Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated sales for Q2 '24 increased by 13% QoQ to KRW2,679 billion, driven by a recovery in renewable energy module sales.
- Operating loss improved QoQ due to better performance in the renewable energy division.
- The module sales volume recovered, and partial realization of profit from power generation assets in Europe helped boost performance.
- Equity method gains improved, reducing the deficit due to better performance of equity method companies.
- The company expects continued growth in module sales and a decline in the size of losses in the third quarter.
Negative Points
- Consolidated operating profit recorded a negative KRW107.8 billion, indicating ongoing financial challenges.
- Pretax profit was negative KRW311 billion and net income was negative KRW329.8 billion, reflecting significant losses.
- Liabilities for non-financial businesses increased by KRW3,045.7 billion, and debt increased by KRW2,609 billion.
- The liabilities to equity ratio increased by 26 percentage points to 185%, indicating higher financial leverage.
- Operating profit for advanced materials declined by 15% QoQ due to rising raw material costs and maritime freight rates.
Q & A Highlights
Q: Can you provide an update on the inventory status and competition in the US market, especially considering the increased tariffs on Chinese companies? Also, could you elaborate on the expected decline in operating loss for the third quarter and any changes in sales volume guidance?
A: We will maintain our existing sales guidance for 2024, which is 9 gigawatts. We expect the operating loss to decline in the third quarter due to improving module sales, which increased by 40% in Q2 and are expected to grow by an additional 30% in Q3. Regarding inventory, we haven't seen dramatic changes, but prices are stabilizing, which should help with sales volumes at better prices.
Q: What is your view of the US solar market demand for the second half of this year, and are there any plans to raise additional funds to address concerns about the company's financial structure?
A: We believe demand remains strong, especially in the utility sector, despite some inventory buildup in the first half. For the residential market, third-party ownership models are driving demand. Regarding financial structure, we plan to issue a KRW800 billion hybrid Tier 1 bond to improve our financial structure and repay borrowings.
Q: How might the ongoing US presidential election campaign impact your strategic direction or business plans, and have you adjusted your IRA forecast for the year?
A: Our business strategy is designed to be resilient to political changes, so we do not expect the US presidential election to impact our plans significantly. We have a strong presence in the US market, and our strategy will remain focused on this key market regardless of the election outcome.
Q: Can you provide a breakdown of the 6 gigawatts sales guidance for the second half of the year between utilities and residential sectors? Also, what are your CapEx plans for 2024 and 2025?
A: We expect significant volume growth in Q3 and Q4, with 50-60% allocated to utilities and the rest to commercial and residential sectors. Our CapEx for 2024 is committed at KRW3 trillion, primarily for US plant expansion. The 2025 CapEx plan will be finalized later this year.
Q: What is your outlook for module ASP (Average Selling Price) in the US market for 2025, considering the current inventory situation?
A: Predicting ASP is challenging, but we expect prices to stabilize after the significant decline of 40-50% from late last year to early Q2. If the factors causing the price drop are resolved, prices should revert to their previous range. We also need to consider other companies' policies and our shift to US manufacturing, which could impact ASP.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
