Trina Solar Limited (ADR) (NYSE:TSL) Failed To Impress The Market


The financial numbers of Trina Solar Limited (ADR) (NYSE:TSL) confirmed that being one of the leading international powerhouses in the solar industry is not essentially a strategy for Investment success. The company failed to record profit despite being a leader in the solar industry. Declining solar prices have causedmayhem on solar manufacturers, and as of now not even building assignments can turn around operations.

The concerns

Trina Solar Limited (ADR) (NYSE:TSL) established a remarkable 1.7 GW of solar modules in 3Q, nearly adequate to supply the entire United States solar market in 2011. The figure is incredible, but it didn’t help the company to record success in this year. Despite recording increased module shipments of 70%, the company saw net revenue surge just half that, and it actually recorded a net loss for the quarter.

The financial performancewas hurt due to settlement costs of $45 million, but even leaving that, net income amounts to just $23.7 million.Trina Solar is developing solar projects on balance sheet that comprised of 350 MW of module shipments in the reported quarter. If those solar modules had been offered in the open market, the company’s gross profit would have jumped by$40 million in quarter.

The industry

The similar phenomena of higher volume growth but declining profit is seen out for other players in the solar industry and Canadian Solar (NASDAQ:CSIQ) is no exception.U.S. tariffs are taking away profits, and Chinese demand doesn’t add significantly to overall profitability. Trina’s net margin was 3% in the quarter compared to Canadian Solar’s net margin of 3.6%.

Considering that Trina Solar Limited (ADR) (NYSE:TSL) have a similar offering as Canadian Solar and other Chinese solar manufacturers, the future of Trina Solar looks dim. Both firms are rapidly increasing production in the face of uncertain demand and declining prices in the next couple of years.