Some Good and Bad in Solar Earnings

Chinese solar manufacturers have started a flood of earnings reports, and so far they aren't pretty, not that we should be surprised. Today I'll highlight one of China's leaders, Trina Solar (NYS: TSL) , but check back tomorrow for my take on LDK Solar (NYS: LDK) , JA Solar (NAS: JASO) , Suntech Power (NYS: STP) , and more.

Trina updated guidance a few weeks ago, so many of the numbers weren't a huge surprise. Shipments were down 6.6% quarter over quarter to 370.1 megawatts and revenue fell 16.8% over the same period to $481.9 million. In-house margins were reasonable at 18.3%, but overall margins fell to 10.8%.

Trina provides some of the best information about costs in the industry, and a look at its sale prices and costs show just how dramatically the industry is changing. In the table below, I show how nonsilicon manufacturing costs, polysilicon costs, and average sales prices have changed over the past year.

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Non-Si Cost






Si Cost






Total Module Cost






Average Sale Price






Source: Trina Solar investor relations.

As you can see, sale prices have fallen off a cliff and until this quarter costs weren't keeping pace. But Trina did take steps to lower nonsilicon costs an impressive $0.08 per watt this quarter.

It is important to note that the polysilicon prices quoted above are in-house blended costs and wouldn't benefit from the dramatic drop in polysilicon prices recently.

A little perspective
You can look at these results in a number of ways depending on your perspective. Falling sale prices will bring down the overall cost to install solar, which is good for the industry as a whole, even though it hurts manufacturers right now. I also see the numbers coming out of China as a sign that U.S.-based manufacturers are staying a step ahead. SunPower's (NAS: SPWR) 11.4% gross margin and First Solar's (NAS: FSLR) 37.7% gross margin look much better in light of a 10.8% margin at Trina Solar, one of China's leaders.

The rough quarter will continue and a shakeout is still coming, but I stick to my conviction that SunPower and First Solar are going to be two of the long-term winners.

Interested in reading more about Trina Solar? Click here to add it to My Watchlist to find all of our Foolish analysis on this stock.

At the time thisarticle was published Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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