to improve the cash flow quarter-over-quarter, because that's one of the concerns of investors as to the operating cash flow.
spk14: Increasingly, it's still our focus. Operational increasing is and minimize the production lead time, logistic deliver time, cash conversion cycles. And the Shanxi Super Factory we are building is one of the key considerations, improves the whole cycle conversion and improves the cash flow, minimize the working capitals, warehouse cost, and the logistic timing.
spk07: Thanks a lot. Finally, on the buyback, I wonder if the company has any guidance on the pace of the buyback, because I've noticed that there's a lot of announcement around that, but I wonder if you would provide any guidance on that, and would there be any blackout in buyback after the end of quarter and before the announcement of the results?
spk14: You know, our plan is, you know, Preliminary price, the shareholder return is roughly 200 million U.S. dollars this year. And you can see in these news, we have spent roughly 105 million U.S. dollars to repurchase back the ADS. And on top of that, which is subject to the board approval, we plan to Decal dividend roughly 70 million US dollars to 80 million US dollars. So together with our plan, you know, preliminary plan this year's shareholder return is roughly 200 million US dollars.
spk06: Understood. Thanks a lot. I'll pass on.
spk21: Welcome. Once again, if you have a question, please press star 1 on your telephone and wait for your name to be announced. The next question comes from Rajiv Chadri with Intrinsic Edge. Please go ahead.
spk09: Good morning and congratulations on a strong performance in a very tough first quarter for the industry. My first question is about the gross margin. It seems like your cost per watt for modules were down roughly 10% from the fourth quarter to the first quarter. And my question is, number one, can you give us an idea of how you were able to achieve such a dramatic decline in cost per watt, given that the polysilicon costs were down as well, but not as significant? And then I have a follow-up on the gross margin as well.
spk14: It's a combination of our supply chain, our R&D teams, new technology, and lower the consumption of the materials. And we upgraded the top-down capacity, adopting the local technology, and significantly improve our sales efficiencies while cutting a lot of the consumptions of the silver paste. And so a lot of efforts we are doing that. And we have internally, we have worried, you know, solid target for the cost reductions and the step-by-step where we think, you know, with quarter by quarter, the cost will be relatively you know, improvement will be relatively quicker. But again, but now the industry situation is the module price is kind of drop a lot. We expect it to be stabilized and cost takes time. And we will try our best, you know, to improve the cost fracture.
spk09: So, Charlie, is it fair to think that, that in the coming quarters, Q2, Q3, and Q4, with all the improvements that you are making, that we can expect costs to improve by 1% to 2% every quarter?
spk28: It depends.
spk14: You know, some of the things, you know, most of the things we can control, but some of the things we are out of control. If you look at the shiver, you know, the, Commodity price is up a lot in recent months. But we're trying to minimize the impact. But if you look at quarter by quarter throughout the year, it's definitely the end of this year, the cost will be lower than the cost as of today.
spk09: Right. But assuming that the material costs don't change, Is the 2% per quarter on a sequential basis a reasonable assumption to make in terms of how you are reducing the cost?
spk14: Yeah, we have internally, you know, even bigger targets, and the 2% each quarter, if I'm assuming the material cost is the same. But overall cost, you know, depending on a lot of things, you know. I think overall, it's going to be improved. But again, we think in the next two quarters, the cost improvement will not be so significant. And because we have done a lot of things, but the commodity price now looks to be keep at a very high level. And considering that, we don't believe the overall cost will be dramatically lower, but it's lower, slightly lower in the next two quarters.
spk09: So, combined with the fact that ASPs, well, that you'll be selling more product in the United States by the fourth quarter, and so it's possible that ASPs are actually up somewhat sequentially, you know, from Q3 to Q4. and your costs are coming down by, let's say, even 2% quarter over quarter. It looks like you should be able to get the gross margin to be in the 16%, 17% kind of range by the fourth quarter. Is that reasonable?
spk14: It's difficult to estimate. We think one of the key things is With the capacity, some of the capacity phase out in the second half year, we think the price will come to a relatively rational level. On top of that, we have Sanxi Super Factory. We have more shipments in the US and some are premium market. It helps our margin, even some level of recovery. But it depends on a lot of things. What we are now doing is we do internal things and we do what we can control.
spk09: I see. Okay. My next question is on market share. Your market share in 2023 was in excess of 15%, closer to 16% for the year as a whole. And in the first quarter, it's already in the 17% kind of range. Do you think that as the capacity comes offline for the rest of the year, that your market share will continue to increase, especially if you hit the 110 gigawatt kind of number for the year?
spk18: Well, we never take market share as our
spk17: So that's why it's harder to say. And also because of the different definitions, there are different ways to calculate it. It's difficult to really define, let's say, a fair, well-accepted market share definition. But anyway, we appreciate your calculations on these numbers. Based on my perception, I think it's roughly around 17-18% market share is how we are looking at ourselves today. Whether that number could go up or go down, it depends on the competition, it depends on the whole industry, it depends on our peer strategy as well. So that's why it's difficult to say that right now, but definitely we are doing our best to make sure we deliver the good result from the financial statement-wise. Meanwhile, we are doing our best to serve our customers in the long term to keep the long-term partnership momentum.
spk09: Thank you. Is the market share that you have combined with the brand name that you are developing as well, is that giving you... a price premium or an increasing price premium relative to other brands?
spk17: Definitely we believe our brands give us a lot of strength and market acceptance or awareness for sure. But whether it creates a market premium, it depends on what numbers you are comparing with. If you compare with Novodate in the market, definitely the brand sell worth quite a lot. But if you compare with the top two or top three, the definition or the acceptance of the customers across the different top brands might not be that much as people imagine. and also the brand premium in the different market sector in different countries will vary a lot as well.
spk09: I see. A question on the end-type products. What do you think the industry's shipments of end-type products will be in 2024?
spk17: Roughly, we believe the market will finish the transition from P-type to N-type by end of this year. So technically, it might start from, let's say, roughly 35% to 40% range until year-end, even 95% range. That's what we believe.
spk09: So you think the competitors will also get up to the 90% range by the end of the year?
spk17: I mean the whole industry, right? Someone might take action faster, someone might be slower. But at the industry, we believe that the whole industry will look slower.
spk09: Now, you have been ahead in terms of getting your cost of N-type down, and now your N-type costs are comparable to P-type. What kind of margin premium does that give you over time? tier two and tier three companies who are behind the cost curve relative to you guys.
spk17: So let's take this as the last question. Thank you for your question. So we believe if you look into some third-party market intel, for example, there's, let's say, PUA InfoLink, right? So if you compare the P-type and N-type price, the gap is roughly one US dollar cent for one piece. So if you can roughly calculate how much it will reflect in the margin-wise, right? So it's roughly like...
spk03: nine ten percent of the marginal difference right that's the way we are looking into it i see okay just one last question sorry sorry because of the time limit we need to connect with the next investor for more questions you can we can negotiate actually okay operator please connect to the next question
spk21: Okay, the last question comes from Leo Ho with Daiwa Capital Markets. Please go ahead.
spk11: Okay, thanks, management. Just a question on the ADCD situation. I just wonder for our U.S. capacity, are we using like our own solar cell from Southeast Asia? And we've been hearing, you know, some industry feedback suggesting that probably there may be the cancellation of the waiver plus free rules, which means that we cannot use solar cell from Southeast Asia anymore. So do you have any view on that? Thank you.
spk17: I'm not quite sure what policies you are referring to, but based on the JNCO situation, we are fully vertically integrated in outside China, means, you know, Poly silicon in the wafer cell module are now all from non-China sources, right? So that's what we have built in the last two years' time under the UFLPA. So that gives us a lot of advantage and trust in the U.S. market.
spk11: Okay. Just one more question, if I may. I would like to ask about the EU situation. Aside from, you know, I think publicly announced situation regarding Longji and also Shanghai Electric, Are we hearing any troubles regarding Chinese players exporting to Europe? Especially, we've been hearing some weird news suggesting that probably there's one of the major module makers with its EU headquarters being raided. I'm not sure if you guys are hearing the same situation.
spk15: Thank you. It's just not something I'm aware of right now. So if I have anything, I'll definitely let you know.
spk10: Okay, thanks so much.
spk15: Thank you.
spk21: This concludes the conference call. Please disconnect your lines. you Thank you. Thank you. Thank you.
spk00: Thank you. Bye. Thank you. Thank you.
spk21: Hello ladies and gentlemen and thank you for standing by for JNCO Solar Holding Co. LTD's first quarter 2024 earnings conference call. At this time, all participants are in listen only mode. After management prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Stella Wang, Jinko Solar's Investor Relations. Please proceed, Stella.
spk04: Thank you, Operator. Thank you, everyone, for joining us today for Jinko Solar's first quarter 2024 earnings conference call. The company's results were released earlier today and available on the company's IR websites at www.jinkosolar.com as well as on Youth Biology Services. We have also provided a supplemental presentation for today's earnings call which can also be found on the IR website. On the call today from Zinco Solar, Mr. Lee Sandel, Chairman and CEO of Zinco Solar Holding Company Limited, Mr. Jenna Miao, CMO of Zinco Solar Company Limited, Mr. Pan Li, CFO of Zinco Solar Holding Company Limited, and Mr. Charlie Cao, CFO of Zinco Solar Company Limited. Mr. Lee will discuss Zinco Solar's business operations and company highlights, followed by Mr. Miao, who will talk about the sales and the marketing, and then Mr. Pan, who will go through the financials. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Steve Harper provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent It harbors risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in Zinco Solar's public filings with the Securities and Exchange Commission. Zinco Solar does not assume any obligation to update any overlooking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Lee Sander, Chairman and CEO of Zinco Solar Holding. Mr. Lee will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Lee.
spk20: Mr. Lee, I am very pleased to introduce Mr. Lee. Mr. Lee, I am very pleased to introduce Mr. Lee. The output of human products increased from 70% in the fourth quarter last year to nearly 80% in the first quarter, keeping the industry ahead. The price of the first quarter is gradually continuing to drop. In the event of a significant decline in the opening power of the industry, our opening power is at a leading level in the industry. In addition, there are more than 70% of overseas market exports in the first quarter. Among them, the output of the European and American markets increased significantly in the fourth quarter compared to the first quarter. The profit margin of the first quarter is 11.9%. We are happy to announce that thanks to our advantages of N-type top-count technology, competitive products, global marketing and manufacturing layout, our module measurements grow 53.3% year-over-year to nearly 20 gigawatts in the first quarter.
spk04: ranking first in the industry. The proportion of n-type shipments increased to nearly 80% in the first quarter from approximately 70% in the fourth quarter last year, maintaining our leading position in the industry. Marginal prices continued to fall in the first quarter, while the industry average utilization rates declined sharply. We maintained our leading utilization rates at high level Over 70 percent of the modules were shipped to overseas markets in the first quarter, while proportion of shipments to Europe and the U.S. significantly increased sequentially. Growth margin was 11.9 percent flat sequentially. Net income was U.S. dollars 84.4 million, up 19.8 times sequentially. Adjusted net income was US$65.1 million, up 1.6% sequentially. 以至中国光伏星增装机规模达到45.7个GW,同比增长了35.9%。 一到三月份,组件合计出口61.7个GW,同比增长超过20%。 光伏行业仍然是为数不周保持较高增速的行业之一。
spk20: We expect the global supply and demand in 2024 to grow by 25% to 30%. Since the second quarter, the supply and demand has been reduced due to the excessive demand. The price continues to drop. The economy has been affected by the macroeconomic situation. Part of the market price has grown. The demand is good. The price of glass, rubber, and other materials has been increased. For various reasons, the stock market price of Dejavu is relatively stable at the low level. In the short term, the profit and loss of sustainable enterprises Newly added installations in China reached 45.7 gigawatts in the first quarter,
spk04: an increase of 35.9% year-over-year. Module exports totaled 61.7 gigawatts, an increase of over 20% year-over-year. The PV industry remains one of the few sectors maintaining a high growth rate, and we expect the global PV demand to grow approximately 25% to 30% in 2024. Coming into the second quarter, polysilicon prices continued to decline as supply exceeds demand. On the other hand, macroeconomic conditions push the commodity prices higher, while increasing market demand drove prices of some materials such as glass and film higher. All those factors combined to keep recent module prices relatively stable at a low level. In the short term, the profitability of integrated solar companies is expected to command the pressure. Yet, these distinctions in operating capabilities performance of different companies will have larger difference. We expect that overall production capacity in our industry will shrink with the elimination of weaker players that lack market competitiveness, sustainable production capabilities, and the ability to regularly upgrade and iterate technology. Facing various external challenges, we will focus on enhancing our competitiveness And we are confident to maintain relative advantages compared to our first-tier peers. In the first quarter, faced with a changing market environment, we flexibly adjusted our sales strategies to better balance shipments and profit ability. Leveraging our global footprint and competitive product, our order book visibility for 2034 currently exceeds 70%.
spk20: In the context of the industrial chain, we continue to introduce new technologies to improve the battery life and power efficiency. On the one hand, There's continued pressure along the industrial chain.
spk04: We continue to deploy new technologies to improve the mass-produced efficiency of top-con cells and module output while reducing costs through initiatives such as optimization of supply chain and production process.
spk20: We are also accelerating the clearing out of our P-type capacity. Our N-type capacity is expected to exceed 90% of total capacity by the end of 2024, and we expect our advanced capacity structure to continue to lead the industry. As a company with the largest overseas one-of-a-kind production capacity in the industry, we not only improve the construction of global industry, but also increase the production capacity of one-of-a-kind N-type components in the U.S. Another one-of-a-kind is expected to increase in the second level. With the advantage of global market layout and long-term intense risk response experience, we are confident in responding to the change in the international trade environment and continue to provide high-performance products and services to global customers.
spk04: As a company with the largest overseas integrated capacity in the industry, we continuously work to expand the global industry chain. One gigawatt N-type module capacity in the U.S. has started production, and another one gigawatt is expected to start production in the second quarter this year. This is the advantage of global operation and long accumulated experience in risk management. We are confident to respond to changes in international trade and continue to provide premium products and services to our global clients.
spk20: 根据IA的最新预测,对于更低的发电成本, 未来五年风能和太阳能发电将上新增可再生能源发电电量的95%。 到2028年,风能和太阳能发电的份额将方一方合计达到25%。 The solar power generation still has a lot of room for growth. At the same time, the cost of the solar power generation will continue to improve the economy of the investment in the solar project and stimulate the rapid growth of the solar demand. We hope that the solar power generation will become the key model for future electricity development. We are confident that we will continue to lead the industry with advanced technology and high-quality products.
spk04: According to the latest predictions by the International Energy Agency , solar PV and wind will account for 95% of global renewable expansion, benefiting from lower generation costs than both fossil and non-fossil fuel alternatives. By 2028, the share of wind and solar PV in global electricity generation will double to 25%. Solar PV still has enormous growth potential. Meanwhile, declining cost of solar plus storage will continue to improve the economics of investing into PV storage projects and stimulate demand growth for storage projects. We are bullish that solar plus storage will become the major model for future growth in electricity generation, and we are confident to continue to lead the industry with advanced technologies and premium high-efficiency products.
spk20: Before I hand over the topic to Jenna, I would like to introduce the industry guidance. It is expected that the battery capacity and efficiency of the N type will reach 26.5% by the end of 2024. It is expected that by the end of 2024, the capacity of high-performance batteries and components will reach 120GW, 110GW, and 130GW respectively. In 2024, the second quarter, the output of components will be between 24GW and 26GW. In 2024, the output of components will be between 100GW and 110GW.
spk04: Before turning over to Jenna, I would like to go over our guidance for the second quarter and the fall year of 2024. By the end of 2024, we expect mass-produced N-type cell efficiency to reach 26.5%. We expect our annual production capacity for monowafers, solar cells, and solar modules 120, 110, and 130 gigawatts, respectively, by the end of 2024. We expect module measurements to be between 24 to 26 gigawatts for the second quarter of 2024, and between 100 and 110 gigawatts for the full year 2024, with n-type modules accounting for nearly 90% of total module measurements. Thank you, Miss Yin.
spk16: Public shipments were 21.9 gigawatts in the first quarter, with module shipment accounting for over 90%, ranking first in the industry again.
spk17: And with the stressful market crisis in the first quarter, we flexibly adjusted our geographic mix. Over 70% of modules were shipped to overseas markets, especially to Asia Pacific and emerging markets. Shipments to the U.S.
spk16: were relatively stable initially, while shipments to Europe increased nearly 20%, evidence of future human-treat reduction.
spk17: On the demand side, the general trend for global low carbon transformation was unchanged despite problems related to installation and collection in some regions and the policy issues in others.
spk16: We continue to expect a relatively rapid growth in global demand in this pinnacle.
spk17: Our extensive self-network and a deeply rooted local customer service infrastructure will help us to respond to market shifts and adjust the flexible lay-and-time list, constantly satisfying clients' demand for more reliable, low-cost, and compliant TV products. Looking forward to the future, to Europe and the U.S. to further increase compared to last year. Shiftments of competitive high-efficiency untapped Tiger Neo modules accounted for nearly 80% overall. Far exceeding the industry average as the value of Tiger Neo is increasing recognized by customers. In the European and emerging markets, the Tiger Neo penetration rate exceeds 90%. In terms of segments, demand from distribution markets in China, Europe, and Asia Pacific was strong during the first quarter. Closely following the market trend, we raised the ratio of distribution to approximately 50% in the quarter. We focused very strongly on building our graduate nation because an outstanding brand is key to gaining the long-term trust of our clients. Recently, we were recognized as a Tier 1 energy storage provider by Bloomberg and Human Energy Finance due to our outstanding products and the capabilities in energy storage, reflecting our commitment to providing safe and reliable energy storage solutions and our recognition by customers for timely delivery and effective deployment capabilities. We received the AAA rating once again in the 2024 Q1 release of PV Tech Module Tech Backability Report, which demonstrates our leadership in manufacturing activity, reliable quality, market share leadership, some financial performance, and technology innovation. With that, I will turn the call over to Pat.
spk19: Thank you, Junar. We are pleased to report that our solo module shipment increased by about 53% in the first quarter. Where solo module price declined, we enhanced the control over cost and expenses, where the profit margin for flat and adjusted incomes likely improved sequentially. At the same time, thanks to our efforts in debt management, our net debt improved sequentially. leveraging our advantages in M-type technology and global sales and manufacturing network. We are very confident in our growth prospects and will continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow, and enhance our resilience to risks. Let me go into more details now. Total revenue. was $3.2 billion down sequentially and slightly down year-over-year. The sequential decrease was mainly attributed to the decrease in the shipment of solar modules, and the year-over-year decreases was mainly attributed to the decrease in average selling price of solar modules. Gross margin was 11.9% compared with 12.5% in the fourth quarter last year. The decreases were mainly due to the decrease in average selling price of modules. Total operating expenses were $426 million, down 18% sequentially. The sequential decrease was mainly due to the decrease in the shipments of solar modules and the lower expense in relation to the settlement of a dispute with one of our customers. Total operating expenses accounted for 13% of total revenues, compared with 11 in the fourth quarter and 12 in the first quarter of 23. Net income attribute to Jinko Solar Holdings' ordinary shareholders was about $84.4 million, up nearly 20 times sequentially, excluding the impact from a change in fair value of the note a change in fair value of long-term investments and the share-based compensation expenses. Adjusting net income was about $65 million, slightly up sequentially. Moving to the balance sheet, at the end of the first quarter, our cash and cash equivalents were $2.44 billion, compared with $2.69 billion in the fourth quarter of 2023, and slightly improved. for 1.48 billion in the first quarter of 23. AR turnover days were 100 days compared with 76 days in the fourth quarter and 95 days in the first quarter of last year. Inventory turnover days were 89 days compared with 57 days in the fourth quarter and 100 days in the first quarter of last year. At the end of the first quarter, total debt was 3.66 billion compared to 4.38 billion in the fourth quarter of 23. Net debt was 1.22 billion compared to 1.63 billion in the fourth quarter of 23, a continuous improvement in our debt structure. This concludes our prepared remarks. We're now happy to take your questions. Rob Prater, please proceed.
spk21: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and then 2. If you are using a speakerphone, please pick up your handset before pressing the keys. Please limit yourself to three questions. The first question comes from Brian Lee. Please go ahead.
spk23: Hey, everyone. Thanks for taking the questions. Appreciate it. I know you guys are not in the practice of providing specific, you know, margin and ASP guidance anymore, but, you know, just given kind of the fluctuations in the pricing environment, can you give us a sense, you know, pricing was down, it seems like, kind of... down to like the low to mid-teens here, ASP per watt if we back out the wafer and the cell revenue in the quarter. Should we expect more ASP degradation in modules embedded in the 2Q guide? And then what's sort of the margin cadence you expect off the – the result here in Q1. Should we expect Q2 to be up, down, flat, and then maybe back half views as well if there's more of a recovery there?
spk14: Hey Brian, this is Charlie. Yeah, back to your question. You know, the module price is down in the recent three quarters, and that's a fact. And we have different ratings, different arrangement, long term versus short term. If you are talking about Q2, the ASP, on average, it's down a little bit. But the most important thing is we are improving the cost and try our best. At the same time, we are adopting the relatively new technology materials. On top of that, we are ramping up. This year, our focus is the Sanjay Chopra factories. We're expecting to be fully operational in the second half year. For the gross margin and probabilities, we strongly believe in the first half year, this year, it's reaching to the bottom. For quarter by quarter, we expect the gross margin relatively stable. for the second quarter, which is Q1. And for the second half year, we expect more shipments, particularly in the United States, as well as the European markets. And on top of that, we are in a very good position for the Middle East market, and it helps the growth margin. In addition, the industry is suffering the very great competition, particularly for price, but we are expecting the capacities for the Tier 2, Tier 3, and even the capacity which are not able to be technology competitive will be phased out throughout this year. This may help the overall supply versus demand situations, particularly in the second half year.
spk23: Okay, that's helpful. So if I summarize, I guess it sounds like ASPs down a little bit more into 2Q and then margins stable in 2Q off the 1Q level. Are you actually seeing quoting activity or what's the outlook for pricing? I know you said shipment volumes and mix improve in the back half, but how about like-for-like ASPs? Are you actually seeing, you know, you said 70% of your 24% is already covered in backlog, it sounds like. What's the pricing dynamic you're seeing in the second half versus Q1 and Q2, where pricing is still going down?
spk17: Yeah, for the pricing, Brent, for the pricing, we believe it will continue to follow the market, which we believe is already reaching the rock bottom, right? Compared to the market prices versus the industry, even the leading cost structures, you know, most of The peers or the industry players are under the water right now. So that's why we believe the price is reaching the bottom. However, when we look into the improvement of the cost structure-wise, it definitely does goes that fast as the price falls in the last five, six, even eight months' time. That's why the market-wise C2O struggle at the beginning of the year, but we believe once the cost structure starts to improve to reach the level of the ASPs and match the level of ASPs, We believe the company or even the whole industry, at least the leading competitive ones, will keep their margin as healthy as possible. Hope that answers your question.
spk23: Yes, absolutely. Very helpful. And then maybe last one from me, and I'll jump back in the queue. You also mentioned back half of the year, it sounds like you're positive on U.S. volume trends growing for you. I know this is pretty fresh, the inception of this ADCVD potential investigation that was petitioned last week by some of the U.S. suppliers. I know in the fall last year you guys were deemed to not have been one of the companies dumping or countervailing, and so you weren't subject to any duties. It sounds like this petition is opening that entire case back up potentially. What are your thoughts on the latest trade policy update here, given what happened last week? And then do you anticipate any or are you seeing any customer feedback right now that suggests there's more uncertainty for you as you move through the next few quarters? Just kind of how are you navigating it? Thank you.
spk17: Well, you know, it's still early to see what could be the result of this upcoming ADCVD petition, but definitely from Ginkgo's perspective, we still prefer a fair trade world, which could benefit not only Ginkgo itself, but also the whole industry where we can drive. That's what the whole industry has been doing in the last even two decades, right, to driving the LCOE of the PV energy more and more competitive, which can help the whole world become greener and more environmental-friendly and less carbon footprint. With trade tariffs or the current geopolitical issue, definitely it is a big challenge. It increases a lot of costs. But as a company side, we have no choice but to try our best to adapt to what the market or what the government wants. So that's why we are working very hard with our lawyers, with our customers, trying to find out the best solution in the U.S. market. But right now, honest speaking, it's still too early to see what could be the pro and cons for that right now. So we will we might need another, let's say, three, even six months to see what could be the upside and downside of that. Thank you.
spk23: Okay. Fair enough. Last one, housekeeping for Charlie. I promise I'll pass it on after this. Charlie, what was DNA in the quarter? What was CapEx in the quarter? And then also, could you tell us what the percent of sales in the U.S. this quarter was and what U.S. ASP range was, dollar per watt or cents per watt in the quarter. Thank you.
spk14: The U.S. shipment roughly 8%, 8% of total, you know, Q1 shipment. That's a shipment. And the revenue percentage will be higher because the price is dramatically higher, right, if you look at the Irish market price. And for the total capacity, you know, you always, you know, share about it. Last year, we spent roughly 20 billion RMB on the capacity expansion. And this year, we'll be 50% lower, lower than 10 billion RMB. And last year, we delivered 25 billion operating cash flow. This year, our target operating cash flow will be larger than the $10 billion. For Q1, the CapEx is roughly $3 billion, and the operating cash flow is $1.5 billion.
spk21: Okay, the next question comes from Philip Sheen with Roth MKM. Please go ahead.
spk02: Hi, everyone. Thank you for taking my questions. First one is a follow-up on Brian's question regarding Southeast Asia ADCVD tariffs that could be coming later this year. So I was wondering if you could talk about how you plan on managing the retroactive tariff risk. So I think you guys talked about increasing your shipments to the U.S. market or certainly having a high mix to the U.S. through 2024. Can you share how much of your shipment volume in 24 could go to the U.S.? And then, how do you plan on managing that retroactive risk that could be as early as, you know, May or July? Thanks.
spk17: Male Speaker 1 Yeah, for, firstly, for the volume-wise, we still stick to our previous plan that we are not intentionally increase or decrease our shipment to the U.S. because of the recent ADCBD petitions. So that's already within the plan of this year. So it is definitely, because you know what happened in the last two years in the U.S. to JNCO. So that's why this year's total shipment numbers or the ratio of the U.S. market definitely will be higher than last year. That's why we're just saying that. And for this counter risk of retroactive, so the number-wise, We don't have mature solutions right now. That's why we are still, as I just answered Brian's question, we are still talking to the lawyers and the customers to see what could be the best solutions. Right now, at least I'm not aware of any good solutions out there.
spk02: Got it. Thank you, Jenna. How are your contracts structured? Meaning oftentimes there's a change of law provision process. that may put the risk onto the customer, but does it cover tariffs? And so do you have the provisions in all your U.S. contracts so that the risk is on the customer? Or in this case, do you believe that the risk of retroactive tariffs may fall into your camp? Thanks.
spk17: I don't think we can disclose the details, the contrast, but definitely customer feel the risk as well. So even there are some language which give the pass, the patch risk to the customer end, but definitely the customer side has this... the basic economics of the project financing. If it goes beyond a certain threshold, definitely the project will not happen as planned. That's why we have to go through all those details with our customers, with their lawyers, and even their financing providers to find out the best mutual solution for all parties. It's not that easy to take one solution for all.
spk02: Okay. Thank you, Jenna. One last question on the U.S. market. What do you think is the amount of channel inventory in the U.S.? We've seen a lot of shipments to the tune of about 5 gigawatts a month coming to the U.S. over the past year. Do you think there's as much as a year and a half of module inventory in the U.S., or do you think it's much lower? Can you help us understand what you see? Thanks.
spk17: We have read the notes saying that there's, let's say, oversupply in the U.S. market. Even some players, either downstream or upstream, try to get more modules before, just not AD3D, but just anti-circ, right? So before anti-circ, we read the notes. But from our end, we have not been able to verify that directly from the customers or from some of our peers right now. But definitely, if we look into the numbers available in the market or some market energy report, we have seen a massive number of the modules or solar product has been shipped to US. But the grid connection numbers might not support that big number. Definitely, we have the same question as you have right now.
spk02: OK. Thanks, . Last question here for me on the fire. that you guys disclosed over the weekend. Can you talk about the impact? Shanxi is supposedly a key part of your margin, right? So you did say that there would be an impact in 24. Can you quantify in any way? When do you think that facility could come back online? How destructive was the fire? Thanks.
spk14: Philip, the impact is still being evaluated. But Sanxi Silver Factory, remember, this year we do two phases. Phase one is 14 gigawatts. Phase two is another 14 gigawatts. And the second phase, phase two, will stick to the original plan. And I expect it to start operation in Q3 for the phase two and fully operational in early Q4 this year. But we are talking about the phase one. Phase one, the file has an impact on the, you know, cell capacity, the 14 gigawatts. And we expect, you know, the cell capacity will be fully operational by the end of this year. And this is our original plan. by the end of the middle year. So it's going to have some kind of impact, two quarters roughly, and estimated 3 to 5 gigawatts. So the impact is not significant. It's a very, you know, not significant impact for the sale. And so for the operational side, we have adjust our, you know, productions throughout the global facilities to minimize the impact to our customers. And for the cost side and the impact of the operation, we think it's not significant. However, for the losses, the file is still evaluating, but the equipment is fully getting insurance from the big insurance companies. in China and we're working on it.
spk02: Got it. Thank you very much for the caller. I'll pass it on. Thank you.
spk21: Next question comes from Wade Wu with Jefferies. Please go ahead.
spk05: Hello. Sorry, can you hear me?
spk07: Yes, your line is now... Yeah, this is Alan from Jefferies. So thanks, management, for taking my question. So first of all, we'd like to follow up the question from Philip on the... Basically, how many or what is the percentage of the contracts you have signed at least have the language that is passing through the potential liability of the delays in ADCVD. The background of this question is because some of the peers suffered a lot last year when they have procured a high-priced polysilicon, and then later on when they failed to deliver the shipment, they even have to pay penalties as per those contracts. So I wonder if those language is already there, And it's only a matter of working with your clients to solve the problem. And is there any potential liability in delivering the obligations?
spk18: Yeah, so again, I don't think we can disclose that level of detail.
spk17: But definitely, we are case by case working with the customers of this AD3D RISC. as we always do, right? So we've got a lot of support from the customers regarding what has happened in the U.S. market in the last two years' time. So definitely we appreciate the support, and we are carrying that love for the future long-term partnership with most of our customers. That's why we never want to end up with a lost-lost solution. So even if there's a risk, we definitely go ahead with the customer to look into the solutions together. That's why we can maintain our leadership in many markets.
spk07: Understood. So the next question is regarding to some of the appears to be one-off income in this quarter. So like the other income is actually has surged quarter by quarter. So I wonder if that's related to a disposal of our disposal gain in our Xinjiang capacity, and how much of that is related to that?
spk14: In Q1, we have completed a transaction to sell 100% of equity of our Xinjiang facilities, and we utilized, I think, roughly $800. 800 million to 900 million net income impact.
spk07: Understood. Also, I recall in the transaction, there's further performance. It's kind of like a performance guarantee in the next couple of years. Has that been factored into this 800 to 900 million, or that is completely separated?
spk14: We didn't record that, you know, the performance, you know, kind of the performance of engaging or variable considerations from the sale of the equity. So we did not account on the bulk. We just recorded the fixed portion, you know, for the transactions.
spk07: Understood. So I think another thing that is quite, I would say quite impressive compared to a lot of your peers is that you actually do not have any impairment on assets. So wonder if you think you will have any impairment risk going forward in this year or because you have a super majority of your capacities are top corner ready, so you do not foresee any
spk14: risk going forward from here yes yes you're right and we you know we have very small per capacities and we accelerated depreciation over five years you know throughout the last two years and the net book value is not significant
spk07: That's impressive. And also you have mentioned the cash flow in the first quarter was actually positive. So I wonder if the company has taken initiative to improve the cash flow quarter-over-quarter, because that was one of the concerns of investors as to the operating cash flow.
spk14: The increasing is still our focus. Operational increasing is and minimize the production lead time, logistic deliver time, cash conversion cycles. And the Shanxi Super Factory we are building is one of the key considerations, improves the whole cycle conversion and improves the cash flow, minimize the working capitals, warehouse cost, and the logistic timing.
spk07: Thanks a lot. Finally, on the buyback, I wonder if the company has any guidance on the pace of the buyback, because I've noticed that there's a lot of announcement around that, but I wonder if you would provide any guidance on that, and would there be any blackout in buyback after the end of quarter and before the announcement of the results?
spk14: You know, our plan is, you know, Preliminary price, the shareholder return is roughly 200 million U.S. dollars this year. And you can see in these news, we have spent roughly 105 million U.S. dollars to repurchase back the ADS. And on top of that, which is subject to the board approval, we plan to Decal dividend roughly 70 million US dollars to 80 million US dollars. So together with our plan, you know, preliminary plan this year's shareholder return is roughly 200 million US dollars.
spk06: Understood. Thanks a lot. I'll pass on.
spk21: You're welcome. Once again, if you have a question, please press star 1 on your telephone and wait for your name to be announced. The next question comes from Rajiv Chadri with Intrinsic Edge.
spk09: Please go ahead. Good morning and congratulations on a strong performance in a very tough first quarter for the industry. My first question is about the gross margin. It seems like your cost per watt for modules were down roughly 10% from the fourth quarter to the first quarter. And my question is, number one, can you give us an idea of how you were able to achieve such a dramatic decline in cost per watt, given that the polysilicon costs were down as well, but not as significant? And then I have a follow-up on the gross margin as well.
spk14: It's a combination of our supply chain, our R&D teams, new technology, and lower the consumption of the materials. And we upgraded the top-down capacity, adopting the local technology, and significantly improved improve our sales efficiencies while cutting a lot of the consumptions of the silver paste. And so a lot of efforts we are doing that. And we have internally, we have worried, you know, solid target for the cost reductions and the step-by-step where we think, you know, with quarter by quarter, the cost will be relatively you know, improvement will be relatively quicker. But again, but now the industry situation is the module prices kind of drop a lot. We expect it to be stabilized and cost takes time. And we will try our best, you know, to improve the cost structure.
spk09: So, Charlie, is it fair to think that that in the coming quarters, Q2, Q3, and Q4, with all the improvements that you are making, that we can expect costs to improve by 1% to 2% every quarter?
spk28: It depends.
spk14: You know, some of the things, you know, most of the things we can control, but some of the things we are out of control. If you look at the shiver, you know, the, Commodity price is up a lot in recent months. But we're trying to minimize the impact. But if you look at quarter by quarter throughout the year, it's definitely the end of this year, the cost will be lower than the cost as of today.
spk09: Right. But assuming that the material costs don't change, Is the 2% per quarter on a sequential basis a reasonable assumption to make in terms of how you are reducing the cost?
spk14: Yeah, we have internally, you know, even bigger targets, and the 2% each quarter, if I show you the material cost is the same. But overall cost, you know, depending on a lot of things, you know. I think overall it's going to be improved. But again, we think in the next two quarters, the cost improvement will not be so significant. And because we have done a lot of things, but the commodity price now looks to be at a very high level. And considering that, we don't believe the overall cost will be dramatically lower, but it's lower, slightly lower in the next two quarters.
spk09: So, combined with the fact that ASPs, well, that you'll be selling more product in the United States by the fourth quarter, and so it's possible that ASPs are actually up somewhat sequentially, you know, from Q3 to Q4. and your costs are coming down by, let's say, even 2% quarter over quarter. It looks like you should be able to get the gross margin to be in the 16%, 17% kind of range by the fourth quarter. Is that reasonable?
spk14: It's difficult to estimate. We think one of the key things is with the capacity, some of the capacity phase out in the second half year. We think the price will come to a relatively rational level. On top of that, we have Sanxi Shoper factory. We have more shipments in the US and some are premium market. It helps our margin, even some level of recovery. But it depends on a lot of things. What we are now doing is we do internal things and we do what we can control.
spk09: I see. Okay. My next question is on market share. Your market share in 2023 was in excess of 15%, closer to 16% for the year as a whole. And in the first quarter, it's already in the 17% kind of range. Do you think that as the capacity comes offline for the rest of the year, that your market share will continue to increase, especially if you hit the 110 gigawatt kind of number for the year?
spk18: Well, we never take market share as our
spk17: So that's why it's harder to say. And also because of the different definitions, there are different ways to calculate it. It's difficult to really define, let's say, a fair, well-accepted market share definition. But anyway, we appreciate your calculations on these numbers. Based on my perception, I think it's roughly around 17-18% market share is how we are looking at ourselves today. Whether that number could go up or go down, it depends on the competition, it depends on the whole industry, it depends on our peer strategy as well. So that's why it's difficult to say that right now, but definitely we are doing our best to make sure we deliver the good result from the financial statement-wise. Meanwhile, we are doing our best to serve our customers in the long term to keep the long-term partnership momentum.
spk09: Thank you. Is the market share that you have combined with the brand name that you are developing as well, is that giving you... a price premium or an increasing price premium relative to other brands?
spk17: Definitely, we believe our brands give us a lot of strength and market acceptance or awareness, for sure. But whether it creates a market premium, it depends on what numbers you are comparing with, right? If you compare with Novodate in the market, definitely it's a The brand itself works quite a lot, but if you compare it with the top two or top three, the definition or the acceptance of the customers across the different top brands might not be that much as people imagine. Also, the brand premium in the different market sectors in different countries will vary a lot as well.
spk09: I see. A question on the N-type products. What do you think the industry's shipments of N-type products will be in 2024?
spk17: Roughly, we believe the market will finish the transition from P-type to N-type by end of this year. So technically, it might start from, let's say, roughly 35% to 40% range. Until year-end, 90%, even 95% range. That's what we believe.
spk09: So you think the competitors will also get up to the 90% range by the end of the year?
spk17: I mean the whole industry, right? Someone might take action faster. Someone may be slower. But as an industry, we believe that's what the whole industry will look like.
spk09: Now, you have been ahead in terms of getting your cost of N-type down, and now your N-type costs are comparable to P-type. What kind of margin premium does that give you over Tier 2 and Tier 3 companies who are behind the cost curve relative to you guys?
spk17: So let's take this as the last question. Thank you for your question. So we believe if you look into some third-party market intel, for example, there's, let's say, PUA InfoLink, right? So if you compare the P-type and N-type price, the gap is roughly one US dollar cent for one piece. So if you can roughly calculate how much it will reflect in the margin-wise, right? So it's roughly like... nine, ten percent of the margin difference, right? That's the way we are looking into it.
spk09: I see. Okay. Thank you. Just one last question. Sorry.
spk03: Sorry. Because of the time limit, we need to connect the next investor. For more questions, we can negotiate after the call. Okay. Alfredo, please connect the next question.
spk21: Okay. The last question comes from Leo Ho. with Daiwa Capital Markets. Please go ahead.
spk11: Okay. Thanks, management. Just a question on the ADCD situation. I just wonder, for our U.S. capacity, are we using, like, our own solar cell from Southeast Asia? And we've been hearing, you know, some industry feedback suggesting that probably there may be the cancellation of the waiver plus free rules, which means that we cannot use solar cell from Southeast Asia anymore. So do you have any view on that?
spk18: Thank you. I'm not quite sure what policies you are referring to, but based on the JNCO situation, we are fully vertically integrated in outside China.
spk17: It means, you know, polycysticone in the wafer cell module are all from non-China sources, right? So that's what we have built in the last two years' time under the UFLPA. So that gives us a lot of advantage and trust in the U.S. market.
spk11: Okay. Just one more question, if I may. I would like to ask about the EU situation. Aside from, you know, I think publicly announced situation regarding Longji and also Shanghai Electric, are we hearing any, like, troubles regarding Chinese players exporting to Europe? Especially we've been hearing some weird news suggesting that probably that's one of the major problems module maker with its EU headquarters being rigged. I'm not sure if you guys are hearing the same situation.
spk15: Thank you. It's just not something I'm aware of right now. So if I have anything, I'll definitely let you know.
spk10: Okay. Thanks so much.
spk15: Thank you.
spk21: This concludes the conference call. Please disconnect your lines.
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