Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to quarter three of 2019 Jinkosolar Holdings Company Limited earnings Conference call. At this time all participants are in listen only mode. There will be presentation, followed by a question and answer session at which time if you.
I wish to queue for a question you will need to press Daryl followed by one on your telephone keypad.
I would now like to have the conference over to your first speaker today Mr. Zhao. Thank you ripple. Please go ahead.
Thank you operator, thank everyone for joining us today for Jinkosolar that like I tend to 19.
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Jinkosolar Dotcom Act, where I found your flat everything we have also provide good discipline on capital constraints I could talk on this call, which can also be found on our website.
Okay quantum koestler I'm never 10, counting Chief Executive Officer, Mr., <unk>, Chief Financial Officer, Nicotine, Emil Chief Marketing Officer.
<unk> disgust Jinkosolar business operation and the company highlights followed by Mr. now, let's talk about their sales and marketing and again, if that's how who will go through the financials.
I'll be available to answer your questions journeys UQM, especially that close.
Please note that todays discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of Nike by well, what looking statements involve inherent risks and uncertainties as such our future results may be materially different from the view.
Dictate what the information regarding these and other risks if coated in jinkosolar topic finding.
With that Securities and Exchange Commission to go so that does not assume and help he gave an update any for what looking statements except as required under the I'll pick up a little.
Now my pleasure to introduce Mr. Chen Kangping C. O often go solar nearer term, we're speaking magazine and I will translate his comments into English. Please go ahead Mr. Tim.
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Thank you live all good morning, and good evening, everyone. Thank your for drilling have today.
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I'm pleased to report strong operational and financial results for the second quarter, which I believe marks a turning point for our business athlete began to increase may benefit from our investments in technology, leading integrated cost structure, and expanding mono wafer capacity, which will stack and they strengthen our over rone.
Perfect, Okay, I'm expand margins going toward total revenue.
During the quarter, well well like Oh five.
In in U.S. dollar increase of 8.2% sequentially and 11.8% Oh, yeah over here.
Leading integrated production costs continue to flow and FP went down sequentially, allowing us to initiate reset overall gross margin expanded to 21.3% during the quarter, it's excluding that benefit from anti dumping and countervailing duties gross margins.
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Calling for Mena U.S. dollar and net income of.
50.9.
Need at U.S. dollar significant increases of almost two to three times sequentially and year after year over year as our mono wafer production capacity ramps up and we further optimize our cost structure in the fourth quarter and 2020 a have a little perfect affinity and we'll continue to stay tuned.
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Exactly like announcement of the government subsidy policy for PV projects in China, I guess here I'd like to know about projects, Steve we land is appealing or preparation stages.
At quarter, which resulted in many of them being pushed back into the fourth quarter and the first quarter next year. This delay is expected to drive strong domestic demand over the next six months, especially since the national.
Renewable energy information management, Santo recently announced that it making up that formulation of a subsidy policy for PV projects 2020 early release of next year subsidy policy and an increasing number of grid parity project will support to demand next year, which is expected.
Increased strongly and exceed 40 Gigawatts. In addition, the Chinese government released a policy that creates the foundation for a market based mechanism to facilitate electricity trade to drive economic well and to help faced out coal fired power plants nationwide.
Over the long long solar power, which go eventually replace traditional source of energy at a faster rate went down under market conditions that help support to the continued reduction in production cost and the continued to that of new ecological technologically.
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Oh, yes cost energy source in over 10 countries.
Back to PV was hampered by fluctuation in production capacity and a perfect Finicky circle with a cost of solar energy now falling below traditional energy sources and competitiveness, increasing the renewable energy, yeah, really confident and optimistic that to blow but in mind equally strong.
On the next year based on our Calvin to estimate we believe installations next year would be approximately 20% higher than this year.
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It's a lot determined by a degree of that Technotica pedal should read you brought forgot beauty that channel Chico towards all women Banco popular time running just how about them wanting them Ali we began our technological transformation back in 2016, when we began producing mono wafer and have seen stay acumen.
83 years of operational and technical expertise, which we applied to our mono production facility in Russia Retract province. This technological transformation is now complete with one of the production facility heavy rescap to fool five gigawatts capacity.
The phase two of the production facility, which is four five gigawatt capacity during the second quarter of 2020 I believe this reflects our strategic for Sac and the ability to rapidly execute we are at your strategic running calling turning point in our corporate history with model based.
Hi efficiency products accounting for nearly 75% over the total shipments during the quarter, which is expected to increased to 99% of total shipments in 2020 on mono wafer products have low oxygen content and extended operational lifetime, which makes the sale product low.
Like decay and high efficiency at the same time, our manufacturing cost has steadily declined to quickly become the industry benchmark the increased production capacity for our high quality and the low cost.
Needing model wafers have facilitated a significant increase in the proportion of Kodak made through our fully integrated manufacturing process, which allow us to maintain an industry, leading cost structure and ensure stable gross margin going forward.
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From Washington will have a hotel out hunting and fishing density that John Ashanti Richie Whitt, our customers up Evans for Isa because after the destiny, Jackie Chimera I'm getting Jeff the efficiency a lot and type sales reached a record high of 24 point to 58% Jobin casting conducted by the Chinese a cat.
Okay. Thanks in June we expand our production capacity of NPAT sales to 800 megawatts during the second quarter and our Calvin today ramp up to four production in the fourth quarter by developing new technological.
And at driving innovation in materially on that.
That produced and type sale efficiency leads the industry across a range of indicators and is expected to exceed 24% efficiency in the future.
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But how should you have about talking about things I mean, we recently unveiled a new tag on larger which offers our client significantly improved efficiency lower production costs and got better internal rate of return using nine plus Bob mono PERC and pipe piling rebrand technology the modules alike.
20 point, 78% efficiency and the peak power output of 460 what.
Providing easy performance booth that doesn't do require much extra effort to each store. The tiger module is suitable for both utility and you look top installation. Meanwhile, we are strengthening our in house integrated capacity to recognize me put new into integration.
Of our high quality inevitably products into mass production, which ensures competitiveness.
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Bob I thought a engine guess timing our in house high efficiency and you'll see come wafer solar sail entered for the module production capacity has now reached 14.5 gigawatt 9.2, Gigawatts and 15 neglect respectively.
Reset to of 319. This includes 11 gigawatt of mono wafer capacity and 9.2 Gigawatts Park sale capacity.
Opportunity Nike, we expect our in house annual city come wafer solar sale and so the module production capacity to which 15 gigawatt.
I'm going to six Gigawatts and 16, Gigawatts actively which.
10.5, gigawatts or model.
Patrick 9.8, Gigawatts of PERC cell capacity and 800 megawatts of NK cell capacity at the end of 2020 , We expect our in house annual city come wafer sort of sale and so that module production capacity to which 20 Gigawatts pinpointed six gigawatts and between.
Two gigawatts, respectively, which includes.
18 of model capacity.
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During your tenure over to Jeff So what does that so some of your thoughts would be hard you about Virgin with our technological transformation complete we are now at a turning point, which occupant nonenergy, leading integrated cost structure global footprint high quality products will open up in noma enormous Neil.
Opportunities and strengthen our overall profitability and in.
Margin profile going forward with domestic demand, who we found these strongly and over safety amount.
Given by grid parity and aggressive you clean energy targets, we expect to the fourth quarter to be a peak quarter Flash based oncology estimate for the fourth quarter of 2019, we expect total solar module shipments to be either range of 4.2 gigawatt to 4.4 Gigawatts.
Total revenue for the fourth quarter is expected to be in the range of $1.7 billion to 1.2, sweet beating US dollars gross margin for the fourth quarter is expected to be between 18.5% and 20.5% for the full year 2019, the company estimate.
Total solar module shipments to be the range of 14 gigawatt to to 14.2 Gigawatts.
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We traditionally release full year guidance, when we report the fourth quarter over the previous years by the we've got the mind going back in April domestically and overseas for our high efficiency Mana products, we have strategically decided to complete our account.
We didn't see mix is strong growth a quoted earlier than expected based on current expectations. We expect that total solar module shipments to be the range of 18.
Good luck to 20 Gigawatts for full year constructed and increased around 65% year over year.
Developer just collection that were down party jogger Jenna, Thank you liberal with Zach ever tank over to Tina.
Thank you Ms. Chen.
Total shipments and the for quarter 3300.
Flat with the second quarter.
With a large number of domestic installation delayed and to the fourth quarter and the first quarter off next year overseas shipments accounted for 90% of our order book during this quarter.
Last piece has a reserve sequentially.
We are at strategic turning point in our corporate history, we smaller base the high efficiency products accounting for nearly 75% off the total shipments during this quarter.
This number is expected to increase to 99% in 2020 and over 40% of which will be adds a new products.
Due to today's announcement of government policy in China earlier this year.
Men in major developers were forced to to delay their projects with a portion of those installation pushed back into the fourth quarter 2020 .
Delayed the demand from 2019 the increased.
Great parity projects expected in 2020 as well as.
To pay to the policy announcement early for next year leave us very confident and optimistic about domestic demand in 2020 , the increase Sally and exceed 40 40 gigawatts.
The majority of which will become post off grid parity and the beating projects.
The mounted U.S. market remained very strong where many days have begun implementing very aggressive clean energy policies and celebrated the facing out coal fired power.
In California for example, all new homes will require rooftop solar panels, starting next year.
There was I rushed this year to submit projects in order to secure at the highest a tax exemption under the solar ITC.
A large portion of these projects are expected to drive demand and the began installation over the next 40 years.
According to the 2019 U.S. installation estimate complied by Blumberg, our market share in the U.S. currently approximately 20%.
Recently, we joined the board of the solar Energy Industry Association.
National Trade Association, representing the U.S. solar energy industry.
We are working to further expands the market share by leveraging our leadership in the industry.
On brand recognition competitive and reliable corridor.
And extensive customer base.
Turning to Asia Pacific.
We expect to advisor for large scale projects to begin next year in Japan in order to rescue secure at the high feeding tariff.
As a nation ready supports Olympic games next summer costs are expected to increase as it becomes harder to construct a new installations, which will drive demand for high efficiency modules.
With large scale projects nearing the end of growth phase distributed PV projects will become the next the major growth driver in Japan.
And the India are expected to search next year with the safe start tire.
Reduced to two at their lowest levels.
Year round off I think is on the way in Vietnam, which will support a stable gross.
In Victoria, Australia, industrial commercial and residential projects are expected to grow rapidly falling good return off that rooftop solar panel rebates and improved economic efficiency from distributed PV.
The renewable energy Certificate recently launched in South Korea will drive sustainable demand for floating solar over the next three years.
Large scale projects in Thailand, Philippines, Malaysia also about to start.
Europe .
In Germany base building streak of four Gigawatts solar power stations as distributed PV continues to grow steadily.
Spare has begun phasing out coal fired power plants and has that annual installation target of four gigawatts.
This policy will also remove barriers to grid connection for distributed PV, which will stimulate growth in the industrial and commercial sectors.
Installations across south in Europe , I expected to increase as grid parity approaches.
Subsidies handed out and that the stimulation offers sustainable energy production.
E plus will continue in Netherlands.
Distributing installation will also grow strongly across northern Europe .
The beating of mechanisms initiated in France is expected to generate two gigawatt of demand annually well subsidies for small scale PV systems are driving to merging of distributed PV.
Visa for large scale projects are taken place across the middle East.
Gigawatt level projects such as.
Hello.
Equally so do you have projects in Saudi Arabia and art.
But in Kuwait will drive installation demand in the region for the next three years.
Large scale, beating projects in Brazil are proceeding according to the plant well subsidies for distributed projects are driving rapidly growth in industrial and commercial sectors.
The Mexican government cancelled all base at the beginning of this year, which has opened up space for the divestment of private beating mechanism, which could possibly becomes a new business model for purchase of electricity.
The model in Central America is gradually growing as it is in Colombia. Following the successful lunch off their first auction well recent economic and social unrest in Argentina, and Chile has tempered demand.
We are confident that Latin America demand overall will continue to increase sustainably over long term.
To conclude that delay in China have many projects to early next year.
Third in the amount of from Europe , and the U.S. to replace congressional energy.
Forces large scale agriculture, PB subsidies and a significant increase in large scale projects installation of India together with steady growth in emerging markets, such as Middle East South Africa, Egypt, and the thing Europe leave us extremely cost access next year will be us.
Strong.
Yes.
We have strategic late developed our resources globally and now have the seven production facilities supporting shipments to almost a 100 countries with over 8000 orders annually.
This has allowed us to take to a large market share in many emerging countries.
We have proven to all the ability to navigate a difficult market environments over the years.
Which is a direct to resolve flexible and the adaptable market oriented to production model.
Combined with our global operations.
Local technology service team supply chain management, and the differentiated product strategy, we will be able to continue strengthening our market leading position.
We focus on competitiveness of our products as much as <expletive> .
Since 2017, we have set knives werent record for cell efficiency on the module efficiency.
Continuously investing in R&D has enable us to large differentiated and the more competitive products.
Faster speed.
At this turning point, our technology scale, and the leading cost structure will ideally positioned us to benefit from emerging opportunities.
Our cheetos serious have become industry standard and the recently.
We launched a new high efficiency Tiger module at our energy, Australia, 2019, which introduced.
Highly repurpose technology to the market for the first time.
This is another tech.
Technical or the while spent that reflects our ability to innovate to cutting edge technology with all will support the march towards great parity.
Recently Jinkosolar was recognized along with 52 other manufacturing champions in the latest subpopulation leased up buys I am I T and CF I'd for ASE excellence in manufacturing office major products solar module.
Which are defined as into price focusing on specific manufacturing segment for the long term.
With internationally, leading technology and the market share off a single product among the top street globally.
During the third quarter, we attended a seven trade shows and the participated and 44 conference. This worldwide.
We also host the over 11 customer events and 57 co marketing activities with key partners across the globe.
Also received eight award we have committed to the.
Are you 100, and as you 100 initiative.
At the first of global solar manufacture and the promised to power all is solar panels and the global operations with hundred percent of renewable power by 2025.
By 2030, we target to deploy a energy management system across all our operations to improve energy productivity by 30% when compared to 2016.
As one of the leading company in said renewable energy sector. We consider it's important to be responsible role model for us sustainable future.
With that I'll pass it over to chart.
Thanks to a dinner we achieved record gross profits on the income from operations in Q3, despite push outdoor China demand.
Switching to the high increasing Z mono takes knowledge has been positive completed making Q Street are turning point for the company.
This gross margin reset has been driven by increasing shifts towards integrated model capacity.
Meeting in house integrated production costs, new premium products on global.
Footprint.
With our strong competitiveness industry, we're optimistic for the successful gross future.
Stepping into two new trend do we expect total shipments grain. So 18 to 20, Gigawatts mended underpinned by the strong growth outside of China on our diversified customer base globally.
The composite.
And to 28, Gigawatts wafer, including 18 Gigawatts model wafer.
1.6, Gigawatts, Hi Inn facing sale on two new two gigawatts of solar modules.
Model base, how youre facing parnaz are expected to make close to 100% our shipments in 20 attendees.
The oil pre dominantly served by the house capacity.
The Capex for 22, India will be around 300 million U.S. daughters significant today is lower than intend to 19.
Gave an outcome pass the management fees Las Vegas.
We plan to finance the Capex by I'm sure renewable infrastructure fund and other operating cash flows.
Turning into a strong performance or Q3 total revenue was one thing in us dollars.
8% quarter over quarter gross margin so substantially.
Moving to 21.3%, excluding the AIDC would either we're so benefits gross margin was 18.5 per cent compared to 16.5% in Q2.
Income from operations was 89.4 million in us dollars up 136% compounds to sort of 7.9 million Usource in Q2.
Was 100 million you asked dollars up 50% to 2% compared to 66 million us dollars in Q2.
GAAP net income was 42 point walkman in us dollars, which translates into non-GAAP diluted earnings per radius of 96 cents.
Operating expenses were 12.8% our total revenue excluding the disposal of obsolete.
From an operating expenses accounted for 12.2% or total revenue come pounce, 2.8%.
Second quarter.
Moving to the balance sheet, and though Q3, our balance of cash cash equivalents for 518 million us dollars compared to 500 Fortys remain you asked ours and though Q2, we continued to drive our operating efficiencies.
Hi, Tim over days improved to 63 days in Q3.
Now to some of the six days in Q2, England tourism over days reduced to 93 days in Q3 compared to 104 days.
Second quarter.
Total debt was one point, so and paying us dollars compared to 1.9 fund in us dollars endocrine second quarter.
Each 309 million U.S. owners.
Loss related to our international solar projects net debt was 1.1 in U.S. honors.
How to 1.2, putting your stars.
And though second quarter. The decrease was mainly due to the decrease borrowings.
In the limber.
Entered an agreement to sell to solar power plants in Mexico, where is that combines capacity of 155 megawatts. This trends they seem a subject to customary closing conditions. Once the transaction is completed the total debt will be reduced by one kind.
So these remain us dollars.
The sale of overseas solar power plants is consistent our growth strategy to focus our coal solar manufacturing business.
Regarding our guidance fourth quarter, we expect total revenue to being a range of 1.1. So anything you are saunders to 1.23, putting us ours, but don't expect an 80 CBDV verso benefits in your fourth quarter.
Gross margin or fourth quarter.
Hey expected to being a range of 18.5% to fund the iPhone, 5%.
Payouts to 18.5% so quarter, if acute excluding the 80 CBDV worshipped benefits.
This concludes our remarks on this.
So a quarter, where now happy to take your questions operator.
Thank you ladies and gentlemen, we will now begin our question and answer session. If you have any questions. Please press zero one on your telephone keypad and wait for your name to be announced.
If you wish to cancel your request decrease prestero followed by too.
Again, that's zero one on your telephone keypad now.
Your first question is from Mahi Manley from Credit Suisse. Your line is now open. Please go ahead.
Hi, everyone. Thanks for taking my question.
Nice quarter guys.
Can you.
Talk about the order visibility and 2020, just looking at the 18 to 20 gigawatts of shipment guidance.
Nice such purpose and uplift.
But just wondering if I understand what geographies driving.
How much visibility do happen to that order book as of now.
Thanks for the question I think.
I think we are having over one third off the order book a full field for 2020 right now.
We are targeting to increase that level into a higher level by the yen and thats tumor type, let's say and for the geographic coverage majority of them are non China. The mouth Marriott International demo I think we have secured a lot of.
Global coverage, including Europe , you less.
Emerging markets Asia markets etcetera.
Got it.
Just on the China market, Yeah, if you can touch upon the.
The new policy.
For 2020, when do we expect that announcement happen.
We've been hearing.
Something to happen then the next month thought in Q1, but any clarity on.
When the new subsidy would when loans and then when you can expect the new route of beds in 2020.
I think definitely that lower than expected installation number in China in 2910 will encourage to let's say the government side.
To announce a policy and also the beating policy for 22 and they are there.
Definitely earlier than Tonight change, we have seen just a news coverage about a detailed also dropped the details dropped at a detail about 2020 policies such as.
What's the proposed feed in tariff.
Ceding feeding terrorists and the also lets say back to the installation water. So from that policy all to the rumor side, we are pretty confident on that.
Policy it could be announced the in the next out what tumor conservatively at least that before Chinese new year embracing could be set up.
And.
Do you need me to remind you on this a numbers.
Yes, there would be helpful.
Yeah. So according to what we have read the ons us Chinese.
Chinese.
Newspapers, we have seen the drop to the policies around ACA.
Four cents.
Six sorry, four sets a says on the 10 says for.
Utilities distribution generation answer.
Individual home owners, so our I see we see that dropped to in the news so I'm not quite sure what should be though what will be the final policy.
If that that number comes sure we definitely expecting over 40 Gigawatts isolation 2020 .
And then my head and then.
Yeah, that's harder on to adjust supplements some back one I think in China, and just see as a bottleneck is upon us it coming out late.
And developers need sufficient time to get to.
No connection approved to get to the nine secured.
So some of developers.
There's no sufficient time so.
I'm a positive nobody debates in Q1 next year.
From the policy.
Later, because back to next year is still going a different.
Going to moving moving more quickly.
So just like you know generates ads.
Just a.
Framework this scheme over the framework.
Generally it's the same versus the year a subsidiary level.
Beyond that a bit I still we're positive.
And the positive for sure come out.
No. That's next couple of months.
So Frank speaking, we were asked we're optimistic for China next year.
Just this year.
Got it a quick follow up on that the 40 gig award China demand on 2020 does that include be trending 19 projects being delayed into the first up mixture.
It's about so I know, it's funny on attorneys ended projects.
Okay.
And then just one housekeeping I'll jump back in the QB Q4 revenue guidance does that include the Mexico asset sale and if not then could you touch on the timing of the sale.
Yes. Good question Linda this revenue does not consider.
Revenue from the monetization Mexico projects, so it's purely or for the 4.2 to 4.54 0.4 Gigawatts module shipments.
And then Mexico, Mexico positive we have side.
Agreement.
It's going to submit some kinda.
Record EU approval procedures, we expect to be close either a couple of months.
And.
It could be unit and the year early next year Q1.
Got it.
Thank you. Thank you.
Thanks.
Thank you.
Next question is from Philip Shen from Roth Capital Partners. Your line is now open Phillips. Please go ahead.
Hey, guys. Thanks for the questions.
First one is on pricing can you confirm what your Q3 ASP was.
Our basic calculation was for about 31 and half sense, but that seems a bit high.
Also what was your module only revenue for Q3, and then looking ahead for Q4.
And given the guidance that you have there we get an implied ASP.
27.9 cents.
We closed on that and.
If not in your can you talk about.
The ASP that you see for Q4 thanks.
Hi, I would take the Asps have it leaves that revenue question two charts. So for ASP side I actually just stated I think the ASP.
Slightly up compare Q3 versus Q2 and the for Q4. It will drop requires side, there's some more shipment to China is some more spot market. The current market prices lower it adds up senza contract, we have signed a quite a while ago. So thats why the blended asps will.
Lower I think I think ace all approximate that Randy you just talk about the detail number will have to check may well have to tech.
And for the Q1 and for the ASP trend that we believe the market it will continue.
Let's say in generally stable, but to steadily going down quarter by quarter, a year by year I think as a whole industry is going into grid parity, which will.
Very helpful or to stabilizing to terrible type of dance offices.
Okay price.
But in general in order to be more competitive for solar installation globally, I think as a module as a whole solar system installation or Pacific, particularly the LCR cost. So we'll continue to going to be more competitive.
So fair, but could you just previous question revenue.
Yes, just simplistically for for your Q3 revenue how much of that was pure module revenue that we kind of associated with your shipments how much wasn't wafer revenue for example.
Yes, it's roughly I think the majority that part of last night is seven nine is something that is 6%.
Comedy from modular room.
Okay.
That's great.
So then generally you were just talking about.
SP is trending down through next year can you talk about the margins you expect to see.
By quarter next year, if we start to see no.
If we look at global pricing.
For mono PERC, especially and also China pricing.
It's quite weak.
And you guys have been able to maintain a pretty high ASP. So.
Maybe talk about that premium and then also.
Charlie if you can talk about the margin trend that you see for 2020.
That would be very helpful. Thanks.
Mmm, Firstly I think in China. This fee is downsizing starting from.
No.
So quarter.
And the slots to the October no.
The because the China demand is weak and due to that.
Policy, a now actually starting from the NATO October while progressing as China demand. These huge is pumping up so the capacity constraint is a big issue for us.
And you know.
So worried tied for the.
Solar cell sauces, even the solar sail marketplace.
Thank you.
Increase on a little bit.
And the.
The fourth for Jinko.
As we have.
We put a business highlights so quarter earnings because it's kind of turning point.
Why it's an important because we have completed its transformation for the Mando base taken on its capacity.
And if you look how about capacity it basically you can general.
Thing about from and looking to attorney to India, we have integrated.
Capacity, it's quarter roughly four gigawatts.
So.
And.
And now we.
I think we are working out work good positioning.
Im software.
Passed the scale.
In terms, our house integrated production costs.
Lender, that's we were promoting.
Hi, efficient paradox lags the Tiger.
The next generation hiding facing more technology integrated TR taken on its on the web promoting.
This flattens the official so next year just.
Lexia and the two maybe three new product is going to account for over 40 over 40% our total shipments.
So the new parts I my key points in new products the efficiencies higher output is higher by the production cost maybe lower or the same with traditional products.
So we are focusing on the.
House in house.
Capacity gross margins on the we're targeting.
You know roughly 20% to 25%.
So that that the seller I would go.
And just be clear Charlie that's.
Thats, what you could possibly see for next year or 20% to 25%.
For your in house.
It's a U haul twenties wondering on what we still need to do you know when we're trying to gigawatt hours.
Need to do some loss or potty or you know.
So it's hard to unify the solar cells, but.
One thing you know for each quarter in general we have four gigawatts.
I'd also say four gigawatts integrated capacity and the risk.
To do some all side.
So it's depending on each quarter some quarters were made by more function party some some quarters really.
So in general for that I think Charlie's point is so with the higher level of the in house, let's say what it go into greater capacity.
No we are.
Manufacturing, a higher more competitive and higher efficiency products, which can generate better margin.
Standard commodity.
And the way I know, we have more confident than ever that to we as a gross margins and also the profitability as.
Much more control.
Okay, Great. One last quick question as it relates to.
Jinko power that.
Can you just update us on whether or not theres any liability there.
For Jinko power how much.
Of the Jinko power. That's it are you guaranteeing if any of these days. Thanks.
I said, it's kinda legacy exit legacy.
Relationship right on our sent back into 2016, when we bring up the.
The Jinko power, we have put existing.
The Argentine related.
Relationship, which can go power.
But in those 2016, so the guaranteed amount that we have being.
You have disclosed tend to have no it's year and it's going down year over year in April this year on average roughly the currency lumber well be down 50 man U S orders to 100 million U.S. honors. So you'll kind of gets it to you and let's say two was 18%.
Lumber.
And the and the cost 50 minutes to how you may.
You can't get.
Roughly a number.
Okay. So roughly now it's about 600 million is that right.
I don't think sausage.
Yes, I don't think so I'm going to get back to you I think it should it should be lower.
Okay, great. Okay. Thank you I'll pass it on.
Thank you.
Thank you. Your next question is from Alex mental from Goldman Sachs Goldman Sachs. Your line is now open. Please go ahead.
Hey, guys, it's actually a it's Brian Lee.
How's it going.
Thanks for taking the questions maybe just.
Charlie on the gross margin question going back to that forbid appreciate the.
Yes, the view on the 20% to 25% internalized stuff to.
Larry on gross margin as we think about maybe the cadence, though because this year you had sort of.
A weaker first half in terms of margin profile versus the second half how you're exiting here could we expect something similar in 2020, given again, you sort of have the similar dynamics, where youll be ramping up capacity I know you had some capacity ramp up headwinds on the margins earlier in the year and then.
Looks like you know, obviously pricing is going to be weaker year heading into year end and then seasonally in Q1 typically we get another pricing downtick. So as you think about all those moving pieces is is it fair to assume you kind of start lower on the margins here just in early 2020, and then you ramp up just like we saw in.
90.
I'd say, it's a totally different scenario that tended to into you know the first half year versus the first half.
Thats engine 19, if you looked at.
Come pass there though to map.
And the dumping upscale Joe's actually our capacity.
No investment interest on 19 Green method, roughly 500 million stars.
The mono wafer the product sale.
Came out second half 2019, so the impact is happening second half year.
And the first half theaters on 19, if it's trimeric.
Worst case is.
PERC cell if.
Supply shortage the appliances worry high on the we have very limited capacities, we need to buy a lot of volume for the for sale for the first half the year, which was on 19.
Stories.
If it's going to never happen next year, because outcome past 18 miles the second half year. This year, our new second stage mono wafer capacity well count ouch flourish we're quickly.
Second quarter.
To first quarter, we are ramping up of the second stage.
The mono wafer starting from low on the kilowatt and continue to ramp up on the full capacity in second quarter.
So the key pointless the the wanting me there and they still sort of different.
The first half year 2019.
And just gives you some numbers is.
So.
The Walliams production volume next year 2019, well be dramatically increase for the mono wafer for the FERC sale unit for the modules.
Look had to the production volume.
On the concept of its capacity because capacity came out.
Late this year.
And the early next year, so year over year production volume for mono wafer.
100.
115% year over year.
So it goes on.
20 of which was on 19 for the PERC cell the Sir.
60% and modular 70%. So my key point is integrated production volume.
Just talks each quarter Roffler woke gigawatts status.
Smell myself and the we have.
Confidence, our beating cost structures, we have confidence our profitability levels, even for the I. I think as Pete.
It's.
It's a so we'll wait when we do the limited.
South planted intended trends here slowing in order to stabilize the growth markets again the.
A couple of how the market price or the spot market changes.
We trying to save plan.
Equivalent the volume growth against our capacity Rep platform.
That will help the how far we believe will be helpful to stabilize that gross margins.
We did not want to surprise capital markets.
Okay Fair enough I appreciate the color maybe a couple more.
Just on the modeling here for 2020 Capex you said is gonna be 300 million I know you spent.
Closer to like 500, you said Charlie for 2019.
Yeah, I think you said seven cents to 10 cents a lot.
Thanks for wafer in two to three cents, so a lot for module.
If I run those numbers it seemed like 2020 Capex will be more in line with the 2019 Capex is there something changing for.
The capex figures for 2020 or are you getting subsidize on a portion of the Capex for 2020 and then.
With that Capex you for 2020 do you expect to be free cash flow positive on there.
Yeah, I think you know we're confident next year, we're going to be.
Free cash flow positive.
The first is the output for but at a level should be no. We're heico's next year.
EBITDA operating cash flow will be warehouse in next year.
Second wise the Capex question.
The investment level is lower basically next year versus this year and next year is just five gigawatts capacity for the model wafer and office six gigawatts.
Six gigawatts.
Total capacity.
And it's going to.
If breaks down you know, it's roughly a 160 million U.S. autos or the mono wafer.
Wong while high demand you are solid for the module and the.
I think 40 him and you are solid for the upgrade upgrades attendance capex.
And they feel look on 2019.
Beginning with the rest on lots.
Okay.
PAREXEL conversion divesting.
Bill as we ask reinvesting.
And next generation and time.
Phil.
When you rescue.
No wafers and the for the for the second stage five Gigawatts.
On a wafer kink come out second quarter next year somewhat capex have already been reflecting this year.
So this is.
Another so something small some.
Some of the impact of the Capex next year.
Okay understood.
Then last one housekeeping I think in the past do you put in the slides the capex the DNA and the operating cash flow for the quarter can you provide those figures for for the third quarter.
I mean depreciation right.
Capex depreciation and operating cash flow I think you've usually put those metrics into the slides.
Diversity on monetizing should be roughly the same no slightly higher.
Within the quarter.
Operating cash flow actually is pretty good so sort of quarter, because our profitability gross margin and as you can see our operating efficiencies that includes four inventories accounts receivables.
I think is awfully at 100 many.
190 to 100 today may operating cash flow in yesterday, so quarter.
And then just on the Capex for the third quarter.
The capex I need to check by these chip accumulated over there for the.
For the Q onto Q3 is roughly 400 coming in US dollars, so I'm talking about others or you know $500 million.
Okay. So for 10 through the first three quarters.
Okay. Thank you guys.
Okay.
Thank you.
Next question is from Sean Shack Rich from luminous. Your line is now open. Please go ahead.
Hey, guys just want to come back to kind of the profitability of the business you've done a great job of proving the margin.
But as you kind of look at it it seems like the margin improvement has really been driven this year by asps going up rather than cost going down and I guess, that's attributable to the fact that you've moved from.
Lower spec product to like more motto Park is that the right way to think about it.
It's all right John .
And ER.
Right and illustrate that our Sps slightly slightly up.
And the impact to the gross margin I think not so.
And it looks like it is up two cents surely isn't it.
I don't think so.
You will be how our revenues and the second wise.
The Q3.
No our production volume because of the mono wafer. The Q3, we are either I'm paying off stage so its ramp up.
Yes that stage the output, let's say the full capacity of five gigawatts, new mono wafer capacity.
You know.
Ronnie full capacity, it's 100% this quarter a software just output is two new study with them.
So for score is going to be.
Hi per cent impact.
So my answer to across seas.
Yeah.
Because you know.
Firstly our.
Production costs improved.
Quarter over quarter second wife, Q3 to the impact the volume for the new capacity pack is not is limited it jumped 20% sort of but since full capacity.
Thank you for the for the sale.
Right Okay.
Okay. So looking at fourth quarter, then you've got a SP is youre guiding down a little over 10%.
And you would expect your cost to fall similarly.
It's up to kind of impact fourth quarter, because we have to 100%.
The capacity the war on waste increase on law.
What I'm talking about ward and Phil deals want him for the mono wafer for the product sale.
Fourth quarter Silicon wise our lead.
In house production costs continue to improve so often gangs our exposure to China.
That's every lower ASP.
So that is why we've got a gross margin.
Fourth quarter, we already improved label.
Okay can you give us the in house cost for two to three Q on what you think it isn't forecasts.
I don't like if confidentiality by that you can do some.
Estimated SP gross margin UK, there was some kind of transformation.
Okay, all right, maybe we'll follow up offline. Thanks.
Thank you.
Thank you there currently no more questions in queue I'd like to hand, the call over back to ripples for closing remarks. Please go ahead [noise].
Thank you will fall filling up nicely. This concludes the call.
Thank you ripple, ladies and gentlemen that does conclude our conference call for today. Thank you all for your participation you may all now disconnect.