Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canadian Solar Inc (CSIQ, Financial) shipped 8.2 gigawatts of solar modules, surpassing previous guidance and demonstrating strong operational performance.
- The company achieved a revenue of $1.6 billion and a gross margin of 17.2%, both in line with guidance, indicating stable financial management.
- Canadian Solar's energy storage segment is on track to grow by more than 500% this year, with industry-leading margins, showcasing significant growth potential.
- The company has made substantial progress in sustainability, achieving significant reductions in greenhouse gas emissions, energy consumption, water usage, and waste intensity.
- Canadian Solar's project development platform, Recurrent Energy, is transitioning to a global developer, owner, and operator of solar and storage assets, positioning it for long-term value creation.
Negative Points
- The solar module business faces margin pressure due to challenging market conditions and oversupply across the solar value chain.
- Total operating expenses increased to $434 million, driven by higher shipping and handling expenses, impacting overall profitability.
- Recurrent Energy's transition to a partial IPP model will result in fewer project sales, leading to a lower contribution to Canadian Solar's P&L in the near to mid-term.
- Freight costs are expected to remain elevated in the second half of the year, adding pressure to the company's cost structure.
- The company revised its full-year 2024 capital expenditure expectations downward to approximately $1.2 billion, reflecting a cautious approach to capacity expansion amid market conditions.
Q & A Highlights
Q: With new AD/CVD charges, how are you expecting sales and distribution costs to trend for the rest of the year?
A: (Xiaohua Qu, CEO) It's difficult to speculate the impact of the new AD/CVD case for the four Southeast Asian countries until the preliminary ruling in October and November. Meanwhile, we work with customers on conditional pricing mechanisms to protect both sides from different tariff levels.
Q: Can you discuss the dynamics of your distribution business amid recent disruptions?
A: (Ismael Guerrero, CEO of Recurrent Energy) Our distribution business remains strong, with over half of our volume going to the DG market, including residential and C&I rooftops. We are doing well in the US and Japan, and have started bundling modules with residential storage and inverters to enhance margins.
Q: What drove the latest 2024 shipment reduction? Was it due to the Southeast Asia AD/CVD tariff process?
A: (Xiaohua Qu, CEO) The reduction is not due to the new AD/CVD case but rather other markets. We aim to balance shipment volume and profit, and have adjusted our guidance to reflect a reasonable estimate while maintaining profitability.
Q: Can you share any color on a potential Recurrent IPO timeline and plans for the e-STORAGE business?
A: (Xiaohua Qu, CEO) We are moving to a partial IPP model, which may lead to capitalization opportunities in the future. However, it takes a couple of years to build a good IPP. We have no plans to spin off e-STORAGE, as it is an important part of CSI Solar.
Q: What is your outlook on US module pricing and its impact on domestic versus imported volumes?
A: (Xinbo Zhu, CFO) We have a healthy margin in the US and are growing our volume there. While there are price fluctuations, the AD/CVD petition adds complexity. Overall, we see prices trending up and are confident in maintaining healthy margins in the US.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
