Yahoo Finance Chinese Solar Company Longi Forecasts First-Half Loss as Prices Drop
(Bloomberg) -- Two of the world’s biggest solar manufacturers lost more than $1 billion in the first half as a massive glut in the Chinese market continued to hurt the sector, which is vital to combat climate change.
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Longi Green Energy Technology Co., until recently the world’s biggest solar firm, said in a preliminary results filing late on Tuesday that a “mismatch” of supply and demand has led to a significant drop in prices for its major products, resulting in no revenue increase even as sales volumes rose. Its fellow Chinese company Tongwei Co. also blamed “persisting” low costs across the supply chain in its statement.
China’s world-leading solar industry is grappling with factory overcapacity that’s spurred a deepening glut in solar generation equipment and an ensuing price war. Beijing has responded to calls for help from beleaguered manufacturers, introducing a set of rules to guide capacity expansions and avoid redundant investment.
In a draft regulation published Tuesday, Chinese authorities asked companies to put in more of their own capital when building new factories and expanding existing ones, introduced higher product quality requirements, and directed firms to boost innovation and reduce costs.
Longi’s shares were actually up by more than 6% at one point on Wednesday and Tongwei’s rose by almost 4%. Longi said that its first-half loss was mainly due to a one-time impairment related to a depreciation in the value of its inventories. The company’s stock is still worth less than a quarter of what it was in late 2021.
The solar manufacturer said it would make a net loss of 4.8 billion yuan ($660 million) to 5.5 billion yuan for the six months through June, compared with net income of 9.2 billion yuan in the same period last year. Tongwei estimated that it had lost 3 billion to 3.3 billion yuan over the same period.
JA Solar Technology Co., another major Chinese producer, reported a preliminary first-half loss of 800 million yuan to 1.2 billion yuan this week.
Zhong Baoshen, Longi’s chairman, warned in a statement on Monday that the solar sector wouldn’t recover anytime soon due to the severe overcapacity, and said 2024 would be “a very tough year” for the industry. Financial challenges have led to five smaller manufacturers withdrawing initial public offering plans in China in the first half, according to BloombergNEF.
--With assistance from David Scanlan.
(Updates on government rule, Longi filing, and stock price changes in 4th and 5th paragraphs)
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