Shares of solar manufacturer JA Solar Holdings Co., Ltd. (NASDAQ: JASO) jumped as much as 17.4% on Thursday after the company reported fourth-quarter earnings results. By 1:30 p.m. EDT, the stock had settled slightly lower to a 7.1% gain on the day.
Shipments of cells and modules rose 4.3% and 43%, respectively, to a total of 1,416.2 MW in the fourth quarter. However, as prices fell net revenue dropped 13.1% to $574.8 million and gross margin declined 420 basis points from a year ago to 12.9%. Net income nearly doubled to $50.9 million on the back of a sharp decline in operating costs and earnings per share were $0.98. The drop in operating costs was helped by a one-time reversal of previously recorded expenses of $50.2 million in relation to a dispute with Hemlock Semiconductor.
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Within these numbers, what's encouraging is that JA Solar managed a decent margin in the face of rapidly falling cell and module prices. Even without the one-time gain, the company would have been close to breakeven in the quarter.
There's a bit of optimism for JA Solar today that conditions aren't worse than they could have been. Margins weren't terrible, and landing near breakeven in an environment where demand and prices were fairly weak isn't all bad. But the company will still require a recovery in the market and some stability in pricing to generate a profit in the long term. And that may be tough when even JA Solar is expecting to grow cell capacity by 1.5 GW this year to 7.0 GW and module capacity to increase 500 MW to 6.0 GW.
In other words, last quarter's numbers were good, but JA Solar still isn't highly profitable, and with pricing challenges ahead, it isn't out of the woods yet in a highly competitive solar manufacturing environment.
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