晶科能源 (JKS) 2011 Q4 法說會逐字稿

Good morning.

My name is Bernita, and I will be your conference operator today.

At this time, I would like to welcome everyone to JinkoSolar's fourth quarter and full-year 2011 financial results conference.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

(Operator Instructions).

I would now like to turn the call over to Mr.

Sebastian Liu.

Sir, please begin.

Thank you, operator.

Thank you, everyone, for joining us today for JinkoSolar's fourth quarter and full-year 2011 earnings conference call.

The Company's results were released earlier today and available on our Company's IR website at www.jinkosolar.com, as well as on newswire services.

We have also provided a supplemental presentation for today's earnings call, which can also be found on our IR website.

On the call today from Jinko are Mr.

Kangping Chen, Chief Executive Officer; Mr.

Arturo Herrero, Chief Marketing Officer; and Mr.

Longgen Zhang, Chief Financial Officer.

Mr.

Chen will discuss Jinko's business operations and the Company highlights; followed by Mr.

Herrero, who will talk about the Company's business strategy; and then Mr.

Zhang, who will go through the financials and guidance.

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 US 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 this and other risks is included in Jinko's public filings with the Securities and Exchange Commission, including its annual report on Form 20-F for the fiscal year ended December 31, 2010, filed with the Securities and Exchange Commission on April 25, 2011, as amended on May 10, 2011, and other documents filed with the US Securities and Exchange Commission.

JinkoSolar does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please be noted that no supplement -- to supplement these consolidated financial results presented in accordance with United States generally accepted accounting principles, or GAAP, JinkoSolar uses certain non-GAAP financial measures.

The Company believes that the use of non-GAAP information is useful for analysts and investors to evaluate JinkoSolar's current and future performances, based on a more meaningful comparison of net income and diluted net income per ADS when compared with its peers and historical results from prior periods.

These measures are not intended to represent or substitute numbers, as measured under GAAP.

The submission of non-GAAP numbers is voluntary and should be reviewed together with GAAP results.

It is now my pleasure to introduce Mr.

Kangping Chen, CEO of Jinko.

Mr.

Chen will speak in Mandarin, and I will translate his comments into English.

Please go ahead, Mr.

Chen.

(interpreted) Thank you, Sebastian.

Good morning and good evening to everyone, and thank you for joining us today.

Despite the challenging fourth quarter of 2011, for both our Company and the industry as a whole, we remain confident in our low cost and vertically integrated business model as it has provided us with the adaptability needed to push through these difficult times as we continue to improve on the efficiency of our production process and generate values for our shareholders over the long term.

The extremely difficult situation directly affected our gross margins and the declining average selling prices, which continued to fall faster than anticipated, adding pressure to an already uncertain global economic environment, which the decline in the price of polysilicon and other auxiliary materials was not able to offset.

In-house gross margin dropped to 5.8% in the fourth quarter 2011, compared with 18.4% in the third quarter of 2011.

Despite such a difficult environment, we managed to achieve total shipments of 227 megawatts of solar products during the fourth quarter of 2011, of which 169.1 megawatts was solar modules.

Total revenue was $190.4 million, or RMB1.2 billion.

These challenging times notwithstanding, our brand remains strong as we continue to develop solid relationships with our customers in key markets, such as Germany, Italy, and Eastern Europe.

While sales were weaker than expected, most of our top customers have stayed with us, and we believe that this is because of the value of our high quality products and great service network.

Our strategy since the beginning of 2011 has been to diversify our global presence and expand into new markets.

Where this past quarter was challenged, the two markets continued to grow, and we have already begun to seek out these new opportunities.

In the first quarter 2011, 75% of our revenues were derived from Germany and Italy; but, by December 31, 2011, those two countries accounted for only 50%.

This geographic expansion into new markets not only will allow us to potentially offset the effects of the decreases in some other regions, but, more importantly, it also allows us to invest in our local business relationships, especially in regions where we saw stronger growth in Q4, such as China and India.

During the fourth quarter, branch offices in Canada and Australia were opened, which, we anticipate, will help yield strong returns, we expect, from our ever expanding geographic presence.

As such, our full-year numbers are starting to show the results of this strategy.

Total solar product shipments were 950.5 megawatts; an increase of 97.9% from 2010.

Total revenue was $1.2 billion; an increase of 58.7% from 2010.

Where the past two quarters have been difficult for the industry, we effectively doubled our solar product shipment and increased revenue by close to [15%] over the past year, which we're very proud of.

This achievement is reflected in the new IMS research [to] module rankings, which rank Jinko number seven in terms of pure module shipment.

This is 11 ranks higher than last year.

With this in mind, we remain optimistic about our prospects and the rebound in second half of 2012.

Leveraging our industry leading cost structure, strong balance sheet, and wide reaching global presence, we will be able to take full advantage of our strengths as the market begins to turn in the second quarter of 2012.

Due to economic instability in Europe, we don't expect there to be high global growth.

We anticipate the 2012 global demand to be around 24 to 28 gigawatts in 2012.

European countries that have such a direct demand are beginning to fundamentally change economically as austerity measures are put in place.

As such, we don't see much growth coming from within Europe; and some emerging markets, such as China, India, Eastern Europe, and the US, which are expected to contribute more meaningfully.

We have also begun to implement a strategy to move further downstream as we continue to deploy resources towards participating in more project developments and [system] sales.

We have begun project developments of our own solar power plants, including one of [30] megawatts, which are expected to [sell] in future.

We're very excited about these new business opportunities.

Leveraging our current resources, we are expanding our business chain, not only to partially mitigate the volatility in our core business, but also to increase our overall gross margin.

Deals like this have effectively secured our place as one of the most significant solar power manufacturers.

With success of these type of projects, we undoubtedly favor the development of more PV-related projects across China as the solar industry continues to grow.

In reaching our project experience, and supported by favorable government regulations, [enhanced] by the national [France] 5-year plan, we believe we can achieve 100 megawatts to 150 megawatts in two project developments in 2012.

With demand expected to be near 5 gigawatts for similar solar projects, we are confident in our ability to expand downstream.

As I mentioned before, when sales were weaker than expected, most of our top customers have stayed with us.

With respect to the quality and environmental considerations, we believe we have made substantial progress in addressing issues in our Haining facilities.

Recently, URS, the top American environmental engineering firm which we have hired to conduct an assessment of environmental conditions in our Haining facilities, conclude that the environment [audit] and approve our remedial work.

This follows technical due diligence conducted by [RINA], a leading European environmental engineering firm.

In late February, we also received environmental approval from [VN] to [attempt program] environmental monitoring.

For the first quarter of 2012, Jinko expect the total solar module shipments to be approximately 170 megawatts to 190 megawatts.

For the full-year 2012, total solar module shipments are expected to be in the range of 800 megawatts to 1,000 megawatts.

And total project development scale is expected to be in the range of 100 megawatts to 150 megawatts.

The Company expects that in-house annual silicon ingots, silicon wafer, solar cell, and solar module production capacity will remain at approximately 1.2 gigawatts each by the end of 2012.

Arturo Herrero, our Chief Marketing Officer, will now discuss our major achievements in sales and marketing for the fourth quarter and the full year in further detail, as well as our strategy and the market outlook for the first quarter of 2012, and the second half in the key countries and regions.

Thank you all.

Thank you, Mr.

Chen.

Good morning and good evening to all of you.

2011 was a very challenging year for our industry, mainly due to the extraordinary negative market conditions created by the financial and debt crisis in Europe.

The combination of a sharp reduction in bank lending, stricter borrowing terms, a fast reduction of feeding tariffs in most important key markets, substantial oversupply supply of modules, and aggressive competition resulted in a faster than expected decrease of prices of PV products in the market, causing several companies to go bankrupt or file for Chapter 11.

Our fourth quarter sales were also negatively impacted by the coverage of the media of the accidents that occurred in our Haining facility in September.

After several clinical due diligence by independent international firms, and after the improvements to our waste management, our Haining facility today operates at a very high health, safety and environment standards and we believe that it is one of the cleanest facilities in China.

Despite such adverse conditions, we achieved great success, almost doubling megawatt shipments at 450 megawatt, almost tripling module shipments, increasing revenues also by 59% to a level of $1.2 billion, and increasing brand recognition, all the while keeping costs under control, and, at the same time, maintaining positive margins in 2011.

From a market penetration standpoint, we grew our market share in the major 15 PV countries to over 3%.

We also increased geographical diversification, entering into new markets, and building brand recognition further, and attracting new customers.

Europe continues to account for the largest portion of our shipments, as we expanded into new geographical locations.

At the beginning of 2011, Germany and Italy accounted for over 75% of our sales; while, in Q4, Germany and Italy together they were down to around 50%.

The other 50% is spread among 12 countries, a proof of our success in increasing market share in other markets, such as India, China, and Eastern Europe.

We benefited from a strong demand coming from Germany during Q4 thanks to better than expected weather conditions and operating feeding tariff cuts, [memorizing] the loyalty from important and well recognized German companies.

Italian demand in Q4 was lower than expected, mainly due to the lack of bank support and higher funding costs due to instability in the Italian economy, a difficult project financing environment, and the approaching cuts in subsidies to around PV systems.

We anticipated this trend, and we have been successfully stretching our sales to wholesalers and EPC contractors dedicated to roof installations.

Outside Europe, we managed to increase sales by over 30%, including our first sales in Chile, Mexico, and Israel, where we see great potential for the next quarters.

In the USA, due to the expiration of cash grants relating to the Safe Harbor policy, our order book increased substantially.

But these revenues couldn't be recognized in Q4, and we wanted to be conservative.

These revenues, however, will be recognized in Q1 2012, and should account for over 8% in that quarter.

We continue to strengthen and further expand our global sales and marketing teams.

Especially, in the USA and Asia we have reinforced our sales and marketing structure by hiring world recognized professionals from the solar industry.

In China, as already mentioned by our CEO, we completed the project for China Guangdong Nuclear on time.

As already announced, thanks to both the feeding tariff for larger scale projects and the Golden Sun program for roof installations, we are seeing great demand coming mainly in Q2 and Q3 2012.

And we expect the market to reach a total of around 4 gigawatts to 5 gigawatts.

Let me remind you that the commitment from the Chinese Government is to reach an annual tariff of 10 gigawatts installed by 2015, and 50 gigawatts by 2020, [most of] China to exceed this target.

In line with this, we opened an office in Beijing, to be closer to the Government, and we have put in place a team to focus on the Chinese market.

In South America, we developed some [interesting] business working closely with local partners and European current customers, and we see good opportunities in the second half of 2012, and mainly in 2013.

We received our first orders from Chile, Mexico, and Brazil during 2011, where we successfully passed the certification of Inmetro with an A grade for most of our module portfolio.

Worldwide, Q4 total solar product shipments were almost 227 megawatts, including 169 megawatts for solar modules.

Sequentially, we have reduced wafers and cells in line with our vertical integration strategy.

In Ontario, Canada, we have entered into a very fruitful partnership for local module assembly in order to comply with the local content, and we've included in all opportunities for such a big potential demand.

We have also opened our subsidiary in Queensland, Australia, where we expect to successfully enter to residential market, both in Queensland and in South West.

We are also very proud of receiving support from existing customers who view us as a trustful, long-term partner, flexible to market changes, excellent provider of service and high quality products, despite the difficulties during this quarter.

We continue to build a strong partnership network with distributors, PV developers, and EPC contractors across the globe, including, from Germany [and the Balkans organic SCHOTT Solar], BULL Tech technology of [Solaire]; from Italy, [Inaventi], Elpo, among others; Premier Power in US and Europe; Martifer in Portugal; Gransolar, [Provincial], etc., in Spain; SunConnex in The Netherlands; or Innotech in India.

We're, once again, also acceptable supplier to PHOTON Power AG after the clinical inspection of our Haining installations.

Regarding marketing, one of our primary goals over the past year has been to grow the brand recognition, particularly in the various important markets in Europe, and also in the United States.

We have become the principal sponsor for the current season for the Valencia Football Club in Spain; the third major team in the Spanish Premier League, after Real Madrid and Barcelona.

They will compete in the European Cup against major European clubs, and we will see our brand recognized in Europe, but also worldwide.

We are in negotiations for the following season, and [the remit] to install our solar models on the roof of the new stadium in Valencia.

We are getting also good exposure for our Jinko brand thanks to the football German national team benefiting our sales in the local residential market in what is still the most important TV market in the world.

In the USA, we increased brand recognition with our sponsorship at the San Francisco 49ers stadium, where they played the semi-finals for the Super Bowl in front of the physically and TV audience of over 80 million.

Unfortunately, they were not selected for the Super Bowl that was played in Indianapolis; hopefully, they will be positioned next year.

During 2011, we attended a clean solar and renewable energy exhibitions and conferences, and we were invited to speak at several high level conferences.

During Q4, we actively attended the renewal French exhibition; the SPI in Dallas, USA; [UBB SEE 2011] in Sydney Australia; and PV Asia-Pacific in Singapore.

Regarding OEM, in line with our strategy to promote our Company, [Jinko brand], we are dedicating our OEM business only to key special partners.

Therefore, our widely available solar modules during the fourth quarter of 2011 accounted for only 10% of our revenues.

Regarding bankability, there is no doubt our bankability was impacted by the accident at our Haining facilities, and some of the banks put on hold the bankability of PV system with Jinko modules.

However, thanks to the [deliberations] conducted by environmental engineering firms from Europe and from the USA, we managed to rebuild the trust from major banks, especially from Italy, Germany, and the USA.

There are now more than 30 banks that are financing PV systems with JinkoSolar modules, and we are still talking with more than 60 banks in 12 countries.

With a banking of the reports issue by URS and Bureau Veritas, we believe that all pending doubts will disappear.

We have done a great effort, with very positive results from PR, to review our Company image.

Finally, regarding ASP, our solar modules declined much faster than expected in 2011 in our sector, especially in Q3 and Q4, in part because of the impact of the Haining accident, but also because of the big erosion on price and margins due to competition and oversupply; 18% decrease from Q3 to Q4, but less than from Q2 to Q3.

From the beginning of 2011 to the end, we have been impacted by ASP reductions of over 40%.

However, thanks to our vertical integration structure, despite the high pressure of prices in the market, our performance is encouraging, and this shows our ability to leverage our advantages cost structure.

Being competitive, and at the same time strong in quality and efficiency, gives JinkoSolar a great opportunity to keep expanding and gaining market share as a clear cost leader and win a significant increasing brand recognition.

Despite the difficult quarter, we have established the basis for a good 2012 and currently we are competing in many countries with tier 1 players.

And Jinko branded modules are being included in most of the big tenders for 2012 and 2013, with important, well-known companies in Germany, Italy, Spain, France, or USA for purchase worldwide.

With that, now I would like to turn the call over to Zhang, our CFO, who will introduce our financial resource for the fourth quarter and full-year 2011, and guidance for 2012.

Thank you.

Thank you, Arturo.

Good morning, and good evening to everyone on the call.

First, I would like to walk you through our financial results for the fourth quarter of 2011, followed by full-year results, and the first quarter and full-year 2012 guidance.

As Mr.

Chen mentioned early, total solar product shipments in the fourth quarter of 2011 were 227 megawatts, consisting of 41 megawatts of silicon wafers; 16.9 megawatts of solar cells; and 169.1 megawatts of solar modules.

Total revenues in the fourth quarter of 2011 were $190.4 million; a decrease of 32.7% sequentially, and a decrease of 32.2% of year over year.

The sequential decrease in revenues was primarily due to an industry wide decline in average selling prices of solar products, and a decrease in sales volume of solar modules during the fourth quarter of 2011.

Gross margin was negative 4.4% in the fourth quarter of 2011, compared with 3.7% in the third quarter of 2011, and 28.5% in the fourth quarter of 2010.

The sequential and year-over-year decrease in gross margin was primarily due to a decline in the average selling price of solar modules, which was partially off-set by the decline in price of polysilicon and auxiliary materials, and improvements in operating efficiency.

In-house gross margin relating to in-house silicon wafer, solar cell, solar module production was 5.8% in the fourth quarter of 2011, compared with 18.4% in the third quarter of 2011, and 34.7% in the fourth quarter of 2010.

The decline was primarily because the average selling price of solar modules fell more rapidly than the price of polysilicon and auxiliary materials.

Now, non-silicon cost decreased to $0.64 per watt in the fourth quarter of 2011, from $0.68 per watt in the third quarter of 2011.

This was primarily due to both our efficiency use of consumable materials in the production process, and a decline in the prices of auxiliary materials, such as glass, EVA and silver paste.

Loss from operations in the fourth quarter of 2011 was $50.2 million, compared with a loss from operations of $30.9 million in the third quarter of 2011, and income from operations of $55 million in the fourth quarter of 2010.

Total operating expenses in the fourth quarter of 2011 were $41.9 million; an increase of 0.2% sequentially, and an increase of 87.5% year over year.

Excluding non-cash charge, which consisted of an impairment of goodwill, operating expenses would be $34.7 million, compared to $41.3 million in the third quarter of 2011, and $21.3 million in the fourth quarter of 2010.

The sequential decrease was primarily due to a decrease of $12.4 million in the provision for bad debt from the third quarter of 2011, which was partially offset by an increase in professional service fees and sales and marketing expenses associated with the expansion of our global sales offices.

In the fourth quarter of 2011, due to the challenging solar market conditions and significant reduction of the Company's market capitalization since the second quarter of 2011, the Company recognized an impairment of goodwill of $7.3 million.

The goodwill subject to the impairment already made from the 2009 acquisition of equity interest in Zhejiang Jinko; an operating subsidiary of the Company.

Operating margin in the fourth quarter of 2011 was a negative 26.4%, compared with negative 11.1% in the third quarter of 2011, and a positive 20.5% in the fourth quarter of last year.

Net interest expense in the fourth quarter of 2011 was $8.4 million; an increase of 7.2% from the third quarter of 2011, and 5.3% from the fourth quarter of 2010.

The sequential increase in net interest expense was primarily attributable to the first full quarter of interest expense incurred by the Company on unsecured one-year short-term bonds with an aggregate principal of RMB400 million issued in July 2011, with an annual interest rate of 6.5%.

We recorded a foreign currency exchange loss of $4.5 million in the fourth quarter of 2011, primarily due to the loss of $9.7 million in foreign currency exchange, which was partially offset by a gain in the change in fair value of forward contracts of $5.2 million, both of which were due to the depreciation of euro and US dollar against the renminbi currency.

We recognized a gain of $1.4 million in change in fair value of capped call options and convertible senior notes due to a gain from the change in fair value of convertible senior notes and capped call options.

We recognized a tax benefit of $2.9 million in the fourth quarter of 2011, compared with a tax expense of $0.2 million in the third quarter of 2011 and a tax expense of $10 million in the fourth quarter of 2010.

The income tax benefit in the fourth quarter of 2011 was primarily due to a reversal of income tax expenses from previous [quarters] in connection with the net loss incurred in the fourth quarter of 2011.

Net loss in the fourth quarter of 2011 was $58.3 million, compared with a net income of $10.7 million in the third quarter of 2011, and a net income of $55.8 million in the fourth quarter of 2010.

This translates into basic and diluted loss per share of $0.65, and basic and diluted loss ADS of $2.58, respectively.

Non-GAAP net loss in the fourth quarter of 2011 was $58.9 million, compared with non-GAAP net loss of $38.9 million in the third quarter of 2011, and a non-GAAP net income of $55.8 million in the fourth quarter of last year.

This translates into non-GAAP basic and diluted loss per ADS of $2.61.

Now, we will briefly review our full-year 2011 financial results.

Total revenues for the full-year 2011 were $1.2 billion; an increase of 58.7% from $705.3 million in 2010.

Income from operations for the full-year 2011 was $50.2 million; a decrease of 68.1% from $150 million in 2010.

Operating margin for the full-year 2011 was 4.3%, compared to 21.3% for the full-year 2010.

Total operating expenses in 2011 were $132.5 million; an increase of 127% from $55.7 million in 2010.

Operating expenses represented 11.3% of total revenues for the full-year 2011, compared to 7.9% for the full-year 2010.

The Company recognized tax expenses of $12.9 million for the full-year 2011, compared to a tax expense of $22.1 million in 2010.

Income for the full-year 2011 was $43.4 million; a decrease of 69% from $133.6 million in 2010.

This translates into basic earnings per ADS of $1.85, and a diluted loss per ADS of $0.78 in 2011.

Non-GAAP net income in 2011 was $0.7 million, compared with non-GAAP net income of $133.6 million in 2010.

This translates into non-GAAP basic and diluted loss per ADS of $0.03 in 2011.

I would now like to take a quick look at our balance sheet.

As of December 31, 2011, we had $92.2 million in cash, cash equivalents and restricted cash.

Total short-term banking borrowings, including the current portion of long-term banking borrowings, were $349.6 million.

We had total long-term borrowings of $24.7 million as of December 31, 2011.

Capital expenditure in the fourth quarter of 2011 was $52.7 million, which was used -- most of -- $39 million is used for the construction of solar power plants.

Now let me turn to our guidance.

For the first quarter of 2012, we expect total solar module shipments to be approximately 170 megawatts to 190 megawatts.

For the full-year 2012, total solar module shipments are expected to be in the range of 800 megawatts to 1 gigawatt; and the total project development scale is expected to be in the range of 100 megawatts to 150 megawatts.

We expect the Company's in-house annual silicon wafer, solar cell, and solar module production capacity to remain approximately 1.2 gigawatts each by the end of the year 2012.

At this moment, we are happy to take your questions.

Operator?

(Operator Instructions).

Philip Shen, Roth Capital Partners.

Hari Chandra.

Satya Kumar, Credit Suisse.

(technical difficulty) the non-silicon cost went to $0.64 in the fourth quarter.

We were wondering where your non-silicon costs may go by the end of 2012.

Okay, I just, maybe, I think, hear part of the question.

You're asking our Q4 non-silicon cost is $0.64 and what we expect by the end of this year, the non-silicon cost.

Is that correct?

Correct, thanks.

I think if you look at our Q4 non-silicon costs, is $0.64, the major reduction, I think, is on the materials.

I think a major is EVA and glass is up almost 18% in Q4, compared with Q3, and the silver paste dropped almost 5%.

So we continue to expect the materials continue to go down.

And by efficient use of those materials, and also to increase our high efficiency in our cells, we are expecting non-silicon costs by the end of this year maybe around $0.57/$0.58 per watt.

You said $0.57 to $0.58?

Yes.

Okay, thanks.

And you also mentioned that some banks had put Jinko on hold because of the Haining issue.

Can you talk about how many banks put Jinko on hold?

And I know that over 30 banks are still financing, but how many were there before?

Okay, I think to clear this question, we think the whole bankability is for the project side; it's not for the credit facilities.

No bank right now put a hold on our banking facilities, okay?

Yes, thank you, Zhang.

Let me clarify; my comment is that the systems utilizing using Jinko solar modules were -- the systems that belonged to these projects were put on hold until we clarify what's really happened in our Haining facilities.

After the due diligence and technical information and the reports, immediately the banks were accepting the explanations.

Some of them they were sending some engineering firms.

And finally they consider it was okay so they started again to have [bankable] these projects with Jinko modules.

So it was solved.

So how many of the banks, did you say?

Well, we don't know exactly how many banks.

We know that some of them they were questioning; we have to send out information, we needed to do a PR effort and to provide them the reports and that's it.

And then they re-establishing there is some offering loans to our projects.

Okay, thank you.

Philip Shen.

ROTH Capital.

I'd like to explore your guidance a bit.

Can you give us a sense for what you expect your geographic shipment mix will be in Q1 and for full-year 2012?

Okay, let me explain.

This time, the guidance we've given, we've given guidance actually two pieces; one is we're going to provide the whole year, the shipments are for the module, 800 megawatt to 1 gigawatt, that purely is the module sales.

Then we also give another piece.

I think we go (inaudible) the projects, so we also the projects developed in China.

And currently, we're also at 30 megawatts; we're now working on that.

So we give a whole year guidance right now is 100 megawatt to 150 megawatts and the project develop.

For the Q1, I think you already see that, we've given out I think the shipment is 170 megawatt to 190 megawatts.

And for the project developed because we are working on that, this is really difficult to project.

Right.

I guess my question was can you give us a sense for, in Q1, for the 170 megawatt to 190 megawatts, what is your geographic mix expectations?

So what percent do you expect to go to Germany, what percent to the US, what percent to China?

And then can you do the same for 2012?

No, no, let me answer.

So, mainly, what we are trying to achieve, as we did quite successful during 2011, is to diversify much more in different geographies.

So still Germany/Italy are our major countries in our portfolio but, thanks to this good job in strategically enter into new markets, we have seen also quite some demand coming from markets like India, like Eastern Europe, and also USA.

So we will see in Q1 also these markets quite strongly taking part of this portfolio.

Great.

And can you give us a sense for expectations for Q1 gross margins?

And what kinds of ASPs are you seeing in Q1, following what's happened in Germany?

I think, talking about the gross margin, for this year, because I've already mentioned, Philip, this year our revenue actually come from two pieces; one's from selling off module; another is selling off the solar plants, developed plant.

So, from whole year, I think for the module selling 800 megawatts to 1 gigawatts, to my thinking.

I cannot give the gross margin.

I think the whole year gross margin may be between 2% to maybe 5%, more conservatively speaking.

And for the full-year side, the gross margin maybe is around 20% to 25%.

And the revenue side, I think, the project selling, where kind of revenue may be 20%, the module selling may be around 80%.

Great, that is helpful.

And then one last question, if I may, and I'll jump back in queue.

You've talked about the project development strategy, how much capital do you think you might tie up in your project development for 2012?

Basically, you already see in December actually the CapEx, $58 million we have.

$39 million is [particularly] to the 30 megawatts project.

Basically, whenever we do products in China because we can control and we also know better, so today, for the 30 megawatts, I think we maybe invest around, per watt, is around $1.80.

So it's easy for you, the calculation.

And how much we will invest into that -- even the [700] megawatts, we have to invest $180 million.

But you have to know that, for example, the 30 megawatt projects we maybe sell it in Q2, so it's rolling over.

You see what I'm saying?

We develop it, we sell it.

Okay, great, thanks very much.

(Operator Instructions).

Aaron Chew, Maxim Group.

Wonder if you could just touch a little bit on the state of the polysilicon market currently and how things have really trended from the end of last year through January and February; and how quickly, if anything, on the pricing front has changed post the German decision; and, finally, where you guys see things shaking out by year end in terms of poly.

Jinko is one of the vertically integrated.

I think we by polysilicon in the front market, major.

And, of course, from time to time, we also contract some polysilicon for [shipping].

So, basically, as you know, that today the situations oversupply I think the costs of [FCF] modules continue to go down.

So that's why, talking about gross margin, we also have to connect those two prices.

If ASP of module prices continue to go down, maybe stick around $0.80 to even $0.75, then the poly also will go down.

As you can see, January the poly even go down to $20.

Today, it's come back to maybe around $23 to $25 per kilograms.

And, basically, we think the reasonable price maybe in between $23 to $26 per kilograms.

So, yes, I think if the scenario continued to go on, especially Germany, I think this period until end of June then the whole market will mirror the situation.

I think, as you know, that GCL-Poly, their costs are only $8 -- $16 -- whatever, [$16] cash per kilograms.

But OCI are a company, they're cost is higher.

But, overall, the polysilicon capacity I think is oversupply, so, me, I think I believe the poly price will go down maybe in Q4 this year, maybe even below $25 per kilograms.

So, just to clarify, you're buying poly in the mid 20s right now?

We buy poly between $20 to $28.

$20 to $28.

And can you maybe just highlight, real quick, if you don't mind, how the pricing strategies differ from GCL to the OCIs and Wackers of the world?

Is GCL a couple of bucks below that normally, $2 or $3?

Yes, GCL is [profit] because GCL signed a long-term contract with some Chinese producer, I think Trina and other, so they were not only selling -- the major are selling [weaver], they're not selling poly.

So, basically, we buy the poly mostly from OCI and Wacker so basically, yes, I think Wacker and OCI maybe the poly price is $0.50 or $1 higher than GCL.

Okay, excellent.

Thank you, guys, so much.

Vishal Shah, Deutsche Bank.

Scott Reynolds for Vishal Shah.

I was wondering how much polysilicon do you currently have in inventory?

And what would your best guess be for the average price currently for that?

Okay, today, by the end of December, we have raw materials total I think is $39 million, out of that $174 million [even poly].

And raw materials, we have around -- for the materials is around I think one is $34 kilograms; that's around [134-tenths].

The cost is, I think, $0.37, right -- $37.

And for that, what would you expect that to be for megawatts, the 134?

If you divide it by 5.5 grams, so it's around 200 megawatt.

Okay.

So it would be fair to say that for next quarter shipments this should be fairly close to the cost?

Yes.

Unless there is an inventory provision.

Okay.

Because if you look Q4, silicon cost was $0.27.

We almost -- it's close to the market price.

So the inventory write-down for Q4 was only $0.5 million, so we're already close to the market.

Okay.

And now, on the last earnings call you talked about market outlook of 19 gigawatts to 20 gigawatts, unless I missed something you talked about a market outlook of 28 gigawatts for today, so what's the difference in your expectations?

I think, basically, maybe Arturo can add on that, we think, especially China, I think if you look at China in our five plan, China expansion by 2015, year '15, the solar capacity, so this year China increased to 5 gigawatts.

We believe even it will be higher than 5 gigawatts.

So then also rest of other countries, especially Australia, other emerging markets, Australia, India, Africa, so basically all these -- while now today we give a figure around 24 gigawatts and 28 gigawatts it comes from [Fortune] and, I think, institution, their estimates.

Yes, we are following very closely around six to eight different sources of information from analysts, that they recognize that the market in 2012 will be around 24 gigawatts to 28 gigawatts.

And mainly there is a switch, is a tendency to increase emerging countries outside Europe but still Germany, Italy, France, Eastern Europe belongs to the top tiers; including India, Japan and USA, of course.

Okay.

And along those lines, we've seen obviously OpEx has gone up fairly significantly over the past few quarters with your geographic expansion, so can you give us an idea of what you expect for your 2012 outlook with regards to OpEx?

Yes, I think for the OpEx, for Q4, basically, OpEx in Q4 in total is $42 million.

If we take that -- the [AR premium] around $6 million, and also goodwill impairment (inaudible), so basically $29 million regular the operating expenses.

And accountable revenue is 15%, and this mainly due to the revenue actually go down, revenue go down so the percentage go up.

So this is a good question.

For 2012, and what's the FX percentage, we think maybe it will be around 10% to 12% of our total revenue will be the operating expenses.

Hopefully, the products we're developing, selling with high gross margins will help us to improve the percentage.

All right, thank you.

(Operator Instructions).

[Senso Pan], Morgan Stanley.

I just have two questions.

One is regarding the financial position of JinkoSolar.

Do you guys have any plans of doing some [final] raising, or trying to pay down the converts out there?

And my second question is since we are not going to increase capacity in 2012, do you guys have any plans to improve the efficiency of the module or generally just talk about the technology roadmap for 2012?

Thank you.

Okay, for your first question about the financial position, I think, basically, we are in good financial position, as you can see that, and we still have banking facilities available today.

As of December 31, we have total banking loans, and the credit facility available is around $1.5 billion.

We've only used $552 million; still have like $1 billion available.

And we are going to continue to optimize -- I think to better structure our debt so maybe in the second quarter we're going to issue local long-term bonds to replace the short-term bonds.

So, basically, I think for the financial business, we think is in a good position.

Secondly is we are not going to expansion our capacity under wafer cell module, so should not have material CapEx continue to expense.

So that's for your first question.

Second question is about the technology and the efficiency on the cell.

We also spend time and people, R&D people, working on all kinds of technology right now on the cell efficiency improvements.

The only thing is, right now, if we want to commercial production the cell we have two categorizations of cost effective.

If the cost effective is enough to support us to expansion those capacity on the high efficiency, just like other people say, I'm not here -- sure you hear yesterday Canadian Solar and the ESPL, we're not sure the cost how much is it going to increase.

So they said their cost is go down to even $0.65 to $0.60 overall per watt; we cannot support that, basically.

So, basically, we think any high efficiency sales develop, it's -- we put into commercial production, we have to calculation per watt how much cost we're going to add; how much we can sell.

So we will -- very importantly to put commercial production.

Okay, great.

Thank you so much.

There are no further questions at this time.

I'll now turn the call back to Mr.

Sebastian Liu.

Thank you, operator.

Again, thank you for joining us today.

If you have any further questions, please do not hesitate to contact us.

You will find all the contact details on our IR website at www.jinkosolar.com.

Thank you, again.

Thank you.

This concludes today's conference call.

You may now disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.