November 12, 2008

Hebei, China: JA Solar Reports Third Quarter 2008 Results

Solar cell manufacturer, JA Solar Holdings has reported financial results for its third quarter ended Sept. 30, 2008.

Total revenue in the third quarter of 2008 was RMB 2.12 billion or $312.3 million, an increase of 149.5 percent from third quarter of 2007 revenue of RMB 850.0 million or $125.2 million, and an increase of 71.5 percent from the second quarter of 2008 revenue of RMB 1.24 billion or $182.1 million.

Total gross profit in the third quarter of 2008 was RMB 458.1 million or $67.5 million compared with RMB 199.3 million or $29.4 million in the third quarter 2007, and RMB 288.4 million or $42.5 million in the second quarter 2008. Gross margin was 21.6 percent in the third quarter 2008, compared with 23.45 percent in the third quarter 2007, and 23.3 percent in the second quarter 2008.

Interest expense in the third quarter of 2008 was RMB 63.5 million or $9.4 million, compared with RMB 1.3 million or $0.19 million in the third quarter of 2007. This compares with RMB 32.9 million or $4.9 million in the second quarter of 2008.

Net loss available to ordinary shareholders in the third quarter 2008 was RMB 142.8 million or $21.0 million compared with net profit of RMB 165.9 million or $ 24.4 million in the third quarter 2007, and RMB 318.6 million or $46.9 million in the second quarter 2008.

The third quarter 2008 included share-based compensation expense of RMB -18.1 million or -$2.7 million, including a reversal of RMB 52.6 million in previously recognized stock-based compensation for the resignation of COO Dr. Sun and other employees in the third quarter of 2008.

"We are pleased with our third quarter results, in which revenue, gross profit and income from operations increased sequentially. We shipped 99.1 MW of solar cells, more than twice the amount we shipped in the same quarter a year ago," said Samuel Yang, chief executive officer of JA Solar.

"JA Solar will remain a strong industry player, but we realize we are not immune from the worldwide financial situation. We will be conservative as we ramp production, but we will be aggressive in securing strategic partnerships and in enhancing our customer and supplier relationships to extend our industry leadership."

"Looking ahead, we expect that our tolling business, which carries with it a lower ASP, will represent an increasing portion of our revenue in the coming quarters. Our fourth quarter 2008 and full year 2009 guidance reflect the assumption of the increased tolling revenue."

"We are carefully managing the company for continued profitability in 2009. With our low cost basis, strong support from our suppliers, and ongoing success in broadening and diversifying our customer base, we believe we can achieve gross margins of at least 16 percent for the full year of 2009, with upside likely as we solidify and strengthen our operations during these uncertain times. JA Solar will continue to prosper, even if the current market conditions remain for an extended period. We will be able to capitalize on opportunities that weaker companies leave behind, and extend our market share and profitability even further," he said.

At Sept. 30, 2008, JA Solar had cash and cash equivalents of RMB 1.69 billion or $248.8 million, compared with RMB 794.1 million or $117.0 million at the end of the third quarter 2007, and RMB 3.57 billion or $525.1 million at the end of the second quarter 2008.

Capital expenditures were RMB 142.5 million or $21.0 million in the third quarter 2008, compared with RMB 144.3 million or $21.2 million in the third quarter 2007, and RMB 264.1 million or $38.9 million in the second quarter 2008. Depreciation and amortization expenses in the third quarter 2008 were RMB 23.7 million or $3.5 million, as compared with RMB 10.7 million or $1.6 million in the third quarter 2007, and RMB 16.4 million or $2.4 million in the second quarter 2008.

"In the third quarter, operating profit more than doubled both sequentially and year over year, demonstrating our ongoing strong financial performance and controls," said Daniel Lui, chief financial officer of JA Solar.

"We ended the quarter with a strong cash position of RMB 1.69 billion or $248.8 million. We believe that the combination of cash on hand with an average operating cash flow of at least 10 percent as a percentage of revenue, will be more than enough to finance our production ramp, including the pre- payments to suppliers, throughout 2009," he said. "We will be cautious as we build out new production lines, but we will continue to invest in process improvements to enable future cost reductions. In the fourth quarter and in 2009, we continue to expect to generate net cash inflows from operations."

Based on current market conditions, the devaluation of the Euro and other global financial uncertainties, the company expects revenue for the fourth quarter to be approximately RMB 1.3 billion or $191.5 million to RMB 1.5 billion or $220.9 million. The gross margin in the fourth quarter is expected to be between 5 and 7 percent; non-GAAP earnings per basic and diluted ADS are expected to be approximately break-even.

JA Solar's target for total production output has been updated to 310MW for 2008, with the nameplate annual production expected to be 600MW by the end of this year.

The company updated 2009 guidance based on market forecasts and the financial environment. For the full year 2009, revenue is expected to be in the range of RMB 10.0 billion or $1.5 billion to RMB 11.6 billion or $1.7 billion. Full-year gross margins are expected to be at least 16 percent. Non- GAAP earnings per basic ADS are expected to be at least 1.00 and diluted ADS are expected to be $0.90.

Total production output is expected to be approximately 800MW with total production capacity projected to exceed 1GW by the end of 2009.

Further details about: JA Solar