Business Context and Reporting Period
JinkoSolar Holding Co., Ltd. filed this Form 20-F annual report for the fiscal year ended December 31, 2013. Although the request metadata refers to 2013 Q4, this filing reports annual results; it does not provide a clear standalone fourth-quarter income statement or cash-flow summary. Financial statements are prepared under U.S. GAAP, principally in RMB.
JinkoSolar manufactures solar ingots, wafers, cells and modules, and develops and operates solar projects. Modules generated 94.1% of 2013 revenue. At year-end, annual manufacturing capacity was approximately 1.5 GW each for ingots, wafers and cells, and 2.0 GW for modules; the company’s share of completed solar projects was 213 MW.
Key Financial Metrics
Amounts below are RMB millions unless noted; USD figures are the filing’s convenience translations.
| Metric | 2013 | 2012 | Change or context |
|---|---|---|---|
| Revenue | 7,078.8 | 4,794.8 | Up 47.6% |
| Gross profit / margin | 1,437.4 / 20.3% | 232.2 / 4.8% | Improved substantially |
| Operating income (loss) / margin | 645.5 / 9.1% | (1,233.5) / (25.7%) | Returned to operating profit |
| Net income (loss) attributable to JinkoSolar | 188.0 (US$31.1 million) | (1,542.4) | Returned to profitability |
| Net interest expense | 223.4 | 221.7 | Up slightly |
| Net cash from operating activities | 625.1 | 716.3 | Lower year over year |
| Cash and cash equivalents at year-end | 456.1 | 279.1 | Excludes restricted cash and investments |
- Solar-module sales volume rose 93.4% to 1,765.1 MW, while average selling price fell 11.7% to RMB3.8 per watt. Module revenue increased 70.9% to RMB6,660.3 million.
- Cost of revenue was RMB5,641.5 million. The filing attributes margin improvement mainly to lower polysilicon purchase prices and lower non-silicon manufacturing costs per watt.
- Net cash used in investing activities was RMB1,286.1 million, including project-asset construction and property, plant and equipment spending; capital expenditures were RMB1,005.1 million. Net cash from financing activities was RMB841.1 million.
- At December 31, total assets were RMB10,611.2 million, total liabilities RMB8,590.6 million and shareholders’ equity RMB2,020.6 million. Current assets of RMB5,342.7 million were below current liabilities of RMB7,237.1 million; the company reported negative working capital.
- Short-term borrowings, including the current portion of long-term borrowings, were RMB1,974.6 million; long-term borrowings were RMB362.0 million. The balance sheet also included RMB800.0 million of bonds and convertible notes classified as current at a reported fair value of RMB770.5 million. The 2011 notes had US$123 million principal outstanding and a May 2014 holder put option.
- Restricted cash was RMB398.5 million and restricted short-term investments were RMB734.1 million; these should not be treated as freely available cash.
Material Changes Versus 2012
- Revenue recovered from the 2012 downturn, led by higher module shipments. Module pricing nevertheless continued to decline, and wafer sales revenue fell 78.5% as wafer sales volume decreased.
- Gross margin rose from 4.8% to 20.3%; operating results swung from a RMB1,233.5 million loss to RMB645.5 million income. Lower operating expenses also contributed: 2012 included substantial bad-debt, supplier-advance and asset-impairment charges.
- General and administrative expense fell to RMB230.1 million from RMB760.8 million. The 2013 result included a RMB308.2 million reversal of bad-debt allowance following collections of aged receivables. The allowance for doubtful accounts at year-end was RMB446.0 million.
- Inventory write-downs remained material at RMB163.7 million, versus RMB332.3 million in 2012. No supplier-advance provision was recorded in 2013, compared with RMB227.1 million in 2012.
- 2013 included a RMB212.9 million loss from the fair-value change in convertible notes and capped-call options, partly offset by a RMB48.4 million gain on foreign-exchange forward contracts. These valuation movements are volatile and affect comparability.
- The company changed to manufacturing and solar-project reporting segments in the third quarter of 2013. Solar-project assets increased to RMB1,358.9 million; electricity revenue rose to RMB76.7 million, including government subsidy revenue accrued after policy clarification.
Outlook, Risks and Unusual Items
- Management expected available cash, operating cash generation and bank facilities to cover working-capital and capital-expenditure needs for at least 12 months after year-end, but cautioned that near-term debt and bond maturities and the May 2014 put option could leave funding insufficient and might require reduced discretionary spending. The company had RMB1.45 billion of undrawn bank facilities at year-end.
- The filing describes solar demand as dependent on subsidies, policy and project financing, and cites industry oversupply, declining module prices, competitive pressure and volatile silicon costs. Management said module prices had been largely stable from January 1, 2014 to the report date, but did not provide formal financial guidance.
- Management cited long-term industry growth opportunities and a project pipeline of approximately 1,100 MW under evaluation, including 300–400 MW in permitting stages that it expected to connect in 2014. These are plans and pipeline estimates, not guaranteed outcomes.
- Liquidity and execution risks include negative working capital, customer credit terms, supplier concentration and prepayments, delayed collection of renewable subsidies, project financing and construction risks, and grid-connection constraints. Five largest suppliers represented 62.1% of silicon purchases; the largest represented 24.2%.
- Trade measures affected exports: the company was subject to U.S. duties and an EU price undertaking and export quota arrangement. The filing also describes new U.S. trade investigations initiated in late 2013 and early 2014.
- Contingencies included an appeal in a U.S. shareholder class action after dismissal of the complaint, and pending litigation with polysilicon supplier Wuxi Zhongcai over a prepayment for which RMB93.2 million had been fully provided. A customer arbitration with COGIP was settled; JinkoSolar received EUR14 million by July 2013.
- The filing disclosed estimated unpaid employee social-security and housing-fund obligations of RMB175.1 million at year-end, including accrued penalties. It also described prior environmental and permitting compliance issues; the Haining facility’s 2011 suspension was resolved and operations resumed, but some production capacity still lacked specified environmental approvals.
- After year-end, JinkoSolar raised net proceeds through a January 2014 share and convertible-note offering, and drew a RMB400 million long-term China Development Bank facility. It also began leasing Topoint manufacturing assets, adding stated capacity of 500 MW each for wafers and cells and 100 MW for modules.
Important Facts for Investors to Verify
- Reconcile reported 2013 earnings with non-cash fair-value movements, the bad-debt reversal, inventory write-downs and the basis for ongoing receivable recoverability.
- Assess liquidity against the May 2014 note put, other near-term maturities, restricted cash and the availability and conditions of undrawn facilities.
- Confirm customer and related-party exposure: 2013 revenue included RMB792.0 million from related parties, and year-end receivables included RMB266.5 million due from affiliated Gansu Jintai.
- Track whether the claimed module-price stability, module volume growth, project pipeline and expected grid connections translated into subsequent operating results and cash collections.
- Review the outcome of trade investigations and the effect of EU quota and minimum-price terms on export volumes and margins.
- Monitor the U.S. securities-action appeal, Wuxi Zhongcai litigation, unpaid employee benefit obligations and remaining environmental or permitting compliance matters.