More Solar Gloom From Trina
The latest signals from China’s struggling solar sector are decidedly downbeat, with Trina (NYSE: TSL) sharply lowering its previous guidance and taking a big inventory write-off. The company dropped its third-quarter shipment guidance by a hefty 25 percent, and lowered its overall gross margin forecast by more than 50 percent as the industry’s worst-ever downturn continued to take its toll. (company announcement) It also lowered its full-year output target by more than 20 percent. Interestingly, the huge margin shortfall, combined with a $19 million inventory write-down in the announcement, may actually be good news, as I suspect these two elements are directly related to the July resignation of the chairman of Trina’s audit committee, which could have hinted at a much bigger accounting scandal. (previous post) Trina’s shares fell a relatively mild 3 percent on Wall Street on Thursday, probably partly due to relief that no accounting scandal was imminent. Look for more similar write-downs by other Chinese solar players when they start to report their results later this month, beginning with Trina on November 21, followed the next day by Suntech (NYSE: STP). The news wasn’t all bad, as Trina was also guardedly optimistic about the future, saying it was seeing more signs of demand from emerging markets to offset a slump in US and Western Europe that have been the industry’s biggest markets to date. On the emerging markets front, Beijing should taking the lead to help the struggling solar sector that it has so carefully nurtured over the last 5 years, and indeed it has made a number of moves that indicate a big new wave of solar energy plant construction could soon begin in China. It should try to accelerate that pace to save its industry from further pain, which could grow worse as the US considers an anti-dumping complaint by US solar firms against their Chinese rivals. (previous post)
Bottom line: The latest guidance from Trina Solar reflects an industry still in the throes of a massive downturn, with no meaningful relief in sight.
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