Q3 2021 JinkoSolar Holding Co Ltd Earnings Call

Hello, ladies and gentlemen, and thank you for standing by for a gene called Solar Hoodies, calling me to go out there to get the Newmont earnings Conference call. At this time, all participants are in listen only mode.

Management's prepared remarks, there will be a question answer session.

Today's conference call is being recorded.

Now I'd like to turn the meeting over to your host for today's call to Missouri. Both junk you'd go saw US Investor Relations manager. Please proceed with both.

Thank you operator, thank you everyone for joining us today for gene coastal there third quarter 2021 earnings conference call. The company's results were released earlier today and available on the company's IR website at Www Dot genco, so that they'll come as well as our newswire services. We have also provided a supplemental presentation.

For today's earnings call, which can also be found on the IR website on the call today from Genco solar and Mr. Li Shanda chimney or what have you.

Factors and Chief Executive Officer of Genco Solar holding company limited missed agenda, Miao, Chief marketing Officer of Genco Solar Company limited, Mr. Polly Chief Financial Officer Health jingles of that holding company limited and it meets the Chinese how chief Financial Officer of Genco Soda Company limited Mr. Lee will discuss.

Genco soda ash business operations and company highlights followed by Mr. Miao, who will talk about the sales and marketing and then Mr. Penny who will go through the financials. They will all be available to answer your questions. During the Q&A session that follows.

Please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995, but what looking statements involve inherent risks and uncertainties as such our future results may be materially different from the views.

Expressed today further information regarding these and other risks is included engine coastal there's public filings with Securities and Exchange Commission didn't go solar does not assume any obligation to update any forward looking statement, except as required under the applicable law.

Now my pleasure to introduce Mr. Li Shanda, Chairman and CEO of Genco soda holding Mr. Li will speak in Mandarin and it was I would translate his comments into English.

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We don't comment on me passenger against which sounds home show you. It's an issue of jumping. She thought this football. We are very pleased to have to leave that to total shipments of approximately five gigawatt total revenues of one point to 33 billion in U S dollars and gross margin at 15 point to 1% total shipments.

Who are impacted by the delay E sales revenue recognition close to final logistical issues and blockage the release of new steel capacity significantly reduced sale production costs, partially offsetting the pressures on production cost inflected by the high prices of polysilicon and other materials.

Logistics costs have further increased compared with the second quarter and module credits hit new highs in almost a year. However, due to the transition to renewable energy in most regions of the world the increase in electricity prices financing support and other favorable.

These clients are more willing to accept higher module prices. Despite all the challenges global installation. This year has not differ from expectations set at the beginning of the year after.

Resilience of solar demand is gradually increasing.

Currently in its most severe shortage, we expect polysilicon supply will gradually return to sufficient levels, starting next year and as a result installation demand is expected to increase significantly.

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Well done E. G. So we're trying to achieve.

That she doesn't mean, we won't see you adapt your Dupont due to high material prices, we accelerated the pace of cost reduction with upgraded technology at present, we have reduce the thickness of our mono wafers by nearly 15% compared to the beginning of the year, which saved with.

Polysilicon in terms of sales the seven Gigawatts high efficiency PERC capacity put into production in the second quarter. Finally reached full production capacity in the third quarter, causing cell production costs in the third quarter, two dropped by more than 10% sequentially the company.

These larger size module.

Product accounted for nearly 50% in the third quarter, a significant increase from less than 20% in the first half of the year. The global demand for solar remains strong, but installation costs are rising over a period of time, we are committed to providing customers with the best solutions based on tenant.

Logical innovation and products.

Competitiveness problems.

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The other changes as all four modules of power generation products without lifecycle of 20 to 25 years and product performance is crucial listen to lay our high efficiency N type mono crystalline silicon solar cell reached a maximum conversion efficiency of 25, 4% setting a world.

I called it yet again based on our continuous leading R&D capabilities and to use mass production experience. We are quickly expanding N type cell production capacity. We are preparing for approximately 16 gigawatt of 10 N type cell protection capacity to be operational in the first quarter.

But 2022 contributing about 10 gigawatt output for the full year. This way of health makeup for the lack of cell production capacity and hopefully will lead the industry into the era of more premium and high efficiency N type product.

Recently, we launched a new series of N type modules with a maximum power output of 621 next year, we are planning to increase our global market share by enhancing our sales and promotions of N type products and achieve at least 50%.

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We continued to improve our global supply chain infrastructure. So far we have signed polysilicon supply agreements with a number of overseas polysilicon manufacturers and have strategically investing in tone ways to triangle town and the enamel go there seemed to have high purity polysilicon.

Reduction project, our seven Gigawatts mono crystalline silicon wafer plant in Vietnam will commence production in the first quarter of next year. After that we will have approximately seven gigawatts health integrated them on the wafer cell and module manufacturing capacity overseas are sound and diversified.

Global industrial channel infrastructure.

Black to be more flexible in terms of order protection and catch them and deliver them as we continue to provide.

Integrated services for our global customers.

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Turning over to Jim I would like to go over our guidance for the fourth quarter of 'twenty 'twenty. One we expect total shipments to be in the range of seven to.

Two 8.8 gigawatt, including module shipment to be in the range of seven to eight five gigawatts for the fourth quarter of 2021 total revenue for the fourth quarter is expected to be either gains of $1 8 billion to $2 2 billion in U S dollars gross margin for the fourth quarter is expected to be in.

The range of 13% to 16%.

Annual mono wafer cell and solar module production capacity is expected to reach 32, five gigawatt 24, gigawatt and 45 gigawatts, respectively by the end of 2021 with impact from net shipments to the U S market and the global logistics situation.

We are lowering our guidance for our full year 2021 shipments, including wafer sales and module to be in the range of 22 point to eight gigawatt to 24 points to eight gigawatt.

Thank you Mr. Li.

Total shipments in the third quarter were five gigawatt with module shipments shipments, increasing 18% sequentially to $4 seven people.

In terms of module shipments by region, Europe, and Asia Pacific was the maintenance visitors.

Given by China's combined go off 30, 60, and efficient energy transition shipments to Chinese market doubled sequentially shipped.

She posed to mercury market increased significantly both year over year and sequentially a sign that market benefiting from policy support.

The People's Bank of China, and recently launched a card based emission reduction support tool.

A large scale in the distributed projects start construction next year's total quite point in Chinese market is expected to see the one or two people.

Looking forward to 2022 market demand in China, India, Europe, and Australia will continue its upward trajectory.

Module prices remain high which was accelerated.

Penetration of products it was slower in <unk> and as the penetration of the distributed generation business, which is less price sensitive.

Our distributed business accounted for approximately 35% to 40% in the third quarter and over 50% in some markets such as Australia, Japan, Brazil.

Clients have been favorable towards our premium quality product such as Tiger Pier, one a two minute mid Dakota.

Which was specifically designed for residential C&I distributed generation facilities.

Meanwhile, our global brand awareness and the Gulf.

The marketing team strengthening the market competitiveness of four O B P V products.

We have recently won the bid for the new Dubai electricity water authorities headquarter building projects.

Which will become the world's largest and the policy the single beauty equipped with PV system.

<unk> system, you use advanced of N type cell technology in the market with our transparency ranch between 3% and 16%.

And can provide a power output of 500 watts to 708 watt.

That's one of the directions of our core departments. So the proportion of shipments in the distributed generation market will further increase next year.

Shipments of the Tiger Pro product says that temporary and lower <unk> accounted for nearly 50% in the third quarter and I expect it to exceed 70% in the fourth quarter.

In 2022, we will optimize and match the capacity advantage of Tiger Pearl and Tiger, New product solidifying, our leading position in high efficiency products.

In terms of contract.

So the pricing in the face of uncontrollable factors such as the severe locality upstream raw material prices energy quota and the carbon emission control, we have established our market forecast and short term dynamic reveal mechanism for newly signed orders we are securing.

Materials, and introducing a floating price clubs in contracts.

Order to avoid an active impact, though for a mark to market of whats heritage to some extent.

Therefore, we are very optimistic about the market being now short term problems such as raw material supply logistics et cetera are gradually being softness through remixing efforts.

We focus on winning the market with the best products and services.

With that I will turn it over to Pat.

Thank you Jenna.

Let me go into more details about this quarter now.

Total revenue was 1.33 billion.

An increase of eight one percentage sequentially.

Mainly benefiting from substantial growth in module shipments.

Gross margin was 15, one percentage compared with 17 one percentage.

Second quarter this year.

Total operating expenses in the third quarter was $184 million.

An increase of 18, 2% sequentially.

The increase was mainly attributed to an increase in selling and marketing expenses due to rising shipping cost under a tight global logistics market.

We remain flexible.

Adjusted both domestic and overseas shipments.

Mitigating the negative impact on <unk>.

Facility from.

All opposed shipping cost by publishing long term shipping agreement with logistic company.

Total operating expenses accounted for.

13, eight percentage of total revenues in the third quarter. This year, excluding impacts from shipping cost the ratio of operating expenses was stable.

Compared with the second quarter this year.

EBITDA was 89 mailings compared with 143 million in the second quarter.

2021.

Taking into consideration the <unk>.

Significant increase in benefits from change of fair value due to decrease in.

And the company stock price in the third quarter this year.

Net income was $13 1 million.

Michigan's increase both sequentially and year over year.

Non-GAAP net income was $2 5 million and diluted earnings per <unk> was five of them.

Net foreign exchange loss, including change in fair value of foreign exchange.

Derivatives was approximately $1 million.

A significant decrease from a net exchange loss of $9 4 million in the third quarter of last year.

And flat sequentially.

We will continue to optimize our hedging against the foreign exchange risk to reduce the impact of foreign exchange volatility on our operating results.

Moving to the balance sheet.

At the end of the third quarter, our balance of cash and cash equivalents.

One 1 billion, which.

Which improved from the second quarter.

Yeah.

Accounts receivable due to do from third parties.

Flat sequentially on a number of days for 65 days compared with 68.

Two days in the second quarter this year.

Shipments to the U S and global transportation routes were hampered by disruptions.

Won't reach the number of days.

171 days compared with 138 days in the second quarter of 2021.

Total debt was 3.69 billion at the end of the third quarter.

Pat to 3.12 billion at the end of the second quarter this year.

Although the total depth 68 million was related to international solar projects.

Net debt was $2 5 billion compared with $2 1 billion at the end of the second quarter. This year.

This concludes our prepared remarks.

We're now happy to take your questions.

Please proceed.

Thank you.

But they'll participants these questions to pose chiefess they'll want a telephone keypad and you'd be pushing to Q2 cancelled the queue. Please press zero too.

Once again, no one telephone keypad now.

Plus we have Phillips from Roth Capital Partners. Your question. Please.

Hi, everybody. Thank you for taking my questions the.

First one is on your Vietnamese.

The wafer capacity that you're bringing online.

So southern Gigawatts by Q1 and with that you'll use.

German Polly I believe when would you expect.

Shipment volumes or shipments to hit the U S.

Right.

That are using either German poly.

Or perhaps even U S poly.

And then.

The Vietnamese wafers, and then southeast Asia's yourself.

Could we see the volumes.

To the U S start to restock.

Restarts.

Q2, and then how much how many gigawatts do you expect to ship into the U S. In 2022 as a result of.

This.

New supply chain. Thanks.

Thank you Phil.

Great question, I think a week.

Have made a very strategic move to establish all these wafer factories.

Together to secure a long term contract with multiple.

That's a non China polysilicon suppliers.

According to <unk> based on the current schedule, we will I will start with Grandpapa, our Vietnam wafer factories by early Q1, let's say.

January and February.

Are you expecting.

Our full value chain established outside China will start to fully utilized up by end of Q1 or a few late.

Product starts to arrive in the U S market to buy.

Late first half, let's say may or June and a massive volume it will be definitely second half. So total volume wise, we are looking to around production numbers. We're looking at around the five five gigawatts of production and considering the uncertainty of logistic away.

100% sure how many of them will arrive at a U S.

Great. Thank you Jennifer good detail and then.

When you think about the anti circumvention risk you know, we we saw the current case go away.

But.

I think the petitioners.

Through their law firm and Tim Brightbill.

Talking about you know potential other cases.

Do you have a view on what those cases could be and how they could impact.

This capacity or what's.

What's your view in general about that thanks.

Thank you I think that's.

Trade Wars.

We'll stop that's our long term view, that's why we have made the decision to establish a fully wanted to integrate to the value channel capacity.

Both Vietnam, Malaysia, including the U S. So.

This should be our ultimate solution to to solve all those potential trade issues.

At least that that's the best solution. We have right now are in long term really really we don't have a crystal ball to see it but.

<unk> you know.

The solution that <unk> can bring to the market it shouldn't be the most one of the most reliable ones.

Right, Okay alright.

And then another one here on the section 201, we recently saw a surprise.

Exemption reinstated for bifacial modules in the U S, which means I think the modulus can come in for free and then also there might be substantial.

Refunds for modules that have been already shipped in.

I was wondering if you might be able to quantify.

The section 201 refunds.

Could be.

The timing of it have you received any thus far for example.

And and then what if this decision gets.

[noise] reversed yet again what would.

The process be two crops return that money to the U S government have you thought through.

The longer term picture.

The section 201 bifacial situation. Thanks.

So I think from a cash flow wise, we are not expecting to receive any refund and a short term.

We have we have.

In your report about the uncertainty of this potential appeal from the government side, we believe that highly possible and that's why we still put a question Mark there we do not expect that.

Such kind of last year that will reach out and they're pretty soon so but if we can get some potential refunds that definitely that will be a very positive for the company.

But we have to wait for quite a while to see the final results. So we will wait how the C suite, we have on the planet in our cash flow yet.

Okay. Thank you one last one and I'll pass it on as it relates to the margin you gave us I think some capacity numbers for 2022.

Maybe can you talk about how you see margins trending in 'twenty two.

Especially if you know the assumptions that you make now kind of persist.

Do you think margin expansion is in is potentially available, especially with a flexible.

Pricing based on input costs.

Get through 'twenty two.

This is Charlie.

Looking to next year.

Two.

I think we are more confident in the.

The margin will be improved year over year, and this serious worries special and the tenants, particularly out of the supply chain.

<unk> on the high input costs, including the.

Let's say the logistics issues as well and in.

Looking to next year, we think that the.

The supply chain will get more friendly and compared to this year and.

On top of that we will increase our production and our integration level and.

Expanding the entire.

Cell capacities.

Next year we.

Roughly we asked 10 minutes.

The capacity will reach to a wafer 48 gigawatt. So 48 Gigawatts of module 50 Gigawatts.

Roughly 80% integration level, and we're expecting that we can get to the.

More.

That's a.

Net income contributions from the N type and because we were confident that.

We have that advantage on this next generation technology in terms of the.

It's a production level and.

The cost advantage versus the.

The car.

Alright.

And our popular in the market and the way, we can get a price premium.

Great. Okay. Thank you Charlie generally Mr. Lee I'll pass it on.

Thank you Sydney thinks we have Gary from credit Suisse. Your question. Please.

Yeah. Thank you management for taking my questions.

My first question.

So can management elaborate a little bit more on our upcoming in the N type cell capacity. So I think we are ready to be kind of early I can touch up on a relatively large scale kind of a N type capacity. So we can imagine maybe share with us more legal or <unk>.

Got to get our cost competitiveness officers funding capacity and how do we see kind of a tool to kind of all the two trends.

Okay.

Yeah.

Hey, Gary this is farhan.

We are.

Investing 16, gigawatt and times top com capacities and.

We have the two years.

Experienced in Ronny roughly.

900 megawatts capacity as you know with factories and now you know the production.

The metrics on the cost.

Advantaged versus the perk.

No.

What worries you know.

Things are leading the industry.

In the.

For for next year, when we ramp up we would expect to ramp up the capacity in the first quarter.

And I think for operations roughly in the second quarter.

And in terms of the.

Integrated production costs for the entire.

Pushes the perk.

For the medium term.

We expect to the cost will know the difference with this approach is a very small even the same.

And the more important you know.

If we look at the conversion efficiencies in time with this.

As you.

You know electricity Additionally associated generation.

So our customers and we believe it's a very good leading market our products and we can get to the.

So the price premium and get more.

Perfect contributions for this product.

Yeah, Okay got it thanks, Mike.

My second question is on the shipment side.

Some of our peers are relatively cautious on their full queue tenant demand, but I think our guidance would suggest a meaningful kind of epsilon to shipment increase so just the one.

It's much more functional.

More on.

How can we achieve this kind of all kind of school student I respond to that.

Hum.

Yes.

Thank you for your passion, Gary This is Jim.

I think.

Quarter over quarter, we have a pretty strong Q4 shipment expectations, mainly driven by combined that the amount of from China on the non China.

Market and I think.

After the relatively weak.

Quarterly shipments in the first three quarters of 'twenty, one I think most of our customers are let's say non Chinese market customers.

Gradually accepting the market balanced off this new.

At new prices and say a.

Try and tool.

Take the time try to close the project close their pipeline.

And for China demand everybody knows you know there are quite strongly mounting in China in the last two two months' time, so we successfully secured quite a significant.

So significant volumes and two to supply a pretty strategic projects.

Projects across China market. So combined those two factors together I think we are we can chew up pretty strong shipments in Q4.

Okay.

Much so my last question.

Is on the AR went up so much money to share with us the latest update.

Subsidiary patients too.

Yeah.

Uh huh.

For the IPO process, you know for our subsidiaries and.

On the track to get there.

Probably.

Did that go down and by the end of September we got approval from the South high stock change now we are in the process.

Patients, whereas China and Chinese Securities Securities regulators.

We expect to.

Roughly in the next one and two months this weekend.

You know to get everything ready attitude to get either IPO down.

Okay.

All my questions. So thank you.

Thank you.

Thank you Jamie.

Oh, no participants with questions to pose piece permit you'll want Oh Daddy phone keypad and you'll be joined in the queue.

Next we have Rajiv from Samsara capital your question. Please.

Yes.

Good morning, and good evening to you.

My first question is about the.

The potential shipments that were lost because of the logistics issues in the third quarter.

And might be lost in the fourth quarter as well.

Can you help us give us a sense of how.

How much.

In terms of megawatts. So you might have lost in terms of the shipments not happening because of logistics in Q3 and what.

That impact might be twofold.

Also help us understand if this lost shipment.

Uh huh.

We are finding things, where the shipments get pushed out.

Thank you to all the August.

That market opportunity was lost for forever.

Thank you.

I think let me take your first question.

In terms of compromised after device I think that is why we're looking at let's say.

100 megawatt level of delays.

The delayed it tends to span Q Q4, it's not of course, we haven't a ship or with having to produce a module or <unk>.

The customer doesn't want of the module.

Is it requires the logistic delays you'll know it theres a lot of attraction tried a traffic jam.

Across the ports.

And I'd say Europe or U S.

Accounting wise, we cannot recognize the module side curious deliberate module into our customers' sites in their warehouse. So that's why we have to delay the revenue recognition I think from <unk>.

Partially from Q3 to two Q4 by approximately one to 200 megawatt several several hundred megawatts.

But the market itself has been produced the contract is solid and the price has been secured store, we just need to wait on to your analysis.

Let's just take a bottleneck been gradually solved and we came back from those revenue net revenues in Q4.

And just to follow up on that in terms of Q4.

Are you experiencing similar maybe even worse because the fourth quarter.

Not all.

All of the competition you have from the rest of you do so is the problem for the fourth quarter.

I don't think so at least Q4 will be slightly better than Q3, the reason I asked that.

China market or domestic market demand is pretty strong. So we can diverse it's a risk.

You know not only rely on their shipping line companies, we can recognize more revenue in domestic market. So thats, a one off positive Saar.

And also are also you know after this.

Heart issues across Europe.

Europe or U S.

Government side has taken many actions to to push for the part itself to speed up the loading per seat all I don't know the speed to make sure you know everything can go faster. So we have seen the improvement from the logistics side as well sort of combine those two we believe the situation will be a much.

Much improved to compare with Q3.

Okay.

My next question is about the average selling prices.

And.

You mentioned that there was a small increase in the selling price.

But obviously it did not.

All set.

M D.

The the.

Increases in material costs.

Could you talk about jobs.

To what extent your shipments.

Shipments in the third quarter, but still.

No subject to long term contracts where.

You have to honor our pricing that was negotiated some time back or close to pricing that was negotiated sometime back what is the.

Pricing that is the.

Modules that are shipping into.

But prices that are.

Currently available in the spot market.

Thank you I think from contract execution wise, we have to find a mutual solution together with our customers. So we essentially assigned US a contract we cannot expect our customers to serve.

That'll all this potential.

Potential increase.

So raw materials. So we have to find a mutual solutions together. So there are quite a several different kind of solution. So we can reach agreement with customers and so I won't spend too much time to illustrate everything but.

At the end of the day I think.

Over 75% of our Oh a contractor.

Delivered or executed in Q3.

The old time heritage.

And also are you know we have to find lots of solutions combined with the short term and the long term solution together with our customers to find a win win solution for long run because we are not doing business in spot market.

We're doing business in power sector, which needs a very long term sustainability and the women's solution with our customers for a long term there'll always be market up and down we cannot just ruined the cup customer relationship to cross the one time issues.

Right.

Just so I understand you mentioned that 75% of shipments.

Into long term contracts and and these long term contracts have been somewhat modified.

To reflect the realities of our.

Of the of.

Of the cost pressures.

Can you.

Give us a sense of what percent of Oh.

Going into 2022 you know.

And learning from the experience of of these higher prices that you have.

Now having to live with a higher cost of materials that were having to live with.

What percentage of shipments might be.

If you do 30 to 35 or 32 to 36 Gigawatts next year, what percentage would be long term contracts.

That have already been signed or or are there a flexibility.

The contract.

Pricing has not yet been determined.

So we have approximately 25% to 30%.

Our order book being signed or committed towards the customer and for the 2022. Some of the contract that is based on the secure the price out in terms. Some of the contract is just a framework contract which means.

We keep the commercial part flexible up to the market.

So we also have some of the framework contract, which has a index based pricing mechanism, which allows you now.

Both of our and our customers to have flexibility with the market it goes up and down or.

Basically we have learned a lot of lessons from 'twenty to 'twenty, one and we carried at all and we we established some new business model with our customer and opportunity to in the longer term.

So.

So what you're saying is that it.

That's the framework agreements will give you more flexibility on pricing.

If the cost of material movement.

Cost moves and Oh I'm sorry.

Overweight.

That is that also the reason why you.

You are confident that the gross margin next year.

Food, because you're embedding a higher gross margin that was achieved in 2020 one.

Right.

Well, so gross margin will be a separate topic I think the gross margin improvement primarily comes from.

Much improved where do you go integrated capacity expansion by end of this year, so which will contribute a lot of.

Marketing improvement another important factor will be the our new product Tiger new products will contribute a lot of premium because of the a nice parameters and extra power output.

Such products it can generate and the start of what will be our purple our portion of <unk>.

We say large large dimension products. For example, you know our one two millimeter product portion increased up from first half around 20% to 25% of the two end of this year around the 60% to 70% and it's next year it might go even higher.

Higher so which gives us a very I'd do the competitive edge.

Hope that answer your question.

Yes, yeah. Thank you Anna.

One last question for Charlie.

Got it.

The general and administrative expenses have been a much.

Much higher this year than last year in the first three quarters two quarters they went up.

In the third quarter as well.

Can you give us some sense of why is that.

In pizza is happening and in particular how.

How much of the increase in costs.

Related to directly to the IPO in China.

Oh.

Thanks for your question.

I think you know the operating expense is relatively high.

It's concept build it by I think firstly, it's the shipping cost specific cost as you know.

Is pretty high and we have.

We have high exposure to.

Two shipments.

Shipments out of China.

Citizen wise.

I feel I feel.

I don't think anybody so we're significant roughly maybe too many U S dollars.

For the third quarter.

And.

On top of that I think.

Third quarter we.

Our shipment is not so big you know relatively.

For the fourth quarter.

We have.

It's a big jumps in on the shipment.

We are you know.

I lose the operating costs.

And excluding the <unk>.

Excluding the let's say the variable costs, particularly the shipping costs.

Warranty costs.

Fixed costs were operating.

<unk> expenses.

Fixed.

They are stable.

Oh absolutely.

Sorry, I missed something that you said.

About.

What amounts to be I feel Kosovo, but the question that I'm trying to grapple with is.

The G&A.

Normally it should not be beat that much you know.

Last year. It was I mean, you got to around $50 million a quarter.

It started at around $55 million to $60 million and it goes almost it was almost 70 million in the third quarter.

So that's a pretty substantial increase can you tell us what is driving that and what would you say that makes a lot of people.

So the G&A cost.

And the Australian costs I seem to be stable you know looking for.

The future should be stable.

We have some you know IPO costs and we have some I think the culture of adjustment for the let's.

Let's say the provision for.

For the accounts receivable and excluding that that thing is.

It is relatively stable.

Okay.

Thank you.

Okay. Thank you.

All participants these questions do please please press one telephone keypad and you'll be placed in the queue.

Yes, and then from Jefferies. Your question. Please.

Thanks, a lot for the operator for having the questions and.

Thanks, a lot for management.

My first question is about.

So just to check on.

Because the inventory has increased by.

By quite significantly so just to check.

It's just tied to the shipment in the C O two overseas market.

Yeah.

So.

Two aspects one is the.

The inventories sound translates to overseas market.

And the challenge by the logistic and the delay.

We.

We are expecting you know back to the third quarter.

Material cost base.

On the upside.

<unk> site, so we <unk>.

Intentional intentionally put more resources in the gas more materials to make sure we have relatively on the wound is to for the production in the fourth quarter.

Understood. Thanks, a lot.

So.

When it comes to the fourth quarter.

I've noticed that the company was guiding for a 12 to 15 I talked to 15% on gross margin over the last three quarters, but the guidance has increased from 12 to 15 of $30 60, while at the upstream polysilicon cost has increased a lot. So.

First of all would like to.

Learn from the managed money is it because of the increase in percentage of large size module and a cost cutting efforts. So that the company is confident to make a probably higher margin even when upstream part of course is highest.

Uh huh.

Combination.

Well as you know.

Talking about the large size percentage and we know our capacity is really a seven gigawatts we've talked in the press release so combines percentage.

So quarter one.

The large size 188 through our Rockford from 2%.

In the fourth quarter, two so whenever sense.

And on top of that you know where you are expecting the.

S P.

Okay.

<unk> you know.

We will continue to increase.

I think.

Particularly because we have shipments.

More shipments in China, and China ASP is the spot market.

Prices are pretty high.

Two four versus the Q3s today speed.

No.

I think you know increase.

Uh huh.

So roughly <unk> two so.

Two cents.

<unk> per watt.

Understood I guess, okay. Thanks, a lot.

So it's a combination of these factors.

Uh huh.

And pipe new generation ourselves, so I suspect with companies using the popcorn technology.

I wonder if.

You're right.

Is it like.

April to just disclose the yield rate.

Production line, because you've watched at cornerstone.

On the UK, because popcorn as more production steps.

Yeah.

We are we are reaching for unpaid popcorn, we are reaching almost 99%. So I think that that's a leading member in this industry. That's why we have our comp goes to expand our capacity issues to such.

Sizable volume too.

To extend our competitive advantage as well.

That's very impressive.

One of the leading indicators in the market.

Manage one.

No problem.

Thank you Ellen.

Thank you one last question from Brian Lee from Goldman Sachs. Your question. Please.

Yeah.

Hey, guys.

Good evening. Thanks for squeezing me in here I I might've missed this or maybe I'm misinterpreting, something but could you help.

Reconcile I think you mentioned 100 to 200 megawatts.

<unk> kind of revenue recognition issue Q3 to Q4, but.

The actual shipment guidance is changing by two plus gigawatts.

Versus what you had previously so is that being.

Pushed even further into.

The early part of 2022 or what what's the I guess the disconnect between the 100 to 200 megawatts, you're calling out specifically <unk> and the bigger.

And kind of shipment guidance change that's happening here for them for the full year.

Yeah sure I think the.

My previous answers is B transit delays.

Our revenue recognition delays from Q3 to Q4, it should be like a nice there's somewhere around 200 megawatt level. So.

The delay will continue but I think the improvement is definitely be better than Q3, because we have seen this.

Traffic jam across all the main parties are improving day over day week over week. So it's that's why I'm, saying you know it's a shipment.

And together, we said we are shipping more into China market in Q4. So that's why we don't have to suffer.

Logistical problems.

For the from the shipping line. So those are the two factors of why we say the revenue recognition in Q4.

The pressure will be a lighter.

Easier. Thank you St. So regarding to the guidance change I think it's mainly because we.

We have some delays off one of our.

Workshops sell workshops, SaaS give us kind of ceilings.

For this capacity expansion. So that's why we need Shirley.

<unk> adjusted our guidance accordingly.

Okay. That's helpful. So just just to be clear you havent seen any.

Cancellations of shipment schedules, whether for this year or into next year, just things are changing on the schedule, but you havent seen anything canceled outright.

We have been pretty let's say several cases canceled by the shipping line companies, but we always kind of find some solutions because even though we have this multiyear a shipping line contract with all the major shipping lines or even be canceled and you know the shipments Oh the shipping.

Right.

This week or next week, we can always trying to find out a solution to squeeze a means for the next one in the eye.

I don't know next month's other months after right.

Yes.

Okay Fair enough and then maybe just two last one for me and I'll pass it on.

Or are you reiterating your capex guidance for 2021, I think you had said $1 1 billion a $1 1 billion USD four and then any early thoughts on capacity increase in Capex for 2022.

Yeah.

Thank you.

This is Pat and it will the Capex side, we expect to see in Q4, we'll have the 400 million.

Milling.

Expectations. So the total capex in this.

This year will be $1 2 billion and then next year with us with the Atlanta, San Juan to billing for Tucson to prevent them from data.

Okay. So the flat capex year on year.

And any thoughts around the funding for a $1 2 billion of Capex in.

In 2022.

Uh huh.

You know where our subsidiaries in the China IPO process.

We're expecting to raise at least.

Thanks, Amit so that is the most.

The most.

Well the majority of ours.

So we were mixed as some of you know.

Yeah.

Yeah.

Okay understood. Thanks, guys I'll pass it on I appreciate the time.

Thank you, Brian and whatnot on real question. Thank you. Please go ahead Ms Russo.

Yes.

Please go ahead.

She thought any color here.

Hello.

Yeah, correct Andrea call today. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

Yeah.

Hum.

[music].

[music].

Hello, ladies and gentlemen, and thank you for standing by for a gene called solar Hoodies, calling me to quote that to get the Newmont earnings conference call. At this time, all participants are in listen only mode.

Management's prepared remarks, there will be a question answer session. As a reminder, today's conference call is being recorded.

Now I'd like to turn the meeting over to your host for today's call to Miss Repo chunk did go Solus Investor Relations manager. Please proceed with both.

Thank you operator, thank you everyone for joining us today for gene coastal there third quarter 2021 earnings conference call. The company's results were released earlier today and available on the company's IR website at Www Dot genco, so that they'll come as well as on Newswire services. We have also provided a supplemental presentation.

For today's earnings call, which can also be found on the IR website on the call today from Genco solar and Mr. Li Shanda churn now both of you.

Factors and Chief Executive Officer of Genco Solar holding company limited Mr. Gender Miao, Chief marketing Officer of Genco Solar Company limited, Mr. Li Chief Financial Officer of jingles till that holding company limited and it meets the Chinese how chief financial Officer of Genco Soda Company limited Mr. Lee will discuss.

Genco soldiers business operations and company highlights followed by Mr. Miao, who will talk about the sales and marketing and then Mr. Penny who will go through the financials. They will all be available to answer your questions. During the Q&A session that follows.

Please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995 forward looking statements involve inherent risks and uncertainties as such our future results may be materially different from the views.

Expressed today further information regarding these and other risks is included in Genco. So there's public filings with Securities and Exchange Commission didn't go solar does not assume any obligation to update any forward looking statement, except as required under the applicable law.

It's now my pleasure to introduce Mr. Li Shanda, Chairman and CEO of Genco soda holding Mr. Li will speak in Mandarin and I would translate his comments into English. Please go ahead in Italy.

Sanjay the comfort zone for that yet.

Be well.

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Doug the Transunion the Qingdao.

With a bunch of them, yes watching that Sheila.

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<unk>, putting up and then saw me, yes, essentially yes with health Tony.

It's an issue of jumping to love US football. We are very pleased to have to leave that to total shipments of approximately five gigawatt total revenues of one point to 33 billion in U S dollars and gross margin at 15% to 12% total shipments were impacted by the delay E sales revenue recognition close to final.

Logistical issues and blockage the release of new cell capacity significantly reduced sale production costs, partially offsetting the pressures on production costs reflected by the high prices of polysilicon and other materials logistics costs have further increased compared with the second quarter.

And module credits heat Hot New heights in almost a year. However, due to the transition to renewable energy in most regions of the world the increase in electricity prices financing support and other favorable policy clients are more willing to accept higher module prices.

Despite all the challenges global installation this year has not differ from expectations set at the beginning of the year at the resilience of solar demand is gradually increasing.

Today, its most severe shortage, we expect polysilicon supply will gradually return to sufficient levels, starting next year and as a result installation demand is expected to increase significantly.

China Chocolate college, she's on shelf and achieve some Jonathan that's hopeful Morten bundling for doing a whole discharging into Jeff all of that.

We know that you don't typically once you ought to do towards her that she got to do on the cost of our poker.

And fed funds reduce the same answer that Don funds, you do that sometimes timber funds.

Hello, everyone.

So we don't want to answer that that's something that we do.

<unk> done some sundries was about choosing Baton Rouge.

Sanjay on somebody off island sources.

Yes, yes, so that you can judge a volatile future Apache he does so again, neither sanchez husband that Samsung almost really well done.

He teased some challenging times and that you won't see you'll start to drop off due to high material prices, we accelerated the pace of cost reduction with escalated technology at present, we have reduce the thickness of our mono wafers by nearly 15% compared to the beginning of the ear.

Which save US polysilicon in terms of sales the seven Gigawatts high efficiency PERC capacity put into production in the second quarter finally reached full production.

<unk> is the third quarter, causing cell production costs in the third quarter to drop by more than 10% sequentially the company's largest size module.

<unk> accounted for nearly 50% in the third quarter, a significant increase from less than 20% in the first half of the year. The global demand for solar remains strong, but installation costs are rising over a period of time, we are committed to providing customers with a Bachelor solutions based on <unk>.

Would you call innovation and product content.

Package of niche.

Well I will do that for so many Fujian Thunder at the auto and home side.

I'm Gonna Shimon coupons O'neill, Jimmy Choo woman that Gaza and she benzene, we don't you against it sounds like on the ovens the Australian food.

That's the starting let's forget studio shoots this unique other jump on them.

Yeah.

Junior momentum that thoughtful job our edge against the 10 ton and the Jensen Beach.

Richard Jones at Olive Garden, you you'd usually close honestly with you AGA and she against yes on them.

They're going to try and use the video at the town yet so.

So Daniel Toohey meetings going through Kansas and end up being you are usually much I think also can godfather and she is talking to that team.

We're more popular changing the engine gotcha.

Gosh, Audi Qatar field that bought me a woman job job out there and some timing of the triple herself.

Sushi on China, and so what happens so you saw the sensor in the sunbelt adventurous with all four modules of power generation products without lifecycle of 20 to 25 years and product performance is crucial listen to lay our high efficiency N type mono crystalline silicon solar cell reached a maximum convert.

Efficiency of 25, 4% setting a world record yet again based on our continuous leading R&D capabilities and two years' mass production experience. We are quickly expanding N type cell production capacity, we are preparing for approximately 16 gigawatt of 10 and.

Hyperscale protection capacity to be operational in the first quarter of 2022 contributing about 10 gigawatt output for the full year. This way of health makeup for the lack of cell production capacity and hopefully will lead the industry into the era of more premium and high efficiency N type product.

Recently, we launched a new series of N type modules with a maximum power output of 600 in terms of what next year. We are planning to increase our global market share by enhancing our sales and promotions of N type products and achieve at least 50 person.

Rent growth in annual shipments.

So she was unchanged from the time Union Joseph Maugeri on Monday June two which I'll highlight we are sending them.

But she.

Finally, she loves and transform with a minimum Washington again.

So you got to do our guns ingredient fulltime jellied Dominion each of those hotels once <unk> gone through the right Zhenjiang. So you got to do at the times ingredient against which the agenda each of Watson and Sudan than me.

While some other trend shows how cancer. She is a woman. So I think that sends a couple jobs couldn't dialing for so should that would change or the approval.

We continued to improve our global supply chain infrastructure. So far we have signed polysilicon supply agreements with a number of overseas polysilicon manufacturers and have strategically investing in toll ways to triangle, Michelle and the number will go down to a high purity polysilicon production.

Project, our seven Gigawatts mono crystalline silicon wafer plant with men will commence production in the first quarter of next year. After that we will have approximately seven gigawatts health integrated them on the wafer cell and module manufacturing capacity overseas are sound and diversified global.

Two a chat infrastructure will enable us to be more flexible in terms of order production in a cast them or deliver them as we continue to provide it.

Good way to get the services for our global customers.

Doug agenda since yeah, what I'd say.

Yes, it's really early.

Our union pieces repulsive, that's one cold water on site to do some stuff out there <unk> excuse me for agenda.

But she's a bought deal but she wants to do.

Yeah. So that's the value of imaging the Asa imaging from here.

I believe you said Bourbons and Savannah.

The odds are union for them in the dungeon waves in skin and so again, that's had a huge phone via the other thoughts out there. We've got to do all of them sort of do a system with you all saw that causes them to avoid out of the jazz also changed at all either Ian or Michele Tyler Kenyon.

Kenyan there's also volume.

I hope we've shipped in Hudson.

The us is food, yeah, Xerox, a gym before turning over to Jenny I would like to go over our guidance for the fourth quarter over 'twenty 'twenty. One we expect total shipments to be in a range of seven to eight gigawatts, including module shipment to be in the range of seven to eight.

Five gigawatt for the fourth quarter of 2021 total revenue for the fourth quarter is expected to be either a range of $1 8 billion to $2 2 billion in U S dollars gross margin for the fourth quarter is expected to be in the range of 13% to 15%.

Annual mono wafer the red cell and solar module production capacity is expected to reach 32, five gigawatt 24, gigawatt and 45 Gigawatts respectively by the end of 2020 Walsh with impact from net shipments to the U S market and the global logistics situation.

We are lowering our guidance for our full year 2021 shipments, including wafer sales and module to be in the range of 22 point to age gigawatt to 24 points due eight gigawatt.

Thank you Anthony.

Total shipments in the third quarter were five gigawatt with module shipments shipments, increasing 18% sequentially to $4 seven people.

In terms of module shipments by region, Europe, and Asia Pacific was the maintenance visitors driven.

Driven by China's combined go Oh, 30, 60, and efficient energy transition shipments to Chinese market doubled sequentially.

She posed to mercury market increased significantly both year over year and sequentially a sign that market benefiting from policy support.

The People's Bank of China, and recently launched our carbon emission reduction support tool.

A large scale in the distributed projects start construction next year's total pipeline and Chinese market is expected to see the one or two people.

Looking forward to 2022 marquee humanity, China U S Europe, and Australia will continue its upward trajectory.

Module prices remain high which was accelerated.

Penetration of products it was slower in <unk> and as the penetration of the distributed generation business, which is less price sensitive.

Our distributed business accounted for approximately 35% to 40% in the third quarter and over 50% in some markets such as Australia, Japan, Brazil.

Clients have been favorable towards our premium quality product such as Tiger Pier, one a two minute mid Dakota.

Which was.

It's really designed for residential C&I distributed generation facilities.

Meanwhile, our global brand awareness and our global marketing team strengthen the market competitiveness of four O U P V products.

We have recently won the bid for the new Dubai electricity and water authorities headquarter building projects.

Which will become the world's largest and polished single beauty equipped with PV system.

So <unk> system, you use once the N type cell technology and modules with transparency range between 3% and 16%.

And can provide a power output of 500 watts to 708 watt.

That's one of the directions of our core departments some proportion of shipments in the distributed generation market that will further increase next year.

Shipments of the Tiger Pro product says that temporary and lower <unk> accounted for nearly 50% in the third quarter and I expect it to exceed 70% in the third and fourth quarter.

In 2022, we will optimize and match the capacity advantage of Tiger CRO and Tiger new product solidifying, our leading position in high efficiency products.

In terms of contract.

So the pricing in the face of uncontrollable factors such as the severe mortality upstream raw material prices energy quota in the carbon emission control, we have established our market forecast and short term dynamic review of mechanism for newly signed orders we are securing.

Materials, you know in the world and introducing a floating price clubs in contracts.

In order to avoid an active impact, though for a mark to market of wood pallet to some extent.

Before we are very optimistic about the market demand short term problems such as raw material supply logistics of Fisher are gradually being soft this through remixing efforts.

With focus on winning the market with the best products and services.

With that I will turn it over to Pat.

Okay.

Thank you Jenna.

Let me go into more details about this quarter now.

Other revenue was 133 billion an increase of eight one percentage sequentially.

Benefiting from substantial girls, Inc module shipment.

Gross margin was 15, one percentage compared with 17, one percentage in the second quarter this year.

Total operating expenses in the third quarter.

$184 million.

Increase of 18, 2% sequentially.

The sequential increase was mainly attributed to an increase in selling and marketing expenses due to rising shipping cost under a tight global logistic market.

We remain flexible and adjust it both domestic and overseas shipments.

Mitigating the negative impact on <unk>.

Our facility from one.

All opposed shipping cost by publishing long term shipping agreement with logistic company.

Total operating expenses accounted for <unk>.

13, eight percentage of total revenues in the third quarter. This year, excluding impacts from shipping cost the ratio of operating expenses was stable.

Compared with the second quarter this year.

EBITDA was 89 mailings compared with 143 million in the second quarter.

20, something wrong.

Taking into consideration the <unk>.

Significant increase in benefits from change of fair value due to decrease in.

And the company stock price in the third quarter this year.

Net income was $13 1 million.

Difficult to increase both sequentially and year over year non-GAAP net income was $2 5 million and diluted earnings per <unk> was 5%.

Net foreign exchange laws, including change in fair value offerings chance.

Derivatives was approximately $1 million.

A significant decrease where I'm unless exchange loss of $9 4 million in the third quarter of last year.

And flat sequentially.

We will continue to optimize our hedging against foreign exchange risk to reduce the impact of foreign exchange volatility on our operating results.

Moving to the balance sheet.

At the end of the third quarter, our balance of cash and cash equivalents.

One 1 billion.

Which improved from the second quarter.

Yeah.

Accounts receivable due to do from third parties.

It's flat sequentially on a number of days for 65 days compared with 60.

Two days in the second quarter this year.

Shipments to the U S and global transportation routes were hampered by disruptions.

Inventory turnover days was 171 days compared with 138 days in the second quarter of 2021.

Total debt was 369 billion at the end of the third quarter.

Pear to 3.12 billion at the end of the second quarter this year.

Although the total depth 68 million was related to international solar projects.

Net debt was $2 5 billion compared with $2 1 billion at the end of the second quarter. This year.

This concludes our prepared remarks.

We're now happy to take your questions.

Please proceed.

Thank you.

But they all participants with questions to pose chiefess still one telephone keypad and you'd be pushing to Q2 cancelled the queue. Please press there too.

Once again, no one oh telephone keypad now.

Plus we have Phillips from Roth Capital Partners. Your question. Please.

Hi, everybody. Thank you for taking my questions. The first one is on your Vietnamese.

Wafer capacity that you're bringing online.

So seven gigawatts by Q1, and with that you'll use a German Polly I believe.

When would you expect a shipment volumes.

Shipments to hit the U S. A.

That are using either German poly.

Or perhaps even U S poly.

And then the.

Newspapers, and then southeast Asia's yourself.

The module could we see the volumes.

To the U S start to.

Restarts in Q2, and then how much how many gigawatts do you expect to ship into the U S. In 2022 as a result of.

There's some new supply chain. Thanks.

Thank you Phil.

Great question, I think a week.

Have made a very strategic move to establish our witness Lee from factory together to secure a long term contract with multiple.

It's a non China polysilicon suppliers.

According to based on the current schedule, we will I will start with Grandpapa our wafer.

Wafer factories by early Q1 lets say.

January and February.

Are you expecting.

Our full value chain established outside China will start to fully utilized up by end of Q1 or <unk>.

Product starts to arrive in the U S market to buy.

Late first half, let's say may or June.

The massive volume it will be definitely second half. So total volume wise, we are looking to around production numbers. We're looking at around the five five gigawatts of production.

Considering the uncertainty of logistics and we are not 100% sure how many of them will.

<unk> the U S.

Great. Thank you Jennifer good detail and then.

When you think about the anti circumvention risk you know, we we saw the current case go away, but I think the.

<unk> through their law firm and Tim Brightbill, we're talking about you know potential other cases do you have a view on what those cases could be and how they could impact.

This capacity or.

What's your view in general about that thanks.

Thank you I think this.

Trade Wars.

It won't stop that's our long term view, that's why we have made the decision to establish a fully wanted to integrate to the value channel capacities in.

Both Vietnam, Malaysia, including the U S. So it's.

SaaS is should be our ultimate solution too.

To solve all those sort of potential trade issues.

And at least that that's the best solution. We have right now are in long term really.

Really we don't have a crystal ball to see it but we are expecting you know.

The solution at the Genco can bring to the market and it shouldn't be the most one of the most reliable was.

Right. Okay, alright. Thank you and then another one here on the section 201, we recently saw a surprise exemption reinstated for bifacial modules in the U S, which means I think the modulus can come in for free and then.

Also there might be substantial.

Refunds for modules that have been already shipped in so I was wondering if you might be able to quantify.

What the section 201 refunds.

Would be.

The timing of it have you received any thus far for example.

And.

And then what if this decision gets.

Reversed yet again, you know what.

The process be two crops return that money to the U S government have you thought through.

The longer term picture for the section 200 one's bifacial situations.

Thank you Phil I think brown.

From a cash flow wise, we are not expecting to receive any refund that.

Short term.

We have we have.

Or you're a report about the uncertainty of this.

Potential appeal from the government side, we believe that highly possible and that's why we still put a question Mark there we do not expect.

Such kind of last year that will reach out and they're pretty soon so but if we can get some potential refunds that definitely that will be a very positive for the company.

We have to wait for quite a while to see the final results. So we will wait how the C suite, we have on the planet in our cash flow yet.

Okay. Thank you one last one and I'll pass it on as it relates to margin you gave us I think some capacity numbers for 2022, maybe can you talk about how you see margins trending in 'twenty two.

Especially if you know the assumptions that you make now kind of persist.

Do you think margin expansion is in.

Is potentially available, especially with.

Flexible.

Pricing based on input costs as we get through 'twenty two.

This is Charlie.

Looking to next year to neutral you too.

I think we are more confident.

The margin will be improved.

Improved year over year and this serious worries special on the tenants.

Particularly out of the <unk>.

<unk> Chan.

Shortage and high input costs, including to the.

Let's say the logistics issues as well and the.

And looking to next year, we think there.

Are there supply chain, where we're getting more friendly and compared to this year.

And on top of that when we were you know increase our production and our integration level and.

Expanding the entire sale.

Cell capacities.

Next year we.

But roughly we estimate.

The capacity will reach to a wafer 48 gigawatt. So 48 Gigawatts of module 50 Gigawatts.

Roughly 80% integration level, and we're expecting that we can get to the.

More.

That's a.

Net income contributions from the N type and because we were confident and.

We have that alone is this the next generation taken knowledge in terms of the.

As the production level and.

The cost advantage versus the.

The.

The carve out his voice and a popular in the market and the way we can get a price premium.

Great. Okay. Thank you Charlie generally Mr. Lee I'll pass it on.

Thank you Sydney thinks we have Gary from credit Suisse. Your question. Please.

Yeah. Thank you management for taking my questions.

So my first question.

Can management elaborate a little bit more on our upcoming the N type cell capacity. So I think we are relatively early in touch over the relatively large scale kind of a N type capacity. So we can imagine Nate maybe share with us more legal or our expected cost of competitors.

There's some new capacity and how do we see probably a kind of a two technology trends.

That's J T.

Yeah.

Hey, Gary this is farhan.

Well, you know investing 16 gigawatt and times top com capacities and.

We have the two years.

Experienced in Ronny roughly.

900 megawatts capacity as you know with factories and now you know the production.

The metrics on the cost.

Although outage versus the perk.

No.

What worries you know.

I think the leading the industry.

In the.

For for next year, when we ramp up.

We expect to ramp up the capacity in the first quarter.

And I think for operations roughly in the second quarter.

And in terms of the.

Integrated production costs for the entire pushes the perk.

For the medium term.

We expect to the cost will know the difference versus the purpose where small even the same.

The more important and you know if we look at the conversion efficiencies in time with this.

So as you know electricity. Additionally.

So city of generation.

Our customers and.

We believe we can tell what it gives the market a product and we can get to the Oh.

The price premium and guests more perf.

Perfect concept buildings for this product.

Yeah, Okay. Thank you.

Second question is on the module shipment.

Some of our peers are relatively cautious on their full Q tenant demand, but I think our guidance still would suggest a meaningful a kind of a Q on Q shipment increase so just for one.

Much more pressure.

How can we achieve this kind of all kind of school students have a strong feeling.

Yes.

Hum.

Thank you for your passion, Gary This is Jim.

I think.

Quarter over quarter, we have a pretty strong Q4 shipment expectations, mainly driven by combined that the amount of from China on the non China.

The market and I think the.

After the relatively weak.

Quarterly shipments in the first three quarters of 'twenty, one I think most of our customers, let's say non Chinese market customers.

Gradually accepting the market balance after the new.

New prices and say Ah.

<unk>.

Take the time try to close the projected close their pipeline.

And for China demand, everybody knows who knows there are quite a strong demand in China in the last two two months' time. So we successfully secured quite a sick notes on the second.

And the volumes and to supply a pretty strategic.

Projects across China market. So combined those two factors together I think a week, we can chew up pretty strong shipments in Q4.

Okay. Thank you.

So my last question.

Is on the with Oh can management share with us the latest update.

Subsidiary patients too.

Uh huh.

So for the IPO process, you know for the our subsidiaries and.

On the track to get there.

Probably.

Oh and by the end of September we got approval from the South high stock change now we are in the process in the registration.

China, and Chinese Securities Securities regulators, and we expect to.

Roughly in the next one and two months this weekend.

And you know to get everything ready attitude to get.

Apio down.

Okay.

Okay. That's all my questions. Thank you.

Thank you.

Thank you Jamie.

Audio participants these questions to pose piece premise, you'll want Oh Daddy phone keypad and you'll be joined in the queue.

It makes me ask Rajiv from Samsara capital your question. Please.

Yes.

Good morning, and good evening to you.

My first question is about the.

The potential shipments that were lost because of the logistics issues in the third quarter.

And and might be lost in the fourth quarter as well could you help us give us a sense of how much.

In terms of megawatts.

Megawatts. So you might have lost in terms of the shipments not happening because of logistics in Q3 and what.

That impact might be twofold.

And also help us understand if this lots shipment is that Oh.

Really a timing thing where the shipments get pushed out and when do you think Youtube or August.

That market opportunity was lost for forever.

Thank you.

I think let me take your first question.

In terms of compromised after delays I think.

We're looking at let's say.

<unk> hundred megawatt level of delight.

I think the delay between Q3 and Q4 is not recourse, we haven't a ship or we haven't produced a module or.

A customer doesn't want of the module.

Is it requires the logistic delays you'll notice there's lots of attractive tried a traffic jam.

Across the ports.

I'd say Europe or U S.

Accounting wise, we cannot recognize those.

Module side curious deliberate module into our customers' sites or in their warehouse. So that's why we have to delay the revenue recognition I think from <unk>.

Partially from Q3 to Q4 by approximately one to 200 megawatts several several hundred megawatts.

But the market itself has been produce the contract is solid and the price has been secured store, we just need to wait on to your analysis.

Let's just take a bottleneck.

Gradually SASSA and though we can drag from those revenue net revenues in Q4.

And just to follow up on that in terms of Q4 I are you experiencing similar just thinking foods or maybe even worse because the fourth quarter.

That's the all of the competition you have from the rest of you do so is the problem for the fourth quarter test must be even worse.

I don't think so at least Q4 will be slightly better than Q3. The reason I ask the China market domestic market demand is pretty strong so we can diverse.

Risks.

And you know not only rely on the shipping line companies, we can recognize more revenue in domestic market. So thats a one off positive Socs and also are also after this call.

Issues across the <unk>.

Europe or U S Gulf.

Government side has taken many actions to to push for the part itself to speed up the loading per seat or I don't know the speed to make sure everything can go faster. So we have seen the improvement from the logistics side as well so our combined those two we believe the situation will be a much.

Much improved to compare with Q3.

Okay.

My next question is about the average selling prices.

And.

You mentioned that there was a small increase in the selling price.

But obviously it did not.

All set.

B B.

The increases in material costs.

Could you talk about jobs.

To what extent your.

Shipments in the third quarter, but still up in the.

Subject to long term contracts where are.

You have to honor our pricing that was negotiated some time back or close to pricing that was negotiated some time back.

The pricing that is the what's the modules that are shipping into.

Prices that are a challenge here.

Available in the spot market.

Thank you I think from contract execution wise, we have to find a mutual solution together with our customers. So we fancy assigned us a contract, but we cannot expect our customers to two sabato August a potential.

Increased because of raw materials. So we have to find a mutual solutions together. So there are quite a several different kind of solution. So we can I reached agreements with our customers and so I won't spend too much time to illustrate everything but.

At the end of the day I think.

Over 75% of our Oh a contract.

Delivered or executed in Q3.

You know the old time heritage.

And also are you know we have to find lots of solutions combined with our short term and the long term solution together with our customers to find a win win solution for long run because we are not doing business in spot market.

We're doing business in power sector, which needs a very long term sustainability and the women's solution with our customers.

Long term, it's there'll always be market up and down we cannot just ruined the cup customer relationship across onetime issues.

Right.

So that's why I understand you mentioned that 75% of shipments into long term contracts.

And these long term contracts have been somewhat modified.

The realities of the of the of.

All of the cost pressures.

Can you.

Give us a sense of what percent of or going into 'twenty to 'twenty two.

Learning from the experience of these higher prices that you have.

Now having to live with a higher cost of materials that were having to live with.

What percentage of shipments might be.

If you do 30 to 35 or 30.

36, Gigawatts next year, what percentage would be long term contracts.

That have already been signed or or are there a flexibility of what's in the contract where the pricing has not yet been determined.

So we have approximately 25% to 30%.

Our order book that have been signed or committed to the customer and for the 2022. Some of the contract. It is based on the secure the price out in terms. Some of the contract is just a framework contract which means.

We keep the commercial part of flexible up to the market.

So we also have some of the framework contract, which has a <unk>.

Index based pricing mechanism, which allows you now.

Both our <unk> and our customers to have flexibility with the market It goes up and down so our.

Basically we have learned a lot of lessons from 'twenty to 'twenty, one and we carried at all and we we established some new business model with our customer and are fortunate to have in the longer term.

So.

So what you're saying is that.

That's the framework agreements will give you more flexibility on the pricing.

Uh huh.

The cost of material movement.

<unk> cost moves in a in an unsafe overweight.

Right.

That is that also the reason why.

We are confident that the gross margin next year.

Food, because you're embedding a higher gross margin that was achieved in 2021.

Right.

Well, so gross margin will be a separate topic I think the gross margin improvement primarily comes from.

Much improved where do you go integrated capacity expansion by end of this year, so which will contribute a lot of.

Marketing improvement another important factor will be the our new product Tiger and new products will contribute a lot of premium because of the a nice parameters and.

Extra power output such products can generate and the start of what will be our purple our portion of.

We say large large dimension products. For example, you know our Y E. Two millimeter product proportionate increase stuff from first half around 20% to 25% of two end of this year around the 60% to 70% and it's next year it might go even higher.

Higher so which gave us a very good competitive edge sword.

Hope that answer your question.

Yes, yes. Thank you.

One last question for Charlie.

Got it.

The general and administrative expenses have been up that.

Much higher this year than last year in the first three quarters two quarters they went up.

Thank you in the third quarter as well.

Can you give us some sense of why that is.

This is happening and in particular how.

How much of the increase in cost is really.

Directly to the IPO in China.

Thanks for your questions.

I think you know the operating expense is relatively high.

It's tons of beauty by I think firstly, it's a.

The shipping cost specific cost as you know.

Is pretty high and we have.

Very high exposure to.

Two.

Shipments although China.

Susan Wise.

I feel I feel.

I don't think anybody so were significant roughly maybe too many U S dollars.

For the third quarter.

And.

On top of that I think.

Third quarter we.

Our shipment is not so big you know relative risk.

The fourth quarter.

We have.

A big chunk on the shipments.

Rich.

Uh huh.

Lose the operating costs and excluding the I think excluding the this is a variable costs, particularly the shipping costs.

On the cost.

The fixed cost for operating.

Expenses.

Fixed.

It was stable.

I can tell you I'm, sorry, I missed something that you said.

About.

What was the amount the ideal Kosovo, but the question that I'm trying to grapple with as you know the G&A.

It normally should not increase that much.

Last year. It was I mean, that's around $50 million a quarter.

Yeah, It's Bob here that round 55 to 50 million and it was almost it was almost 70 million in the third quarter.

So that's a pretty substantial increase can you tell us what is driving this and what can you say that makes a lot of people.

So the G&A cost.

And in Australian cost.

It's stable.

Looking for.

The future should be stable.

We have some you know IPO costs and we have some I think.

Quarter adjustment for the.

Let's say that provision for.

For the accounts receivable and excluding that I think it's.

It was relatively stable.

Okay.

Thank you.

Okay. Thank you.

All participants will be a question as to push please press <unk>, one telephone keypad and you'll be placed in the queue.

Nick Yes, and then from Jefferies. Your question. Please.

Thanks, a lot for the operator for having the questions and.

10 filler for management.

My first question is about.

So just to check on.

Because the inventory has increased by.

By quite significantly so just to check Oh.

Despite to the shipment in the C O two overseas market.

Yeah.

So.

Two aspects one is the.

The inventories down translates to overseas markets.

And the challenge by the logistic.

And the delay.

Second my as well.

We are expecting you know back to the third quarter.

The material cost is still on the <unk>.

<unk> site. So we intentionally intentionally put more resources in their case more materials to make sure. We have relatively on the wound is to for the production in the fourth quarter.

Yeah.

Thanks, a lot.

So.

When it comes to the fourth quarter.

I've noticed that the company was guiding for 12.

12 to 15, I talked to 15% on gross margin over the last three quarters, but the guidance has increased from 12 to 15 of 32016, while at the upstream polyethylene.

Cost has increased a lot so.

First of all would like to.

Learn from the managed money is it because of the increase in percentage of large size module and a cost cutting efforts. So that the company is competent to make a probably higher margin even when the upstream part of course is highest.

Uh huh.

Combination.

Well as you know.

We're talking about the large size percentage and we know our capacity is really a seven gigawatts we've talked in the press release, so can one minus percentage.

So quarter one.

The large size 188 to around 52% and the.

Fourth quarter, two so whenever sense.

On top of that you know where you are.

We're expecting the resp.

Okay.

We will continue to increase.

I think.

Particularly because we have shipments.

More shipments in China, and China ASP is the spot market.

Rice is pretty high.

Q4 versus Q3.

I think you know increase.

So roughly <unk> two cents per watt.

I guess okay.

So it's a combination of these factors.

Uh huh.

And pipe new generation ourselves, so I suspect with companies using the pop on technology on one day if the.

You're right.

Is.

Is it like.

April to just disclose the yield rate.

That's in line because he was a concern on the UK because popcorn has more production steps.

Yeah.

We are we are reaching for unpaid popcorn, we are reaching almost 99%. So I think that that's a leading number in this industry. That's why we have our confidence to expand our capacity issues to such.

Sizable volume too to make to extend our competitive advantage as well.

That's very impressive.

One of the leading indicators in the market. Thanks, a lot manage one.

Yeah.

No problem.

Thank you Ellen.

Thank you one last question from Brian Lee from Goldman Sachs. Your question. Please.

Hey, guys I'm.

Good evening. Thanks for squeezing me in here I might have missed this or maybe I'm misinterpreting something but could you help reconcile.

Reconcile I think you mentioned 100 to 200 megawatts.

Kind of revenue recognition issue Q3 to Q4.

But.

The actual shipment guidance is changing by you know two plus gigawatts.

Versus what you had previously so is that being.

Pushed even further into.

The early part of 2022 or what's the I guess the disconnect between the 100 to 200 megawatts, you're calling out specifically <unk> the bigger.

And kind of shipment guidance change that's happening here for them for the full year.

Yeah sure I think the.

In my previous answers is b trends just delays.

<unk> revenue recognition delays from Q3 to Q4, it should be like that.

Somewhere around 200 megawatt level so.

So a delay will continue.

The improvement is definitely be better than Q3.

First we have seen this traffic jam across all the main part is in.

Proving day over day week over week, so thats why im saying the.

The shipment.

And together with we are shipping more.

Into China market in Q4, so that's why we don't have to suffer as a logistical problems.

From the shipping line. So those are the two factors of why we say the revenue recognition in Q4.

There will be a.

Lighter easier. Thank you Sri so regarding the guidance change I think it's mainly at the course.

We have some delays off one of our.

Workshops sell workshops, SaaS give us kind of ceilings.

For this capacity expansion. So that's why we naturally.

<unk> adjusted our guidance accordingly.

Okay. That's helpful. So just just to be clear you havent seen any.

Cancellations of shipment schedules weather for this year or into next year, just things are changing on the schedule, but you havent seen anything canceled outright.

We have been pretty let's say several cases canceled by the shipping line companies, but we always kind of find some solutions because even though we have this multi year shipping line contract with all the major shipping lines or even if they can so that the shipments are shifting.

Right.

This week or next week, we can always trying to find out a solution to squeeze a means for the next one in the I don't know next months or the months right.

Okay Fair enough and then maybe just two last one for me and I'll pass it on or are you reiterating your capex guidance for 2021, I think you had said $1 1 billion $1 1 billion USD four and then any early thoughts on capacity increase and Capex for.

2022.

Yeah.

Thank you.

This is Pat and it will the Capex side, we expect that in Q4 will have 400 million.

Milling.

Expectations. So the total capex in this.

This year will be $1 2 billion and then next year with us with the length of stay and one 2 billion for 2022.

Okay. So the flat capex year on year, and any thoughts around the funding for a $1 2 billion of Capex in.

In 2022.

Uh huh.

You know where our subsidiaries in the China IPO process.

We're expecting to raise at least.

Thanks, Amit so that is the most.

The most.

Have you resolved the majority of ours.

So we may ship, some you know.

Financing.

Okay understood. Thanks, guys I'll pass it on I appreciate the time.

Thank you Brian I would not want my question. Thank you. Please go ahead Ms Russo.

Yes.

Sure.

If you strip out any color here.

Hello.

Yeah, Nick N vehicles today. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.