Canadian Solar Inc. ("Canadian Solar") (CSIQ) announced financial results for the fourth quarter and full year ended
December 31, 2022.
Fourth Quarter 2022 Highlights
- 68% increase in solar module shipments year-over-year ("yoy") to 6.4 GW, above guidance range of 6.0 GW to 6.3 GW.
- 29% increase in revenue yoy to $1.97 billion, above guidance range of $1.8 billion to $1.9 billion.
- 17.7% gross margin at the high end of guidance range of 16% to 18%.
- Net income attributable to Canadian Solar of $78 million or $1.11 per diluted share.
Full Year 2022 Highlights
- Record revenues of $7.47 billion, a 42% increase yoy.
- Record net income attributable to Canadian Solar of $240 million, or $3.44 per diluted share.
- Record solar module shipments of 21.1 GW by CSI Solar, a 45% increase yoy.
- Record utility-scale battery storage shipments of 1.79 GWh by CSI Solar, doubling last year.
- 25 GWp of solar development pipeline and 47 GWh of battery storage development pipeline, as of January 31, 2023 (Global Energy).
Dr. Shawn Qu, Chairman and CEO, commented, "We achieved record financial results in 2022, with revenue increasing 42% and net income attributable to shareholders increasing 152%. Our company and industry are at a critical turning point as we transition towards a grid parity market where clean energy investments are attractive both economically and from a sustainability standpoint, unlocking significant global demand. In addition, as solar equipment costs reach closer to the bottom of the cost curve, volume growth is translating into both revenue and earnings growth, driven by a combination of a stabler cost structure, increasing pricing power and operating leverage. This is evident in our 2022 results and adds to our confidence in our future growth opportunities. Lastly, CSI Solar's carve-out IPO just got approved by China Securities Regulatory Commission as we speak today."
Yan Zhuang, President of Canadian Solar's CSI Solar subsidiary, said, "We achieved significant growth and profitability improvements throughout 2022. We continued to focus on strengthening our competitive advantage in technology and product leadership, positioning our brand in high-priced premium markets, building on strong customer and channel relationships, and increasing control over costs through vertical integration of manufacturing capabilities. Both material and logistical costs declined further. Looking ahead, we expect significant growth driven by our solar and battery storage offerings. In particular, we achieved over $1 billion in contracted battery storage revenues as of January 31, 2023, giving us significant visibility over our multi-year growth prospects and ability to deliver sustainable long-term value to our shareholders."
Ismael Guerrero, Corporate VP and President of Canadian Solar's Global Energy subsidiary, said, "The fourth quarter of 2022 was impacted by the timing of project sales, as expected, and adjustments in our growth strategy to hold valuable solar assets for the longer term. We continue to execute on 25 GW of solar and 47 GWh of battery storage projects (of which 13.5 GW and 11.6 GWh respectively have interconnections), one of the largest pipelines globally, and create value in our projects."
Dr. Huifeng Chang, Senior VP and CFO, added, "In the fourth quarter, we achieved $1.97 billion in revenue, a 17.7% gross margin, and net income of $1.11 per diluted share. We ended the quarter with a total cash position of $2.0 billion and reduced our leverage from a net debt to EBITDA standpoint. Overall, we remain disciplined in our capital deployment and are positioned to capture long-term growth and value."
Fourth Quarter 2022 Results
Total module shipments recognized as revenues in the fourth quarter of 2022 were 6.4 GW, up 68% yoy. Of the total, 216 MW were shipped to the Company's own utility-scale solar power projects.
Net revenues in the fourth quarter of 2022 were up 29% yoy and 2% quarter-over-quarter ("qoq") to $1.97 billion. The sequential increase primarily reflects higher solar module shipment volumes, partially offset by a small decline in module average selling price ("ASP") and lower revenue from battery storage solutions and project sales. The yoy increase was mainly driven by the significant increase in solar module shipments.
Gross profit in the fourth quarter of 2022 was $349 million, up 16% yoy and down 4% qoq. Gross margin in the fourth quarter of 2022 was 17.7%, compared to 18.8% in the third quarter of 2022, at the high end of the guidance range. The gross margin decline was mainly driven by lower margin contribution from project sales and lower module ASPs, partially offset by lower manufacturing costs and the depreciation of the Renminbi relative to the U.S. Dollar.
Total operating expenses in the fourth quarter of 2022 were $213 million compared to $274 million in the third quarter of 2022 and $234 million in the fourth quarter of 2021. The decrease was mainly driven by lower logistics costs and a lower impairment charge related to certain manufacturing assets.
Depreciation and amortization charges in the fourth quarter of 2022 were $50 million, compared to $56 million in the third quarter of 2022 and $84 million in the fourth quarter of 2021. The decline was mainly driven by an accelerated depreciation of a production facility that occurred in the fourth quarter of 2021 and currency translation of the Renminbi relative to the U.S. Dollar.
Net interest expense in the fourth quarter of 2022 was $11 million, compared to net interest income of $4 million in the third quarter of 2022 and net interest expense of $13 million in the fourth quarter of 2021. Net interest expense returned to a normalized level in the fourth quarter with the absence of an interest benefit generated by the anti-dumping and countervailing duty deposit refunds in the third quarter of 2022.
Net foreign exchange and derivative loss in the fourth quarter of 2022 was $15 million, compared to a net gain of $39 million in the third quarter of 2022 and a net gain of $1 million in the fourth quarter of 2021. The net foreign exchange loss was mainly driven by the strengthening of the Euro and the Japanese Yen against the U.S. Dollar.
Net income attributable to Canadian Solar in the fourth quarter of 2022 was $78 million, or $1.11 per diluted share ("diluted EPS"), compared to net income of $78 million, or $1.12 per diluted share, in the third quarter of 2022, and net income of $26 million, or $0.39 per diluted share, in the fourth quarter of 2021.
Net cash flow provided by operating activities in the fourth quarter of 2022 was $397 million, compared to $68 million in the third quarter of 2022. The increase in operating cash inflow was mainly driven by changes in working capital.
Total debt was $2,593 million as of December 31, 2022, compared to $2,713 million as of September 30, 2022, and included $684 million and $842 million of debt related to project assets as of December 31, 2022 and September 30, 2022, respectively. Non-recourse debt used to finance solar power systems and project assets increased to $365 million as of December 31, 2022, from $311 million as of September 30, 2022.
Total project assets at the end of the fourth quarter of 2022 were $824 million, compared to $911 million at the end of the third quarter of 2022. Project assets are projects that are developed and built for sale, as part of Global Energy's business model.
The net value of solar power systems at the end of the fourth quarter of 2022 were $365 million, compared to $101 million at the end of the third quarter of 2022. Solar power systems are projects that are developed and built to hold on the Company's balance sheet. During the fourth quarter of 2022, the Company determined that certain solar projects in Brazil and Italy with book value of $264 million were appropriately reclassified as solar power systems as the intention on these projects transitioned to be held on the Company's balance sheet for the purpose of generating long-term electricity income.
