Canadian Solar Q1 2020 Earnings Report

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Canadian Solar Q1 2020 Earnings Report

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On 28th May 2020, Canadian Solar Inc. (NASDAQ: CSIQ) has announced its first-quarter results which ended on March 31, 2020. The company primarily deals in two business segments Energy business segment and Module and Systems Solutions (MSS) business segment, the Chairman and Chief Executive Officer, Dr. Shawn Qu, has said that the impact of COVID – 19 on the demand for the company’s products was limited in the first quarter and the company will remain cautious due to the current uncertainty in the global business environment, in the past periods of volatility, the company was focused on supporting its employees, customers and business partners, the company. The company is focused on reducing its discretionary spending and will invest in long term growth opportunities. The company also said that it will continue to sell and recycle its capital to grow its ongoing projects, and their focus remains on improving the return on capital and equity of the company to improve the company’s position for long term sustainable growth.

Earnings Highlights

  1. Net Revenue: The Net Revenue in Q1 2020 was $825.63 million which has increased by 70.33% compared to $484.71 million in Q1 2019 (Y-o-Y), but the net revenue has decreased by 10.22% compared to $919.70 million in Q4 2019 (Q-o-Q). The company has said that this growth was the result of higher module shipments and project sales.
  2. Gross profit: The Gross Profit in Q1 2020 was $223.19 million which has increased by 107.74 % compared to $107.43 in Q1 2019 (Y-o-Y), but the gross profit has decreased in Q1 2020 by 2.74% compared to $229.50 in Q4 2019 (Q-o-Q).
  3. Gross Margin: The Gross Margin in the Q1 2020 was 27% which has increased from 22.2% in Q1 2019 (Y-o-Y) and 24.95% in Q4 2019 (Q-o-Q). The company has said that the increase in gross margin was a result of the increased contribution of high margin project sales.
  4. Income from operations: The income from operations in the Q1 2020 was $113.43 million which has increased compared to $7 million in Q1 2019 (Y-o-Y) and $111 million in Q4 2019 (Q-o-Q).
  5. Operating Margin: The Operating Margin in the Q1 2020 was 13.7% which has increased compared to 1.36% in Q1 2019 (Y-o-Y) and 12.11% in Q4 2019 (Q-o-Q).
  6. Net Income: The Net income in Q1 2020 was $110.63 million has increased by 63.32% compared to $67.73 million in Q4 2019 (Q-o-Q). The company reported a loss of $17.16 million in Q1 2019 (Y-o-Y).
  7. Diluted EPS: The Diluted Earnings Per Share (EPS) for the Q1 2020 was $1.84 per share which has increased compared to $0.29 in Q1 2019 and $1.12 in Q4 2019.

Balance – Sheet Highlights:

The Cash & Cash Equivalents of the company for Q1 2020 was $618.64 million which has increased by 67.13% compared to $370.15 million in Q1 2019 (Y-o-Y) and decreased by 7.49% compared to $668.77 million Q4 2019 (Q-o-Q). The Total debt (includes short term and long term borrowings) of the company in Q1 2020 was $1.57 billion which has increased by 4.74% compared to $1.50 billion in Q1 2019 (Y-o-Y) and it has increased by 1.5% compared to $1.55 billion in Q4 2019 (Q-o-Q).

The Inventory for Q1 2020 was $632.36 million which has increased by 64% compared to $385.14 million in Q1 2019 (Y-o-Y) and it has increased by 14.13 % compared to Q4 2019 (Q-o-Q), the company has said that the increase was strategic decision to qualify for the investment tax credit in the US. The Shareholder’s Equity for Q1 2020 was $19.23 million which has increased by 47.42% compared to $13.04 million in Q1 2019 (Y-o-Y) and it has increased by 11.96% compared to $17.17 million in Q4 2019 (Q-o-Q).

Other Financial Highlights

The company has reported that it has used its derivative instruments to hedge its losses in foreign exchange, in the Q1 2020, the company has reported a loss of $34 million which was later offset by using the $33 million which it had gained on the change of fair value of derivatives which is used in the company’s hedging program for foreign exchange. This resulted in a net loss of $ 1 million in Q1 2020, which is less compared to the net loss in Q1 2019 of $14 million and a net loss of $3 million in Q4 2019.

The company has reported a loss of  $14 million investment income in Q1 2020 which has caused due to the invested amount book value was more than the recoverable amount primarily known as impairment in its 49% equity interest in its  US project named “Roserock Project”. The company has also announced that it has secured a $30 million in funding on April 2nd, 2020, for the development and construction of power projects in Brazil.

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