September 4, 2024
By Li Zhenxing
In a stark reversal of fortune, Tongwei Co., Ltd., a major player in the photovoltaic industry, has seen its net profit swing from a surplus of 13 billion yuan to a deficit of 3 billion yuan within a year. The company attributed the dramatic shift to an imbalance in supply and demand, coupled with a continuous decline in product prices, leading to widespread losses in the industry.
According to a performance briefing held by Tongwei on September 2, the company’s performance aligns with the broader challenges faced by the photovoltaic sector. The prices of various components in the industry have hit historical lows, piercing through enterprise cost lines and pushing the sector into a phase of widespread loss. The current price levels are considered to be at the bottom of the cycle.
Financial Overview
Financial reports reveal that in the first half of this year, Tongwei achieved operating revenues of 437.97 billion yuan, a decrease of 40.87% year-on-year. The company’s net profit attributable to its parent company posted a loss of 31.29 billion yuan, marking a decline of 123.58% year-on-year. Data from Wind shows that Tongwei has reported losses for three consecutive quarters.
In contrast, the first half of 2023 saw Tongwei’s operating revenues reach 740.68 billion yuan, a year-on-year increase of 22.75%, with a net profit of 132.70 billion yuan, up 8.56% year-on-year. In the first half of 2022, the company’s operating revenues surged by 127.16% year-on-year to 603.39 billion yuan, with a net profit of 122.24 billion yuan, a 312.17% year-on-year increase.
Market Dynamics
The photovoltaic industry has been experiencing a severe imbalance in supply and demand, leading to a steep decline in product prices. According to statistics from professional institutions like the China Photovoltaic Industry Association (CPIA), the prices of polysilicon, silicon wafers, batteries, and modules have dropped by 40%, 48%, 36%, and 15% respectively in the first six months of this year. These prices have not only hit historical lows but have also fallen below the cost lines of many companies.
The price fluctuations in the photovoltaic industry are influenced by a variety of factors, including the dynamic supply and demand of upstream and downstream products, power consumption, and electricity demand. The short-term predictability of price trends remains uncertain.
Company Strategy
Despite the challenges, Tongwei’s Chairman and CEO, Liu Shuqi, expressed confidence in the company’s long-term strategic direction. He stated that Tongwei will steadfastly pursue its goal of becoming a world-class clean energy operator and a global leader in safe food supply. The company plans to strengthen its core competencies in cost control, research and development, and branding, while enhancing its ability to withstand risks.
Business Expansion
Despite the difficulties in the photovoltaic business, Tongwei continues to expand its production capacity. Liu Shuqi mentioned that the company is making steady progress in constructing its 200,000-ton high-purity polysilicon project in Inner Mongolia and is preparing for the pre-construction phase of its 400,000-ton high-purity polysilicon project in Ordos. Additionally, the company’s 200,000-ton polysilicon project in Yunnan successfully started production and achieved full capacity in the first half of this year.
Diversified Operations
While the photovoltaic business faces challenges, Tongwei’s feed business has shown resilience. The company has been able to meet the essential needs of its customers from the raw material, production, and market ends, leading to an increase in sales volume of aquatic feed and a steady increase in the sales volume of poultry feed, despite the overall decline in the industry. The company has also seen a year-on-year improvement in the overall profitability of its feed business, although specific figures were not provided.
Conclusion
Tongwei’s dramatic profit reversal highlights the volatility of the photovoltaic industry. However, with a focus on long-term growth and strategic diversification, the company remains optimistic about its future prospects in both clean energy and the feed business. As the industry continues to evolve, Tongwei’s ability to navigate these challenges will be crucial to its sustained success.
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