JinkoSolar Holding Co., Ltd. - 20-F Filing Summary
Business Context and Reporting Period
Company: JinkoSolar Holding Co., Ltd. (NYSE: JKS)
Reporting Period: Fiscal year ended December 31, 2011
Business Overview: A vertically-integrated solar power product manufacturer based in China, producing silicon wafers, solar cells, and solar modules. The company also engages in solar power project development and system integration.
Accounting Basis: U.S. GAAP
Key Financial Metrics (Year Ended Dec 31, 2011)
| Metric | 2011 (RMB '000) | 2011 (US$ '000) | 2010 (RMB '000) |
|---|---|---|---|
| Revenues | 7,384,951 | 1,173,351 | 4,654,855 |
| Gross Profit | 1,149,851 | 182,693 | 1,357,386 |
| Gross Margin | 15.6% | 15.6% | 29.2% |
| Operating Income | 315,886 | 50,189 | 989,922 |
| Net Income (Attributable to JinkoSolar) | 273,343 | 43,430 | 881,873 |
| Net Profit Margin | 3.7% | 3.7% | 18.9% |
| Cash & Cash Equivalents | 433,851 | 68,932 | 521,205 |
| Total Debt (Short & Long Term) | 2,355,533 | 374,244 | 1,441,026 |
| Convertible Senior Notes | 61,612 (Carrying Value) | 9,789 | N/A |
Note: US$ figures converted at RMB 6.2939 = US$1.00. Debt figures include short-term borrowings and long-term borrowings excluding current portion.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 58.7% to RMB 7.38 billion, driven by a 104.7% increase in solar module sales volume (760.8 MW vs. 265.4 MW in 2010).
- Margin Compression: Gross margin declined significantly from 29.2% to 15.6%. The average selling price of solar modules dropped 28.7% (from RMB 12.2/W to RMB 8.7/W) due to reduced government subsidies in Europe and industry over-supply.
- Profitability Decline: Net income attributable to shareholders fell 69.0% to RMB 273.3 million. Operating income dropped 68.1% to RMB 315.9 million.
- Non-Operating Items:
- Exchange Loss: Increased to RMB 139.0 million (from RMB 10.1 million) due to RMB appreciation against the Euro and USD.
- Goodwill Impairment: Recognized a charge of RMB 45.6 million related to the acquisition of Zhejiang Jinko.
- Derivative Gains: Recorded a non-cash gain of RMB 299.7 million from the change in fair value of convertible senior notes and capped call options.
- Liquidity: The company reported a negative working capital balance as of December 31, 2011.
Guidance, Outlook, Risks, and Contingencies
- Market Outlook: Management expects continued price declines for solar modules due to over-supply and reduced subsidies. The company plans to maintain production capacity at 1.2 GW for wafers, cells, and modules, focusing on efficiency improvements rather than expansion.
- Trade Risks: The U.S. Commerce Department launched an anti-dumping and countervailing duty investigation. A preliminary decision in March 2012 imposed countervailing duties of 3.59% on JinkoSolar. Final decisions were pending as of the filing date.
- Supply Chain Risks: Significant exposure to supplier Hoku Materials, Inc., which suspended plant construction due to financing difficulties. JinkoSolar has outstanding prepayments of approximately US$19.1 million to Hoku, with delivery delayed to July 2012.
- Legal Proceedings:
- Securities Class Action: Named as a defendant in a shareholder class action lawsuit regarding environmental compliance disclosures at the Haining facility.
- Customer Litigation: Lost a lawsuit against customer Zhejiang Global, ordered to pay RMB 12 million in late charges and return RMB 4.8 million in advances.
- Regulatory Compliance: Risks regarding unpaid social security and housing funds for employees (estimated at RMB 118.3 million) and potential penalties for vacant land fees on residential-zoned land.
Key Facts for Investor Verification
- Debt Maturity Wall: Verify the company's ability to refinance or repay approximately RMB 2.5 billion in short-term borrowings and RMB 400 million in short-term notes due in 2012, given the negative working capital position.
- Hoku Prepayment Recovery: Assess the recoverability of the US$19.1 million prepayment to Hoku Materials, given the supplier's suspension of construction and financing difficulties.
- Impact of U.S. Tariffs: Monitor the final outcome of the U.S. anti-dumping and countervailing duty investigations, as JinkoSolar's U.S. sales (1.6% of total revenue) could be impacted by retroactive duties.
- Inventory Valuation: Review inventory provisions, as the company recorded RMB 201.7 million in inventory write-downs in 2011 due to falling polysilicon and module prices.
- Environmental Compliance: Verify the status of the Haining facility environmental incident and the ongoing shareholder class action lawsuit related to it.