Business context and reporting period
JinkoSolar Holding Co., Ltd. filed an annual Form 20-F for the fiscal year ended December 31, 2019; it is not a standalone 2019 Q4 report. The filing presents audited U.S. GAAP results for 2017–2019. JinkoSolar manufactures and sells photovoltaic products across an integrated value chain. Solar modules generated 95.8% of 2019 revenue; the company’s downstream solar-project business in China had been disposed of in 2016.
Key financial metrics
Amounts below are RMB unless stated otherwise.
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | 29.75 billion (US$4.27 billion) | 25.04 billion | +18.8% |
| Gross profit / margin | 5.43 billion / 18.3% | 3.51 billion / 14.0% | Margin +4.3 percentage points |
| Operating income / margin | 1.73 billion / 5.8% | 644.9 million / 2.6% | Operating income +168.2% |
| Net income | 924.4 million | 405.6 million | More than doubled |
| Net income attributable to ordinary shareholders | 898.7 million (US$129.1 million) | 406.5 million | +121.1% |
| Operating cash flow | 1.41 billion | 614.5 million | Increased |
| Capital expenditures | 4.11 billion | 3.88 billion | Increased |
| Cash and cash equivalents at year-end | 5.65 billion | 3.10 billion | Increased |
Module shipments rose 27.2% to 14.2 GW, while management said average module selling prices declined amid industry oversupply. Gross margin excluding U.S. countervailing-duty and anti-dumping-duty reversal benefits was 17.5% in 2019, versus 13.2% in 2018. Net interest expense rose 32.4% to 391.6 million. The effective income tax rate increased to 22.2% from 1.1%.
Liquidity, debt and financial position
Current assets were 31.69 billion and current liabilities 31.28 billion at year-end, leaving working capital of 411.0 million (US$59.0 million). Cash and cash equivalents were 5.65 billion; restricted cash was 576.5 million and restricted short-term investments were 6.93 billion, so a substantial part of reported liquid assets was restricted or otherwise not freely available. The company reported 5.78 billion of undrawn credit facilities.
Short-term borrowings, including current portions and failed sale-leaseback financing, were 9.05 billion; long-term borrowings were 1.59 billion. The company also had US$85 million principal amount of 4.5% convertible notes due 2024; holders may require cash repurchase on June 1, 2021. The filing reports a 2019 net increase of 7.38 billion in financing cash flow, largely reflecting new borrowings and capital contributions from non-controlling shareholders. Investing cash outflow was 6.03 billion, including significant purchases of restricted short-term investments and 3.30 billion of property and equipment purchases.
Capital commitments totaled 1.73 billion, of which 1.55 billion was due in 2020. Management stated that cash, expected operating cash generation and available credit were sufficient for working capital and capital expenditure needs for at least 12 months from April 24, 2020.
Material changes, outlook and risks
- Operating performance: Revenue and profit improved as higher module and wafer shipment volumes and lower integrated production costs more than offset falling module prices. Module shipments rose from 11.2 GW to 14.2 GW. Mono PERC module shipments increased substantially, while poly module shipments declined.
- Costs and unusual items: Operating expenses increased 29.0% to 3.70 billion, including higher freight, receivable provisions and 68.3 million of long-lived-asset impairment related to technology upgrades. The company recognized 63.0 million of non-asset government subsidy income. Fair-value losses included 78.3 million on foreign-exchange forwards and 70.0 million on an interest-rate swap; convertible-note issuance costs were 18.6 million.
- 2020 outlook: Management expected year-end capacity of 20 GW of wafers, 11 GW of cells and 25 GW of modules. As of March 31, 2020, 55% of expected 2020 module shipments were secured by orders. These are forward-looking expectations, not guarantees.
- COVID-19: Supply of some raw materials and logistics were temporarily affected in Q1 2020; some shipments moved to Q2, customers delayed payments, and overseas facility utilization was affected. Management warned that prolonged disruption could further harm operations, liquidity and results.
- Contingencies and exposures: JinkoSolar guaranteed JinkoPower financing obligations of 2.63 billion at year-end and reported 72.0 million of related-party guarantee liabilities. Receivables from JinkoPower were 484.3 million, including 418.4 million overdue more than one year. Estimated unpaid employee social-insurance and housing-fund contributions were 595.3 million. Patent disputes, a Portuguese arbitration and Singapore customer defect claims remained unresolved; the company said losses were not probable or could not be reasonably estimated. U.S. trade-duty rates and reviews remained subject to change.
- Market and funding risks: Oversupply and price declines, subsidy reductions, trade barriers, foreign-exchange and interest-rate movements, customer collections, supplier prepayments, and substantial near-term borrowing needs could pressure margins or liquidity. The company also identified uncertainty around LIBOR transition and restrictions on moving cash from PRC subsidiaries.
Important facts for investors to verify
- Confirm annual versus quarterly comparisons: this filing does not provide standalone 2019 Q4 financial results.
- Reconcile the 18.3% reported gross margin with management’s 17.5% figure excluding U.S. duty-related benefits, and verify the timing and collection of related duty refunds.
- Assess accessible liquidity against short-term debt, restricted deposits and investments, the 2021 noteholder put, and 2020 capital commitments.
- Track overdue related-party receivables and JinkoPower guarantees, including whether collections and guarantee obligations change.
- Monitor COVID-19 effects on shipments, customer payments, utilization, and whether the 2020 order coverage and capacity plans were achieved.
- Review the status and potential financial impact of employee-benefit underpayments, trade-duty proceedings and outstanding legal claims.