Emeren Group Ltd (SOL) 2011 Q1 法說會逐字稿

Hello, ladies and gentlemen, and thank you for standing by for ReneSola Ltd.'s first quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference is being recorded. I would now like to turn the meeting over to your host for today's call, Mr. Justin Raybeck, ReneSola's Investor Relations consultant from Ogilvy Financial. Please proceed, Justin.

Hello, everyone, and welcome to ReneSola's first quarter 2011 earnings conference call. ReneSola's first quarter 2011 earnings results were released earlier today, and are available on the Company's website as well as our newswire services.

You can follow along with today's call by downloading a short presentation, which can also be found on the Company's website at www.renesola.com.

On the call today from ReneSola are Mr. Xianshou Li, Chief Executive Officer, and Ms. Julia Xu, Chief Financial Officer. Mr. Li will discuss ReneSola's business highlights and strategy, and Ms. Xu will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

Before we continue, 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, the Company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the Company's annual report, on form 20F, and other documents filed with the US Securities and Exchange Commission. ReneSola does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Before I turn the call over to Mr. Li, please be reminded that unless otherwise noted, all figures mentioned during this conference call are in US dollars.

It is now my pleasure to introduce Mr. Xianshou Li, CEO of ReneSola. Mr. Li will give his remarks in Mandarin, and Ms. Xu will translate into English. Please go ahead, Mr. Li.

(interpreted) Hello. Thank you for participating in today's 2011 first quarter earnings call for ReneSola. Please turn to page 4 on the presentation.

We began 2011 with positive results and several achievements, including record wafer shipments. This occurred despite slower demand from Europe resulting from solar policy shift. In the first quarter, we continued to execute on our cost-cutting strategies, reducing polysilicon costs as we ramped up production and controlling wafer cost against rising raw material prices.

Our cost reduction efforts helped contribute to healthy growth and operating margins, despite declining ASPs for both wafers and modules during the quarter. Though our market outlook is cautious, we are confident in our ability to continue reducing costs and gaining market share, as we strive to be a leading low-cost wafer producer.

Please turn to page 5. Let's have a quick snapshot of our shipments and financial progress. Total solar product shipments in the first quarter of 2011 were 330.4 megawatts, a decrease of 5.4% from 349.4 megawatts in the fourth quarter of 2010.

However, we continued to gain market share in terms of wafer shipments, which increased 9.4% to a record 243.5 megawatts, while module shipments decreased by 31.5% to 86.9 megawatts. This is a result of a slower demand in response to solar policy changes in Europe.

Lower solar module shipments, along with a drop in module ASP, contributed to lower revenues of $328.2 million for the first quarter of 2011 when compared to the fourth quarter of 2010. However, revenues increased by 58.9% year-over-year, due to relatively high wafer ASPs, which held strong during the quarter, and substantial growth in the Company's Module business.

In the first quarter of 2011, we produced approximately 750 metric tons of polysilicon, up from 610 metric tons in the fourth quarter of 2010. Our production cost was approximately $40 to $45 per kilogram, down significantly from $55 to $60 per kilogram in the previous quarter.

As we continue to reduce our costs toward our target of $35 per kilogram by the end of this year, we expect to be well protected against the high spot polysilicon prices, which we continued to see in the first quarter.

We are on track to produce 3,500 metric tons this year and expect to add an additional 5,000 metric tons of polysilicon production facilities in order to meet the growing demand of our Wafer business.

Our Wafer business continues to grow, with record total wafer shipment of 243.5 megawatts, up 9.4% from the fourth quarter. With slightly declining ASPs from $0.88 last quarter to $0.87 this quarter, we were still able to maintain a healthy gross margin for our Wafer business by controlling processing costs at $0.24 per watt. We are on schedule to achieve $0.18 per watt by the end of 2011, and expect to continue attracting clients with our cost-leading wafers.

As part of our cost reduction initiatives, we also expect to expand horizontally into the Wafer consumable business, in particular with the steel production commencing in the second half of this year.

Our Solar Module business slowed in the first quarter, as a result of weakened demand in Europe surrounding solar policy uncertainties, particularly those in Italy. We shipped 27.2 megawatts of modules to Italy, 33.7 megawatts of modules to Germany and 26 megawatts of modules to the rest of the world, totaling 86.9 megawatts in the first quarter.

While we hold a cautious outlook on demand for Europe, we still see promising potential in our downstream business, and plan to capitalize on our growing module service, to attract new customers and strengthen existing relationships.

(Spoken in Chinese).

Thank you, Mr. Li. If you turn to page 10 to 13, let's take a look at our financial highlights.

We delivered good financial results in the first quarter, exceeding shipment guidance and achieving both revenues and gross margin guidance within a soft macro environment. Despite declines in ASPs and increases in raw material prices, our vigorous cost control, prudent polysilicon purchasing and balance sheet activities, position us well for growth in the coming quarters.

Now, I'd like to run through the details of our financial results. Net revenues for the first quarter of 2011 were $328.2 million, in line with our guidance, and a sequential decrease of 15.1% from $386.4 million. The sequential decrease in revenues was driven by a decline in ASPs of solar wafers and modules, and a slower market demand, as a result of the solar policy changes in Europe.

Gross profit margin for the first quarter of 2011 was 30.7%, in line with our guidance and an excellent result against a challenging operating environment. It was down slightly from a gross margin of 30.9% in the fourth quarter of 2010, primarily due to the decline in module ASPs and increases in raw material prices.

Operating income for the first quarter 2011 was $75.6 million, compared to operating income of $85.9 million in the fourth quarter of 2010.

Total operating expenses for the first quarter were $25 million, a decrease of 25.1%, from $33.4 million in the fourth quarter 2010. These decreases were primarily due to a drop in Other expenses, as a result of a one-off sale of recyclable polysilicon in the fourth quarter.

Operating expenses represent 7.6% of total revenues in the first quarter, a decrease from 8.6% in the fourth quarter last year.

Operating margin for the first quarter 2011 was 23%, representing a good 0.8 percentage point higher than 22.2%, sequentially.

We recognized a tax expense of $10.6 million for the first quarter, compared with a tax expense of $26.7 million in the fourth quarter.

Net income attributable to holders of ordinary shares for the first quarter of 2011 was $43.3 million, compared to net income of $61 million for the fourth quarter of 2010. This represents basic and diluted earnings per share of $0.25 cents and $0.24, respectively, and basic and diluted earnings per ADS of $0.50 and $0.49, respectively.

On the balance sheet as of March 31, 2011, our overall debt was $522.8 million, excluding the $200 million convertible notes offered in the first and second quarter. Short-term borrowings increased slightly from $400.8 million in the fourth quarter to $404 million in the first quarter.

At the end of first quarter, short-term borrowings consisted of $141.7 million in trade finance, $182.6 million in short-term borrowings and US$79.7 million as the short-term portion of the long-term debt.

Our net cash and cash equivalent position was $388.6 million and total cash, including restrictive cash, was $435.9 million at the end of the first quarter, compared to a net cash and cash equivalent position of $290.7 million, and total cash, including restrictive cash, of $324.3 million at the end of last year.

In March 2011, we successfully offered $175 million of convertible senior notes, due 2018, at an initial conversion rate of approximately $10.55 per ADS. In April, we exercised a $25 million over-allotment option. In addition to this offering, we also entered into call spread, in which we effectively increased our conversion price to $15.07 per share.

Our capital expenditures for the first quarter of 2011was $31.9 million. We are currently budgeting $350 million for the year to expand our wafer capacity to 1.9 gigawatts, and module capacity to 600 megawatts, and to expand the polysilicon production to 8,500 metric tons.

Now, let's turn to our guidance, which can be found on page 20. For the second quarter, we expect revenues to be in the range of $280 million to $300 million and shipments to be in the range of 300 megawatts (sic - see slide 20) to 350 megawatts, with gross profit margin to be in the range of 25% to 27%.

At this time, we are happy to take your questions. Operator, please?

(Operator Instructions). Kelly Dougherty, Macquarie.

We didn't hear much mention of your full-year expectations, so just wondering if anything has changed there, or if you're still looking for the 1.6 gigawatts to 1.7 gigawatts this year, with a -- or maybe -- and any kind of change between the wafer and module mix.

(interpreted) No. The answer to your question, Kelly is that we do not change our full-year forecast. We maintain our full-year shipment of 1.6 gigawatts to 1.7 gigawatts. Although in the first quarter, we have witnessed a slower demand, but traditionally, Q1 is a seasonally weak season, and coupled with Italian's weak demand from Italy market.

But we do expect, as the market stabilizes, we should be able to maintain our guidance. Also, in particular, I'd like to stress that the 1.6 gigawatts to 1.7 gigawatts shipment guidance that we gave, was already factoring in the softer market demands we are seeing currently.

Okay, so are you implying then that this second quarter is not -- you expected the level of shipments in the second quarter, or you think you can just make up for any slowness in the second quarter in the second half of the year?

(interpreted) In terms of our Wafer business, the reason why we will have an increase in the second half versus the first half, in terms of shipment, is because, as you know, we've added the 600 megawatts of wafer capacities, and all of that capacity will contribute to shipments in the second half of this year. Therefore we will have a substantial increase.

In terms of Module, we obviously, as in the first quarter, we are cautious, so we expect second quarter module shipments to be in line with the first quarter module shipments.

Great, thanks. And then it seems that you certainly had some upside for wafer ASPs relative to previous expectations. Are you still thinking about $0.70 for the fourth quarter? And if that's the case, how do we see pricing change? Do you think it's more gradual than the move we saw down in cell and module pricing, or do you think we've hit an inflection point where wafer costs don't work for many cell producers right now, so there has to be a more significant step function adjustment?

(interpreted) Starting the second half of April, we have witnessed pricing pressure on the wafers, but we do believe that because the movement along the supply chain, in terms of pricing declines, are going to be gradual. So we do expect to have gradual pricing declines quarter-over-quarter.

And you're still thinking about $0.70, what was written into the contracts for the fourth quarter, is that a good end point?

(interpreted) Yes, we do believe that.

Great thanks, I'll jump back in the queue.

Wayne Chang, representing BMC.

Just touching on pricing again, could you give us a little bit more clarity around how pound pricing is trading overall, and perhaps just give us a little bit more insight into the other adjacent markets that you may see picking up or absorbing some of that inventory, in the event there is ongoing European weakness in demand.

I'm sorry I didn't quite get the first part of your question. You were asking pricing on which product?

On the module side.

Oh, so you're referring to pricing on the module side yes?

Correct.

(interpreted) The module prices continue to see downward pricing pressure, and the lowest price now we see is about EUR105.

Got it, and any indications that that's starting to stabilize into that April timeframe, or do you think it's going to still be fairly linear, in terms of that ongoing weakness?

(interpreted) We believe there is still going to be downward pricing pressure.

Okay great, thanks guys.

Sanjay Shrestha, representing Lazard Capital.

I wanted to follow up on that $0.70 per watt expectation by the end of 2011. So the reason you are still so comfortable with that number, what's your embedded assumption for the full-year demand, and the clearing price of the module for the fourth quarter, 2011, that you guys are confident that we can stay at that level by the end of the year?

(interpreted) There is a possibility that Q4 module prices could potentially decrease to about $1.00, $1.10 to $1.20.

$1.10 to $1.20, okay, but even in that price, you guys still feel comfortable that you can maintain your $0.70 wafer pricing?

(interpreted) Yes, we do believe so. That is because there has been substantially larger capacities downstream, versus the -- as compared to the wafer segment of the supply chain.

Okay, got it. So then is it fair to say that the mix of the customer that you guys have are the players that are operating in strictly one segment of the value chain? Maybe it's the cell manufacturers, or maybe cell and partially module manufacturers, right? So it's basically that's why you are so confident that they'll pay up for it, even though their margins will actually come under a lot of pressure in the pricing environment at $1.20?

(interpreted) Yes, you are right. Over the last few quarters, we have witnessed that our wafers have always been selling at a slight premium to the average product, and that's primarily due to our quality and our efficiencies. And also the fact that we have many long-term contracts. So we are very confident of our Wafer business.

Okay, great. One last question from me then guys. So with GCL and LDK also adding a tremendous amount of capacity, and that capacity hitting the market really in the second half of the year, have you seen any changes or any negotiation with your existing customer? Or can you talk about the competitive landscape a little bit, and see if that has any implication to your further expansion plans, or the way you guys are thinking about your business, into 2012?

(interpreted) In general I do believe the over-capacity situation will probably exist along all segments, in all segments along the supply chain.

From our perspective, in the short term at least, we still actually buy polysilicon from the market, so as the over-capacity situation worsens, the polysilicon prices will also decrease. So that will give us also a little bit of flexibility in buying low cost -- I mean lower priced polysilicon in order to maintain our profit margins for the wafers. Not to mention that our quality and our efficiency are still superior to our competitors.

And secondly, we also have a significant portion of business that is generated from Tolling business. And that business will give us stable margin profiles.

And lastly also, we do have a module platform which can actually take up some sales of the Wafer business.

Okay, that's very helpful, thank you so much guys, and congratulations on a successful wrap-up of poly plant.

Sam Dubinsky representing Wells Fargo.

Just a couple of quick questions. What were your blended average poly costs for 1Q, and how should we think about them by year end, as your internal poly plant ramps?

(interpreted) We have a Q1 blend of poly cost is around approximately $60. We do expect Q4 to move down to about $50, although that is a moving target, because it's very difficult to forecast where polysilicon prices are going to be by fourth quarter.

What was your internal poly production cost in Q1?

It was between $40 to $45.

And then if you look at your customer base, where are you seeing the greatest pockets of weakness for your wafers? Is it cell manufacturers or is it panel manufacturers?

Sorry, I didn't quite get your question, sorry Sam.

Your wafer customer base, obviously everyone is seeing some pockets of weakness. If you look at the market, is it to your panel customers that you're seeing weakness or is it to your -- you're seeing greater weakness in cell manufacturers?

You mean weakness in terms of their own profitability?

In terms of when you see shipment or end demand, is there any customer of yours that is struggling a bit more than others?

All right, I see what you mean, okay.

So cell manufacturers, have you seen production get cut off for them, or are they still ordering and running their factories fully utilized, or do you see any pare back at panel customers?

(interpreted) We believe the cell only companies are probably experiencing a little bit more difficulties.

Okay, and my last question is, if possible for your panel business, is there any way you can quantify how much inventory is out there, maybe on a month's basis? At what point should we see this business start to re-accelerate?

(interpreted) That's just our own estimation, perhaps in the first quarter, the industry still manufactured about 3 to 4 gigawatts of panels. And it's difficult to estimate how much there are inventories in the channels, but probably, definitely, probably we estimate it as more than 2 gigawatts at least.

As far as your question, when the Module business will stabilize and start to increase demand again, I think that probably has to wait until when the pricing reach a more stabilized level.

And do you have to sell your panel at discount in the market, because you're more of a new brand?

(interpreted) When we look at our Q1, I do believe that our pricing are actually probably above average. And a couple of reasons for that, maybe perhaps is because we are not selling at a massive amount, we have a little bit more flexibility and a little bit more choosy in terms of our customers.

And it's actually not that difficult for us to really increase the module shipments if we are willing to extend our payment terms. But we are very cautious in terms of cash flow, so we are not willing to sacrifice sales at expense of extending our payment credit terms.

Thank you. And last one, where are cell ASPs today? And then I'm done. Thank you very much.

(interpreted) Around $1.05 per watt.

Thank you.

[Graham] Black, Barclays Capital.

A couple of quick housekeeping questions. On OEM shipments for wafers and modules, did you disclose those for the quarter, and if not, could you?

There's no module OEMs. For the wafers, it's probably around 60 to 70 megawatts.

And do you guys have any idea as to what that might be in Q2 or the rest of the year?

Slightly more than Q2.

Okay, great. And then a quick question on your non-silicon costs. I noticed that you still have that $0.18 target for the end of the year, but it looks like non-silicon costs this quarter stayed the same.

Was that as an impact of silver, or is there other things going on, and what gives you confidence that you can get down to $0.18 by the end of the year?

(interpreted) A couple of factors that give us confidence to maintain our $0.18 processing costs until the end of this year. As you all know, in Q4 and Q1 not only polysilicon prices have witnessed increases, but also other raw materials, consumables have also seen price increases. So we are able to maintain our processing costs against a backdrop of raw material price increases.

So from an efficiencies perspective we actually have reduced our processing costs if you're holding all raw material pricing constant. Therefore in the second quarter and third quarter, with prices dropping along the supply chain, we are confident that consumable prices will also reduce. That will lead to lower processing costs.

And secondly, as I also mentioned earlier, we have ventured into the steel wire productions, and we do expect to see that bearing fruits in Q3 of this year. And we expect that to reduce our processing costs by $0.02 to $0.03 at least.

Great. And then was there any silver impact?

Silver is only in the cell segment, and our cell production is very small.

Okay. And how many third party cells did you purchase during the quarter?

Very little; less than 10 megawatts, 10 to 15 megawatts.

Okay. And then finally, one last question. When you talk to your customers, especially the ones that are either in Italy, or shipping into Italy, what do they say they need to happen out of this political uncertainty?

It looks like we should get a resolution here shortly. And what are most of your customers waiting for in terms of Italian policy? Are they saying, once something gets done we'll start installing again, or what do they feel about the Italian political uncertainty?

(interpreted) It is very difficult to say. As mentioned we are primarily a wafer producer rather than a module producer. It's very difficult to gauge into what end markets will do, especially surrounding the policy uncertainties.

We do know that the installers and distributors in Europe are very cautious; they are cautious against decreasing -- price declines, and they are also very cautious against the fact that government policies are still unclear.

I think it doesn't need to have any specifics, but it needs to have clarity. One way or another, the market can stabilize if there is clarity. The worst is when you have a lot of uncertainties, so I think clarity is what is going to kick off the market.

Great, thanks.

Ahmar Zaman, Piper Jaffray.

This is Sean for Ahmar. Just wondering, you gave us some idea of your Tolling shipments. Could you talk a little bit about your ASP for 1Q and where you see that going for the rest of the year?

In terms of the Tolling shipments, we normally do not disclose our Tolling ASPs for customer sensitivity. But Tolling prices are fairly stable.

Okay, thank you. And as far as -- we talk a little bit about a wafer price going to $0.70 by the end of the year. In 2Q -- have you guys seen that price falling off in 2Q as well, and if so can you tell us by what degree?

(interpreted) The wafer prices are actually, held up pretty nicely. In April we still see wafer prices around $0.83 or so, but we do expect the wafer prices to come down slightly, so we expect it to be around $0.80.

Great. And can you give me the same commentary from what you're seeing for modules as well in 2Q?

(interpreted) We do not want to predict what the prices are going to be, but I can tell you the current price is around EUR1.05 to EUR1.10.

Great. And then also I wanted to get an update, if you guys could disclose your module processing costs, and even what your processing level is for cells as well.

Cells is around $0.17 to $0.18; modules is about $0.30 to $0.31.

Great, that's it from me.

Mark Bachman, Auriga.

I need some clarification here. In response to Sanjay's question about ASPs in Q4 of 2011, you mentioned that pricing was going to reach $1.10 per watt, and again that's $1.10. Did you get confused here with euro and dollar pricing, and should have been quoting euros there instead of dollars?

No, I did not.

So you truly believe that you're going to see module pricing at $1.10 by the end of this year.

(interpreted) We have always been conservative in terms of pricing. But as we have also mentioned, the Module business now is not our core business, but we have to be conservative in building our assumptions. The downstream capacities are pretty massive, so it is not unlikely module prices can fall very substantially from the current levels.

So Julia, you may have a very competitive cost structure here across your whole business, but when you look at the industry, do you really believe the pricing will go this low and the industry is going to survive, based upon this outlook that you give?

Your competitors can't even produce at $1.10 per watt right now. Why would you suggest that the module price then would reach $1.10 by Q4?

And then let me just follow up with this. If you truly believed in this -- do you believe in price elasticity here? Why wouldn't you be raising guidance at this point on shipments if you really believed that the module prices are going to go this low?

I'll answer your second question first. We are at full capacity so we cannot raise any more shipments. So that's to your second question.

But I will refer the first question to Mr. Li.

(interpreted) It is not a rosy picture Mark. The reason why we are saying it is not because people cannot survive, or whether or not they can make a profit off the current cost structure. It is because there is really massive capacity that's out there. So when you have a fairly severe over-capacity situation, it is very difficult to pinpoint pricing just based on a cost structure.

Julia, I guess our -- go ahead, I'll let Dr. Li finish.

(interpreted) Well, just because -- I am trying to answer your question in a sense of cost structure. Even wafer price is around $0.70. The cell and the module processing costs are going to be well below $0.50, so even at $1.20, companies are still going to make a slight profit, and this is not that bad of an outcome against a very large over-capacity situation.

I would just say I would argue with you there. You can quote all the capacity numbers you want, but it's not cost effective capacity out there. I would say that I find these comments here quite reckless, and I just hope you didn't kill the solar market overall today. Thank you.

[Adam Whitman, Luminus].

I was wondering if you could give a bit more color around the Q2 guidance. And how many modules do you expect to ship in Q2?

We expect to ship similar module shipments as Q1, so around 80 megawatts.

Just trying to back in then to the gross margin guidance. And using your numbers, it seems like it's really challenging to get to the gross margin guidance. Can you walk me through it?

I'm not sure what you mean by it's difficult to get to --

If I assume EUR1.05 for a module and $0.80 for a wafer, are your processing costs going up somewhere, or is there something that I may be missing?

No, we will have similar poly costs, Q2 versus Q1, and the rest is fairly stable.

Okay, and then can you walk through the FX? Pretty big FX loss there. Trying to understand, it's well above what you've had historically. Is that due to the Module business or is there something else going on?

Yes; sure, Adam. Let me explain a little bit; that's a good question. The FX losses were primarily attributable to the euro/dollar hedges that we have done. Obviously, it is higher than previous quarters because the euro income was a result of the Module -- the expansion of the Module business.

As a result, we entered into a very plain vanilla forward contracts to lock in our euro/dollar exchange rate at an average rate of between -- I don't want to talk too much, but slightly below $1.40, and therefore as the euro rises to $1 -- above $1.40, we do set our mark-to-market losses for the forward hedges.

So shouldn't those losses be offset by foreign exchange gains?

No, because these are forward future contracts. Foreign exchange gains are only attributable to the real life cash when you come in with revenues.

Okay, so does that mean that maybe Q2 you were still recognizing gains from accounts receivable in Q4 and Q1, and those losses have already been taken?

No, actually, you shouldn't really look at it that way. If euro continues to rise, we'll continue to have FX losses in the subsequent quarters. Because we actually locked in euro/dollar exchange rate for future contracts at a lower rate than today's spot rate.

In other words, if I were to exchange my euro into dollar today, I could exchange at $1.48, but my contracts were locked at $1.40, so I will actually make less money because I've locked in at a lower euro rate.

Okay, thanks.

Amy Song, Goldman Sachs.

Just back to the ASVR [locks] by the end of this year. So maybe the other way to understand is if you think of your wafer price is going to stay firmly at a $0.70 where your customer is selling modules at $1.10, does that mean all your customers is going to be losing money still producing?

(interpreted) Several points to answer your question, okay? Firstly, we still fundamentally believe there's a lot more capacity downstream than the upstream, so relatively speaking, mid to upstream companies have a slightly better pricing capabilities than downstream customers, the downstream players.

Secondly, if we -- our wafer prices, wafer ASPs fall very significantly, we can actually opt to ship more modules than wafers. That's second point.

And then the third point is also, it's a very important one, is because we have a lot of long-term contracts which do have prices at $0.70, and these contracts do have penalties embedded in them.

Okay, thank you. Maybe can you give us some color on the inventory situation caused by your churn from module to cell, and also to wafer? How do you see that inventory has accumulated throughout the value chain?

As Mr. Li mentioned earlier, we could probably speak best on the wafer side of the business. We do not have any inventories. Wafer inventories, a lot of the supply chain is very low, but we are probably not the best to talk about cell and module inventory situation.

Okay, great. Thank you.

Kelly Dougherty, Macquarie.

Hi, thanks for following up. Not to belabor the point, but can you just help us think about --? I know you have contracts that have penalties, but at $0.70 wafers and $0.40 plus in processing costs, how are you comfortable with the demand number if --? It would just be at that point worth it for your customers to not order anything and to just shut down.

So is it you're being conservative with your module prices, just factoring in the worst case scenario? Or is that really something that you think will play out as we move throughout the year?

(interpreted) Well, perhaps let me just give you a current situation, so to help you understand a little bit about these pricing dynamics.

In the last week or so, we believe the lowest module prices was perhaps at around $1.35, and the range was about $1.35 to about $1.70. Okay? And if we look at our wafer prices, wafer prices is actually still higher than $0.80, and the cell price is $1.05. If the cell companies were to buy the wafers at $0.80, their margins are actually very thin at the moment. And if the module companies were to buy the cells at $1.05, they're probably not making money selling at $1.35.

So this is not a phenomena which cannot occur, and this is not something -- and as we pointed out earlier, we've just been very conservative, but this is something that we can actually currently witness.

Understood that that can happen for a short period of time, but you can't assume that people will just continue to produce full on at those kinds of economics. So I guess the question then becomes, are you worried about demand?

(interpreted) Basically, we are hopeful if the China and the US market can pick up substantially, without those two larger markets, it's very difficult to see how the European market alone can digest all the capacity that's out there.

When you say, of course, from economic perspective, it doesn't make sense for a lot of companies to operate if they are loss-making, but for a lot of the smaller companies, their costs, their operating cost is relatively very low, so even with 3% to 5% margins, very thin margins, they still want to operate, because their other overheads are very low.

So when you still have a lot of these small players in the industry, it is difficult to really make a case from obviously economic perspective that most companies will not operate at these economics.

Okay. Two more quick questions from me and then I'm done. One, I guess you're hopeful that China and the US pick up substantially. Can you give us some kind of magnitude of what that means substantially for both of them?

And then maybe what percentage of your customers do you think are those smaller companies, or at least those that are more cost advantaged and can produce at levels near where you think they may be selling?

(interpreted) In terms of the emerging markets for solar industry, we do believe for the China market, the next five years will be a -- will have significant milestones for the renewable energy sector, and also in particular for the solar industry. And we also see a lot of upcoming potential in India and the US.

But it's very difficult to pinpoint when the inflexion point is going to happen. I think it depends on government policies and depends on solar module prices. But once -- if it does take off, especially in China, I think it could many multiples of Germany or European market combined. It could be a very substantial market. But as I said, it's difficult to pinpoint when that inflection point is going to happen.

In terms of our customers, I think most of our customers are fairly large, sizeable customers, and most of them are probably listed companies and global solar brands.

Okay, thank you.

Ladies and gentlemen, this concludes the time we have for questions. I will now turn the call back over to ReneSola's Chief Financial Officer, Julia, for closing remarks.

Thank you, everyone. Overall, we performed relatively well in the first quarter, given the weak macro environment from the uncertainty surrounding European solar policies. Though our Module business was impacted by a slower market demand and declining ASPs, we were still able to deliver impressive growth and operating margins through reductions in costs and strength of our Wafer business.

Going forward, we will continue to capitalize on our cost reduction capabilities to attract customers and expand our business, to solidify our position as a leading cost efficient solar company.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact us.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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.