Canadian Solar flags up polysilicon, glass and EVA shortages

Sino-Canadian solar manufacturer Canadian Solar has presented a ‘good news-bad news' scenario in its latest quarterly update.

While Shawn Qu hailed “another strong set of results for the third quarter” as his company beat its three-month guidance figures for shipment volumes, revenue and gross margin, the Canadian Solar chairman and CEO acknowledged shortages of materials would affect figures for the current three-month period.

Yan Zhuang, president of the CSI Solar subsidiary which is due to be spun out of the parent via an IPO in China next year, said shortages of solar module raw material polysilicon, solar glass and the EVA used for module backsheets had driven up their prices between 50% and 100% during the third quarter.

Forecast

Zhuang said the rebound in global demand for solar since July, after the shock of the Covid-19 pandemic had lifted, had buoyed the company but added Canadian Solar had suffered “input material shortages.” “As a result,” added the executive, “we are expecting pressure on our short-term profitability.” The extent of that pressure was confirmed by Qu as the update spelled out an expectation the guidance-busting gross margin of 19.5% seen in July-to-September will bounce back to 8-10% in the current business period.

The CEO said he expects the effects to be short-term, in part because he anticipates “large capacity additions for solar glass over the next few months,” and, in less welcome news for project developers, because “some of the higher cost burden will be shared with our customers.”

The chairman also indicated energy storage could be expected to contribute more significantly to revenues after the company signed its first large scale storage deal last month – to supply Goldman Sachs Renewable Power with a 75 MW/300 MWh lithium-ion battery storage solution for the 100 MWac Mustang solar plant in California.

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Canadian Solar plans to hit 2.1 GW of annual solar ingot manufacturing capacity this year, rising to 5.1 GW by July and 10 GW by the end of next year even amid the polysilicon shortage noted. Module capacity of 16.1 GW this year is set to rise to 23.2 GW by July and 25.7 GW by year-end 2021 and 6.3 GW of wafer output is due to rise to 11.3 GW by July with cell capacity to increase from 9.6 GW to 18.2 GW over the same period.

The company shipped 3.2 GW of modules last quarter – beating guidance of 2.9-3.1 GW – but said that figure is expected to slip back to 2.9-3 GW in the current trading period for full-year shipments of 11.2-11.3 GW, with 18-20 GW anticipated next year. The U.S., Vietnam, Brazil, China and Japan were the biggest markets in July-to-September.

Revenue

Third-quarter revenue topped guidance of US$840-890 to hit US$914 million for net income of US$8.8 million after a US$12.6 million tax hit in China related to a special dividend paid to the company's Module and System Solutions subsidiary. Revenue in the current quarter is expected to be US$980 million-1.02 billion.

Canadian Solar's project business – which landed two power purchase agreements related to 862 MWp of its project capacity in Brazil in this three-month window – aims to have sold 1.1-1.3 GW of projects this year and to dispose of a further 1.8-2.3 GW next year, 2.4-2.9 GW in 2022, 3.2-3.7 GW in 2023 and 3.6-4.1 GW in 2024.

The company said it is on track to complete the IPO of its CSI Solar business in China in the second quarter after raising US$260 million for the move during the third quarter and completing a US$230 million convertible bond issue.