Yingli Green Energy Earnings Call Insights: Pricing Premiums, Gross Margins

On Wednesday, Yingli Green Energy Holding Company, Ltd. ADR (NYSE:YGE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.

Pricing Premiums

Susie Min – Deutsche Bank: This is (Susie Min) calling on behalf of Vishal Shah. What kind of pricing premiums are you seeing for your PANDA modules and how do you plan to continue selling these high efficiency products in the U.S. if you have to buy the cells from Taiwan that has different cost structures compared to yours?

Robert Petrina – Managing Director of Yingli Green Energy Americas: Yes, I’ll take the second part of the question. This is Robert. I mean this is unfortunately the side effects of the AD/CVD investigation that it will make things difficult in terms of new petition of PANDA due to the fact it’s all manufactured in China, but as I mentioned in my opening remarks, we are working on having an alternative solution for that as well. It’s just that the immediate result of those products can only come in under the current preliminary duties.

Zongwei (Bryan) Li – Director and CFO: For the PANDA price we can charge around at least a 10% price premium compared to the standard module products.

Gross Margins

Satya Kumar – Credit Suisse: I was wondering how we should think about stabilization in the gross margins. Obviously, shipments were up 44% in Q1 and up another 15%, but you are sort of guiding gross margins down in Q2. Could you talk a little bit about the moving parts between the ASP changes you expect for Q2, the silicon and non-silicon cost reductions in Q2?

Zongwei (Bryan) Li – Director and CFO: Yes, sure. Based on our current expectation and we expect for the non-polysilicon processing cost and we will be able to drive the costs down to somewhere close to $0.50 by the end of this year and then that will make the all-in costs for model production to somewhere close or slightly above $0.60 per watt. So considering the pricing – the pricing potential at the end of this year so we’ll be expecting the gross margin will exit this year should be spending above 10% to 15%.

Satya Kumar – Credit Suisse: So for Q2 could you give any color on how much change you expect in pricing.

Zongwei (Bryan) Li – Director and CFO: Yes. We currently see close to 15% decline on the ASP from the first quarter to second quarter, whilst we also see slightly above 15% cost reduction we can make from the first quarter to second quarter.

Satya Kumar – Credit Suisse: China you mentioned would be 30% of your shipment growth. It seems like that’s unchanged from your previous outlook, is that correct? And what type of linearity and pricing do you expect from the China market? Thanks.

Miao Liansheng – Chairman and CEO: The Chinese market and it has slight changed of the year compared to the last year and we think that it might be – the revenue from Chinese market might be increased a little bit. It will be roughly 20% to 30% this year, and as we said in my previous speech, in the – for Chinese market the PV module selling will be 10% lower than the international price.