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Canadian Solar stung by turmoil in global solar market

Canadian Solar Inc. missed revenue guidance during the second quarter and lowered full-year sales expectations as the solar panel manufacturer braces for continued market volatility.

China threw the solar industry into turmoil in May when it announced plans to slow the pace of construction in the world's biggest market. The move, which has driven down the price of solar panels globally, followed new U.S. solar tariffs that also have weighed on demand. Additionally, India is considering imposing duties on solar cells and panels made in China.

"There are certainly greater headwinds in [the second quarter] than in recent quarters, but nothing our team has not worked through in the past," Canadian Solar Chairman, President and CEO Xiaohua "Shawn" Qu said on an Aug. 14 earnings conference call.

After reporting second-quarter revenue that was 6% below the low end of guidance, Canadian Solar, which is based in Canada but does much of its manufacturing in China, lowered full-year guidance for revenue and module shipments and scaled back plans to expand production.

"In the near term, we will focus on maintaining our market share and protecting a reasonable profit margin," Qu said. "You can only choose one road, right? Either you protect your margin or you go for volume."

The strategy could make Canadian Solar an outlier. China-based JinkoSolar Holding Co. Ltd., for example, said Aug. 13 that it plans to increase its manufacturing capacity by 1,800 MW this year while maintaining guidance for shipments.

"Other companies will either tell you they will continue to expand [production] or they will say nothing," Qu said. "So I hope the industry as a whole can be more rational."

Guidance cut

Analysts at Oppenheimer & Co. Inc. said Canadian Solar is making "prudent" technology investments. The company "has historically been a leader in technology-driven cost reduction for silicon module technology and maximizing performance of lower purity materials," the analysts wrote in an Aug. 14 note. "This leadership appears to be true again, going through this cycle."

Canadian Solar reported second-quarter net income attributable to shareholders of $15.6 million, or 26 cents per share, compared to net income of $38.2 million, or 63 cents per share, a year earlier. The second-quarter S&P Global Market Intelligence consensus estimate for EPS was 33 cents.

The company reported revenue of $650.6 million during the second quarter, down from $692.4 million a year earlier and below its guidance of $690 million to $730 million. The S&P Global Market Intelligence consensus estimate for second-quarter revenue was $711.5 million.

In addition to a decline in module prices, Canadian Solar said revenues were hurt by the deferral of several planned project sales. China-based Shenzhen Energy Group Co. Ltd. recently said it was pulling out of a deal with Canadian Solar subsidiary Recurrent Energy LLC because the Committee on Foreign Investment in the United States did not finish its review in time. Canadian Solar CFO and Senior Vice President Huifeng Chang on Aug. 14 said the company is in "very late-stage" negotiations with new buyers.

For 2018, Canadian Solar expects to generate between $4 billion and $4.2 billion in revenue, down from earlier guidance of $4.4 billion to $4.6 billion. The company also cut full-year guidance for solar module shipments to between 6,000 MW and 6,200 MW from an earlier range of 6,600 MW and 7,100 MW. Canadian Solar said it made the adjustments in response to "market changes."

Canadian Solar shares were down 1.99% to $13.31 in late afternoon trading Aug. 14.