晶科能源 (JKS) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the JinkoSolar Holdings first quarter of 2012 earnings conference call.

At this time, all participants are in a listen-only mode.

There will be a presentation followed by a question and answer session.

(Operator Instructions).

I must advise you that this conference is being recorded today, Wednesday, June 20, 2012.

I would now like to hand the conference over to your host today, Mr. Sebastian Liu, Director of Investor Relations of JinkoSolar.

Thank you, sir.

You may begin.

Thank you, operator.

Thank you, everyone, for joining us today for JinkoSolar's first quarter 2012 earnings conference call.

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

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

On the call today from JinkoSolar are Mr. Kangping Chen, Chief Executive Officer; Mr. Arturo Herrero, Chief Marketing Officer; and Mr. Longgen Zhang, Chief Financial Officer.

Mr. Chen will discuss JinkoSolar's business operations and Company's highlights, followed by Mr. Herrero, who will talk about the Company's business strategies; and then, Mr. Zhang 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 JinkoSolar's public filings with the Securities and Exchange Commission, including its annual report on Form 20-F for the fiscal year ended December 31, 2011, 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 the applicable law.

Please be noted that to supplement these consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles, or GAAP, JinkoSolar uses certain non-GAAP financial measures.

The Company believes that the use of the non-GAAP information is useful to analysts and investors to evaluate Jinko's current and future performances based on the more meaningful comparison of the 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 the non-GAAP numbers is voluntary and should be reviewed together with GAAP results.

And now I will deliver Mr. Chen's remarks in English.

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

Despite the difficult and Volatile market conditions that continue to cause downward pricing pressure and bleak outlook in the solar industry's traditional markets of Western Europe, we managed to achieve total shipments of 249 megawatts of solar products during the first quarter of 2012, representing a sequential increase of 9.7% from 227 megawatts in the fourth quarter of 2011, of which 157.1 megawatts were solar modules.

Total revenues were up $168.3 million or RMB1.1 billion.

We slightly missed guidance on module shipments, as we adopted a conservative approach to the pending countervailing and anti-dumping decision in the US, as well as our decision to decrease inventory at the beginning of the first quarter, resulting in a shortage of products for the European market where demand rebounded better than we expected.

We were able to maintain positive gross margin despite average selling prices that were slightly lower than expected, and the impact from the anti-dumping and countervailing duties.

The first quarter is typically a low season, and we anticipate that on going forward, the fall in ASPs will slow down and begin to stabilize.

In-house gross margin improved to 10.8% in the first quarter of 2012, compared with 5.8% in the fourth quarter of 2011.

In line with our overall strategy, we have continued to diversify our global presence and expand into new emerging markets, thus reducing our exposure to the traditional Western European solar market.

Traditionally, roughly 15% of the revenues were derived from Germany and Italy, but in the first quarter of 2012, these two countries accounted for only less than 14%.

This geographic diversification to new emerging markets provides us with the flexibility to adapt to the possibility of the reduced amounts from Western Europe.

And more importantly, it also allows us to invest in local business development and nurture long-term relationships, especially in regions where we see great growth potential in the second half of 2012; China, Eastern Europe, India, Japan and South Africa.

Meanwhile, I'm very pleased to announce that we're on the verge of signing an 81 megawatt contract to supply the largest solar project on the African Continent in South Africa.

Arturo will go into more detail on this later.

We launched our WING series solar modules in May.

We believe that our new modules offer a sleeker and more modern aesthetic, [which wanted] commerce instead of [traditional pointed] ones, and with clamps rather than bolts, making the installation process simpler and more convenient.

These modules are also less heavy to fit in requirements from the customer for rooftop installations in residential and commercial segments.

Further, we encapsulated the newly designed junction box in the module itself, thereby protecting the key components from temperature variance, and other environmental improvements.

Besides improving the physical structure, the WING series also represents an increase in efficiency.

The power output of our 60 high-efficiency cell solar modules can reach up to 260 watts.

All modules in the series received IEC 5400 Pa mechanical load test certificate.

We remain committed to providing our customers with the most competitive and cost efficient products, and the way is [set] to market our new WING modules among our customers to further drive our module sales.

We have continued project development of our [own] solar power plants in China, and we expect to record revenues in the second half of the year.

With our vast experience in developing, planning and construction, we're aiding the development of this huge market alongside the state-owned utility companies to expand our business chain and mitigate the volatility of our core manufacturing business.

We believe that this strategy is sustainable, and through this process, we'll be able to build our reputation in project development and develop strong relationships for future projects in China.

Turning briefly to the US market where it is still preliminary decision that yet awaits a final ruling, we expect that JinkoSolar will be subject to an anti-dumping tariff of [31.18]%.

We believe that this duty is both unfair and unfounded, and do not reflect the reality of the highly competitive global solar industry.

However, we remain optimistic, and we'll continue to serve our growing US business.

Further, we believe that the impact of these tariffs on our overall business is limited, as our US business currently accounts for a fairly small portion of our overall sales.

In terms of cost, we're successfully managing to control our blended silicon cost under $[30] per kilo, or $0.16 per watt, and reduced non-silicon costs to [$458] per watt in the first quarter of 2012 from [$0.64] in the first quarter of 2011.

This was primarily due to both the increase of [efficiency] cells, and the decline in the price of the consumable materials, such as (inaudible) and EDA.

We expect our non-silicon cost per watt to further decline to $0.55 in the second quarter, and target around $0.50 towards the end of the year.

Looking forward, I believe that by leveraging our industry-leading cost structure, strong balance sheet, wide-reaching brand name and global crisis, we will be able to take full advantage of our strengths and success.

For the second quarter of 2012, JinkoSolar expects total solar module shipments to be approximately 200 megawatts to 240 megawatts.

We reaffirm our full-year 2012 guidance.

For total solar module shipments, we expect to be in the region of 800 megawatts to 1,000 megawatts; and total project developments figure is expected to be in the range of 100 megawatts to 150 megawatts.

The Company expects that its in-house annual silicon ingots, silicon wafers, solar cells and solar module production capacities will remain at about 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 first quarter in further detail, as well as our strategy and market outlook for the second quarter of 2012 and the second half in the key countries and regions.

Thank you.

Now, please, Arturo.

Thank you, Sebastian.

We believe we have seen the worst, and see signs of global demand recovery at least for the quarter Q2.

Q1 2012 was one of the most challenging quarters in our history.

In addition to the usual seasonality, the worsening financial and economic crisis in Europe caused banks to reduce lending, and even cancel loans for several (technical difficulty), and triggered additional reductions in feeding tariff in most important PV markets.

Finally, substantial module oversupply in the market at last continued to depress ASPs, especially during the first part of the quarter.

We see some improvement in demand across Europe, and specifically in South Europe, we have seen funding flowing once more to PV projects in these regions.

Additionally, our bankability in Europe is strong again.

So is the confidence and trust in our modules from our customers and investors in projects.

We have established the highest international standards of health, safety and environment, and we have recovered our reputation image as a green company.

Right now, more than 30 banks have been financing PV systems with our modules, and we are still in discussions with more than 60 banks in 12 countries.

Despite such adverse conditions in Q1, we managed to reach 249 megawatt shipments, $[168] million revenues, and an increased brand recognition versus last year, 2011.

Our ASPs in solar modules declined faster than expected during Q1 2011, especially to the market unfavorable conditions, weaker euro currency, and lower sales in the USA.

From now on, we expect to see stable ASPs until the reduction of feeding tariff in certain important markets such as Germany and Italy.

According to the IMS Research Institute, we are now in the top six worldwide crystalline module producers in terms of shipment volumes, up from number 11 only one year ago.

We have successfully managed to reach in 2011 a very decent 3% market share for the major 15 PV countries.

Expecting PV market recovery in the coming quarters, and our good expansions and diversification strategy, we continued to strengthen our global sales and marketing teams, while controlling cost very closely.

We continued to push our geographic diversification strategy, entering into new markets, expanding our brand recognition and attracting new customers.

During Q1 2012, we sold modules to over 30 customers in over 20 different countries.

Shipments to Germany and Italy were down to around 40% to 45% compared to over 70% in the first half of 2011.

We managed to accelerate our market presence in Eastern Europe.

Both Bulgaria and Ukraine, establishing our presence, our brand name and with (inaudible) brands that will enable us to develop several emerging PV markets in Eastern Europe, such as Romania and Hungary.

Eastern Europe accounted for over 20% of our shipments in Q1.

Regarding Germany, it still remains our largest market without around 35% of sales.

We've strengthened our sales force by hiring several local sales managers, and we brought on board [Ulrich Bremer] from First Solar, our new Director for Sales in Germany.

While we were number one in the sales in Italy with over 250 megawatts last year, 2011, demand in Q1 this year was negatively impacted by higher credit rates, leading to a decrease in private equity, a lack of financing and support from banks, and delays in project financing for PV installations.

Back in 2011, we anticipated the market shift from larger scale projects to mainly commercial and residential installations, and adjusted our focus to wholesalers and EPC constructors dedicated to roof installations.

We have started to see the benefits of this shift in Q2, which is much stronger than in Q1.

With Spain, we have continued to increase our sales to customers focused both on domestic distribution, as well as customers involved outside the country.

We believe this is partly due to increasing brand recognition after our sponsorship of Valencia Football Club.

In Q1, we have been also active in other European markets such as Greece, UK and Portugal, and we have entered into new markets such as Luxembourg and Switzerland.

Regarding the USA, while we were conservative during Q1, we continue to view the market as important for our future, and we expect shipments to increase going forward.

We are actively reviewing our options to overcome the tariffs of the anti-dumping issue, and we will make relevant announcements when appropriate.

In China, we have established our sales and project development team in our Beijing office.

The team is entering into supply agreements to capture the booming demand we are enjoying in our local market.

Thanks to both the feeding tariff for larger scale projects and the Golden Sun program for roofs, we are seeing a great demand coming mainly in the second half of the year, and we expect the total market to reach around 5 gigawatts in China.

The Chinese Government is committed to reaching 10 gigawatts of installed capacity by 2015, and 50 gigawatts by 2020.

In South Africa, we managed to gain the trust of a number of European developers, local partners and banks, and we were selected for the largest project in the first round of the tender for [PV Solar Deluxe Steel project].

This project will be the largest in South Africa, and also in the African Continent with a size of 81 megawatts, and shipments starting in Q4 this year.

We are also very confident we will be successful in the second and third rounds of the tenders.

Regarding the Rest of the World, we increased sales in Japan, Israel, India and Australia.

We expect our efforts in emerging PV markets to be successful in the coming quarters, especially in markets such as India, South Africa, Australia, Canada, and also countries in South America.

We continue to build strong partnerships with a network of distributors, PV developers and EPC contractors across the globe.

They view us as a trustful, long-term partner, flexible and responsive to market changes; excellent provider of service and high quality products; and committed to be both competitive and financially healthy.

In terms of marketing, as a young company with no strong consolidated brand outside China before, our primary goal over the past two years has been to broaden our brand recognition, particularly in the important markets in Europe, but also in the USA, Asia Pacific and African markets.

I believe we have made good progress, while conserving our budget and spending less than our major peers.

We [renewed] a very favorable contract for the next two years as the principal sponsor for the Valencia Football Club in Spain that finished the Spanish League Championship in third position behind Real Madrid and Barcelona, and will be playing in the European Champions Cup against all major European football clubs starting this coming August.

This will give us a great visibility throughout Europe.

Continuing on our strong performance at exhibitions and conferences in 2011, in Q1, we actively attended [PVX] in Tokyo, PV American in San Jose, USA, Ecobuild in London, Solarworld Africa in Johannesburg, and Solar (inaudible) in Shanghai.

In conclusion, and despite a difficult quarter, we have established the basis for a good 2012, and currently, we are competing in many countries, with Tier 1 players, and our branded models have been included in most of the big tenders for this year, 2012, and next year, 2013, with important well known companies.

With that, now I would like to turn the call over to Zhang to introduce our financial results and our guidance for the second quarter.

Thank you.

Thank you, Arturo.

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

As Mr. Chen mentioned earlier, total solar product shipments in the first quarter of 2012 were 249 megawatts.

Total revenues in the first quarter of 2012 were $168.3 million, a decrease of 11.5% sequentially, and a decrease of 50.5% year over year.

The sequential decrease was primarily due to a decrease in the Company's ASP, as well as a decrease in the sales volume of the Company's solar modules.

Gross margin was 0.7% in the first quarter of this year compared with negative 4.4% in the fourth quarter of last year, and 26.2% in the first quarter of 2011.

In-house gross margin relating to in-house silicon wafer solar sales and solar module production was 10.8% in the first quarter of 2012 compared with 5.8% in the fourth quarter of 2011, and 31% in the first quarter of 2011.

Gross margin and in-house gross margin improved from the fourth quarter of 2011 primarily due to reduced costs for our polysilicon and auxiliary materials, and improvement in our operating efficiency, which was partially offset by the declines in the ASPs of the Company's solar modules.

Gross margin and in-house gross margin decreased from the first quarter of 2011, primarily due to the declines in the ASPs of the Company's solar modules.

Loss from operations in the first quarter of 2012 was $48.6 million compared with loss from operations of $50.2 million in the fourth quarter of 2011, and income from operations of [$64] million in the first quarter of 2011.

Total operating expenses in the first quarter of 2012 were $49.7 million, an increase of 18.6% sequentially, and an increase of 123% year over year.

The sequential increase was primarily due to a provision for the advance to supply $20.6 million in the first quarter of 2012, which was partially offset by the impairment of goodwill of $7.3 million in the fourth quarter of last year.

Excluding non-cash charge for the provision for the advance to supply in the first quarter of 2012, and impairment of goodwill for the fourth quarter of last year, the operating benefits would stand at 17.3% of total revenues in the first quarter of 2012, a decrease from 18.2% in the fourth quarter of last year, and an increase from 6.6% in the first quarter of last year.

Operating margin in the first quarter of 2012 was a negative 29.0%, compared with negative 26.4% in the fourth quarter of 2011, and a positive 19.6% in the first quarter of last year.

Net interest expense in the first quarter of 2012 was $9.3 million, an increase of 10.8% from the fourth quarter of 2011, and 71.9% from the first quarter of this year.

The sequential increase in the net interest expenses was attributed to a decrease in interest income in the first quarter of this year.

We recorded foreign currency exchange gains of $4.6 million in the first quarter of 2012, primarily due to the gain of $4.7 million in foreign currency exchange, which was partially offset by a loss in change in fair value of forward contracts of $0.2 million, which was primarily attributable to appreciation of the euro against renminbi.

We recognized a loss of $2.9 million in change in fair value of convertible senior notes and capped core options.

The Company did not recognize any tax expenses in the first quarter of 2012, since the estimated annual effective tax rate for 2012 is zero.

The Company recognized a tax benefit of $2.9 million in the fourth quarter of 2011, and a tax expense of $8.1 million in the first quarter of last year.

Net loss in the first quarter of 2012 was $56.6 million compared with a net loss of $58.3 million in the fourth quarter of 2011, and a net income of $51.4 million in the first quarter of 2011.

This translates into basic and diluted loss per ADS of $2.55.

Non-GAAP net loss in the first quarter of 2012 was $52.5 million, compared with non-GAAP net loss of $58.9 million in the fourth quarter of last year, and a non-GAAP net income of $51.4 million in the first quarter of 2011.

This translates into a non-GAAP basic and diluted loss per ADS of $2.36.

As of March 31, 2012, the Company has $67.1 million in cash and cash equivalents and restricted cash.

Capital expenditure during the quarter was $15 million.

As of March 31, 2012, total short-term borrowings, including the current portion of long-term banking borrowings were $380.2 million compared with $349.6 million as of December 31, 2011.

Total long-term borrowings were $27.4 million as March 31, 2012, compared with $24.7 million as of December 31, 2011.

As of March 31, 2012, the Company's working capital [deficit] was $141.8 million compared with a deficit of $164.3 million as of December 31, 2011.

Now let me turn to our guidance.

For the second quarter of 2012, we expect total solar module shipments to be approximately 200 megawatts to 240 megawatts.

We expect the Company's in-house annual silicon ingots and wafers, solar cells and solar module production capacity are each expected to be approximately 1.2 gigawatts by the end of this year.

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

Operator.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

(Operator Instructions).

Philip Shen, Roth Capital Partners.

My first question is related to your shipments in Q1.

We noticed the spike in wafer shipment mix, and it looks like about one-third of your shipments were due to wafers versus a typical shipment mix of 15% to 20%.

What happened, and should we expect this greater mix of wafers going forward?

I think for the first quarter, we shipped 249 megawatts, of which the modules is 157 megawatts, and we still ship the wafers 79 megawatts and cells [12] megawatts.

The reason is I think even though we have the capacity on each segment, but the utilization for each segment is different.

And also, in some time you see the product mixture [mode] is different.

And I think for the follow-on quarters, we will make all the efforts to make a sequential balance.

So we will reduce selling the wafer and cells to close to more vertically integrated.

Okay.

And what kind of module ASPs did you experience in Q1?

And going forward, what do you expect to end the year on in terms of module ASPs?

I think for the ASPs, it's easier for you to calculation, and our silicon costs and (inaudible) costs added together, total is $0.74.

Our vertically integrated gross margin is [10.3%], so you can calculation.

I think it's easy to calculation the ASP.

And for the follow-on quarters, especially second quarter and third quarter, we think the second quarter to third quarter, the ASP may be around $0.70 to $0.75.

And for the fourth quarter, we think the price maybe will continue go down.

Let me ask one more, if I may.

Can you give us a sense for what you're seeing in terms of silicon pricing?

And how do you expect that to trend as we go through the year?

For the first quarter, I think our average -- [weekly] average silicon cost is $29 per kilogram.

And therefore, I see our silicon cost per watt is around $0.16; plus non-silicon cost is $0.58, together $0.74.

We expect the polysilicon price will continue go down from $29.

Right now currently, I think polysilicon price is around $21/$22 per kilogram, and we think this price will continue to stable, maybe even go further $1 to $2 down.

So that's why we expect maybe on the Q4, the poly price will be around $20, even $21, so the poly cost may be around $0.10 to even $0.12 per watt.

Great.

Thanks very much.

Satya Kumar, Credit Suisse.

Brandon Heiken speaking on behalf of Satya Kumar.

I was hoping you could clarify on the module shipment guidance of 800 megawatts to 1,000 megawatts for the year.

Does that include the modules for the projects of 100 megawatts to 150 megawatts for the year?

No, this is purely the modules -- I think only selling the modules.

Okay, so it's separate modules then for the projects.

Yes.

Okay, great.

And I was hoping you could clarify if you have any future plans to raise additional capital, for instance, renminbi-denominated bonds, as you did earlier this year.

Okay.

As you can see that we already raised I think [RMB300] million [short-term] bonds for the [retirements] in the Q1, and we right now are already working on another [RMB800] million in long-term bonds right now, and it's in the processing of the Government's approval.

And we expect that will be occurred in the third quarter.

But besides that, we think right now we still have [a renminbi], the credit line available.

That total is around -- by the end of Q1, we still have $860 million credit line available; the banking facility.

And how much of that -- that's how much is available?

Yes.

So to answer your question, if you look our balance sheets right now, our projects assets is sitting in the current assets, and we right now have 30 megawatts, and we still have a pipeline around [100 megawatts].

So we were -- certainly, the first [four years], 30 megawatts we can sell in the third quarter, so we were [running over].

So therefore, I think the projects' assets, we used our capital, used the banking loans.

But as far as we can control, I think the banking facility is available; it's cheaper cost for us.

Right.

Okay, thank you very much.

Vishal Shah, Deutsche Bank.

You mentioned $0.70 to $0.75 ASP.

Are you seeing that right now, or you expect that to be in third quarter?

Let me answer the question first, then maybe Arturo can give you more comments.

Right now in second quarter, the price is around we think $0.72 to $0.76.

In the third quarter, we believe it will go down to around $0.70 to $0.74.

In the fourth quarter, definitely we think it may be even below $0.70.

Arturo, can you give more comments on this question?

Mainly, for Q2, we have seen an instability on prices in the range of $0.73 to $0.76 for Q2, but Q3 will be quite uncertain depending on the major two markets, Italy and Germany.

If finally the reduction in the feeding tariff is postponed to September and October, then still we will see quite a strong Q3, and prices will be stable.

So I don't think we will see further reductions until probably Q4 when we will see the news announcement on the [caps] on the major market of Germany and also the Italian feeding tariff going down.

Then probably we will see another $0.05 reduction in the last quarter of the year.

Okay, that's very helpful.

Are these prices also applicable for some of the new markets like Africa and some of the non-European markets, or are you talking mostly about European [pricing]?

Well, mainly -- as you know, mainly still 50% or 60% I would say is coming from Europe, so the transactions in the European countries are very easy and very common.

So prices in Germany or in Italy, they spread very rapidly to countries in Eastern Europe, for example, that now we have quite interested demand.

So there is not so much -- so big differences between countries in Europe.

But going outside of Europe, as you are questioning, we are seeing still some differentiation and some upside on pricing in new emerging PV market.

So for example in South Africa, the prices of the contract we are entering into at the end of this year, the price is higher than in Europe.

So it gives a little bit of compensation and upside on pricing for the end of the year.

And other countries, like probably China, also India, still competitive, they're quite aggressive in pricing.

That's very helpful.

Now I understand that you don't have much visibility in Europe in the near term, but outside of Europe, some of these projects have longer lead times.

So can you maybe talk about the second half; how many megawatts of demand do you already have secured based on your guidance for the second half?

Well, mainly there are some countries that we have already been applying for different tenders, and we are quite positive we will get these contracts.

So in this regard, we have some visibility for certain amount of megawatts in Q3, but mainly also in Q4, countries like South Africa.

And then also in China.

we will see a big amount of demand coming from our local market in -- especially in Q3 and also in Q4.

So we are executing out of [megawatts]; in fact, making sure that we have enough availability in production to cover both European and China demand when it happens.

So we are quite confident that the year, and this is why we keep the guidance, the year will be quite positive in terms of shipments.

Would you say that 50% of your second half volumes will be from these new markets?

Well, 60% is still Europe, so I think it will keep the range probably between 60% -- 50% to 60% will be still Europe, and then around 40% will be new markets, including China, India, Australia and South Africa at the end of the year.

Okay.

And one last question, Zhang.

Bonds payable and accrued interest of $66 million in the first quarter, when do you have to make that payment?

The bonds payment, $66 million; you're talking about the convertible bonds or the domestic?

No, in your balance sheet, short-term liabilities have been, besides the $380 million of short-term borrowings, you also have --?

July.

It's in July of this year, third quarter.

We already have the money.

July.

And the money will come from --?

Temporary, we already scheduled with Agriculture Bank of China.

Okay.

So we should see an increase in your short-term borrowings as a result of that?

Yes, if at that time, our medium -- long term, the bonds $800 million, the Government still not approved, then we have to use the banking loans, yes.

Then as far as we got that bonds issued, then we can replace that, replace the banking loans.

Thank you very much.

Pranab Sarmah, Daiwa Capital Markets.

My first question is on your accounts receivable.

It has gone up quite a bit on first quarter.

Could you give some color like why it has gone even on the number of days and what type of measures you have taken so that bad debt provisions is not high?

Yes, our accounts receivable I think, compared with the end of this year, I think we are increased.

Yes, we are increased.

I think basically, we increase from the end of this year $254 million to -- by the March 31 [$296 million].

And our DSO is almost in a -- yes, around more than [130] days.

The major reason I think, as you can see that in our Q1 and also Q4, our major revenue come from Italy, and this is I think in Q1, the Italy [accounts] have fallen and the [financing], just like Arturo explained.

We think the situation is better now and they show a willingness to pay, especially from Italy's side.

Especially in the second -- in Q2, we see the accounts receivable recovery improve.

Then also we see the rest of other clients from Germany and from China, they still pay I think regular.

So basically, I think if you look at the whole solar companies right now, Trina may be the same as Jinko.

The sale majority coming from Italy is a lot; accounts for a lot of percentage in Q4 and this year Q1.

So therefore, both Trina and Jinko, the DSO in Q1 is a little longer compared with our competitors, but we think that will improve in Q2 and Q3.

And let me add just comments from Zhang that the situation has been mainly delayed on financing from banks.

It has been a struggle to get all this liquidity on board needed by the customers.

So it is a question of time that a lot of these customers are getting the financing, completing the systems and paying back to Jinko.

So most, I would say 90% or 80% of these contracts are very much under control, and it's a question of timing.

And probably there's 20% that they are coming from a couple of customers that are filing for insolvency for bankruptcy due to the financial economical crisis.

But I just want to add more comments.

I think from a cash flow point, we also in Q1, we lost actually what I call [DTO].

So basically, our operating cash in Q1 is positive $25 million.

Okay, got it.

And could you also give us some color on what will be your non-polysilicon processing cost by end of this year from $0.58 now?

We believe right now, I think our non-silicon cost is $0.58, of which the wafers are $0.15, and the cells are $0.16, and the module is $0.27.

So the Q1 non-silicon cost is $0.58.

We believe we can reach $0.50, and by the end of this year, we can continue to cut $0.02 from wafer and cut around $0.03 from the cell and $0.03 from the module, so basically, we will keep the non-silicon cost below $0.50.

That's our target.

Okay, got you.

Thank you very much.

Jesse Pichel, Jefferies & Co.

I'm just curious to know if you're -- in your strategy planning, are you contemplating that the EU may impose dumping duty on Chinese OEM?

And if this happens, as it did in the US, does Jinko have the liquidity to diversify manufacturing outside of China?

Jesse, thank you for your question.

This is Arturo again.

So I will reply to your question.

I guess right from Munich Intersolar exhibition, I think you should be there also, we were expecting the announcement from our friends from Solarworld about these filings for the anti-dumping thing.

It finally didn't happen.

And our guess, after talking to many of the best informed people in this industry, also from the association in Europe, is that they have a lot of difficulties to convince enough quantity or to get enough quantity of signatures and support for filing for anti-dumping.

We believe, and this is our research from part of my team, that there is a lot of interest for not going forward in this direction, mainly because in our industry, a lot of European companies are exporting to China, especially equipment or material manufacturers, and it will be quite a negative impact for all of them, and not only in Germany but in the rest of the European Union.

And I think a part of this industry in the solar market, there are a lot of sectors that will be affected for these kinds of protections.

So we don't believe it will happen.

In case something like that would happen, we will do as we are planning to do for the USA is to enter into any kind of option to overcome this anti-dumping by having any kind of agreement with productions not in China, so outside China.

So we are always finding some solutions.

As we look towards the exit of the year, how much your business will be OEM versus projects?

What do you mean?

OEM versus Jinko brand, this is what you mean?

Yes, sorry.

We have been reducing -- Jesse we have been reducing quarter by quarter our production of third party branding modules, so now, we are below 10%.

And we just removed that from my script because we thought it was not even need to mention as our strategy is to keep our Jinko brand investing in our marketing, as we have been showing and we have been seeing a lot of good results in terms of reputation after our issue last year in our facilities.

Is there still one large contract for the OEM modules in Germany?

Yes, that's correct.

165 megawatts is it or --?

I cannot confirm the number right now, Jesse.

All right, but that will be over 10% though I would think, no?

No, it's not.

This quarter it has been below 10%.

This quarter, I see.

Right, in Q1.

All right.

Thank you, everyone.

You're welcome.

(Operator Instructions).

Okay, thank you for joining us today, and if you have further questions, please do not hesitate to contact us.

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

Thank you again.

Ladies and gentlemen, that concludes our conference for today.

Thank you for your participation.

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.