JinkoSolar Holding Co., Ltd. (JKS) Q2 2012 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the JinkoSolar Second Quarter 2012 Conference Call. All lines have been placed on listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] Please be advised that this conference is being recorded today August 23, 2012. I’d now like to hand the conference over to your speaker today Sebastian Liu, JinkoSolar Investor Relations Director. Please go ahead.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar’s second quarter 2012 earnings conference call. The Company’s results were released earlier today and available on the Company’s IR website at www.jinkosolor.com, as well as on the newswire services. We have also provided a supplemental presentation for today’s earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer, Mr. Arturo Herrero, Chief Marketing Officer, and Mr. Zhang Longgen, Chief Financial Officer. Mr. Chen will discuss Jinko’s business operations and Company’s highlight, followed by Mr. Herrero, who will talk about the Company’s business strategies. And Mr. Zhang will go through the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Please note that today’s discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve the inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar’s public filings with the Securities and Exchange Commission, including its annual report on the Form 20-F for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission on April 25, 2011 as amended on May 10, 2011 and other documents filed with the US Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under the applicable law. Please be noted that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles, or GAAP, JinkoSolar uses certain non-GAAP financial measures, the Company believes that the use of non-GAAP information is useful for analysts and investors to evaluate Jinko’s current and future performances. Based on a more meaningful comparison of the net income and diluted net income per ADS, when compared with its peers and historical results from prior periods. These measures are not intended to represent or substitute numbers as measures under GAAP. The submission of non-GAAP numbers is voluntary and should be viewed together with GAAP results. It is now my pleasure to introduce Chen Kangping, CEO of JinkoSolar. Mr. Chen will speak in Mandarin and I will translate his comments into English. Please go ahead Mr. Chen.

Thank you, Sebastian. Good morning, good evening for everyone, and thank you for joining us today. I’m pleased with the improvements we’ve made in our performance in the second quarter, as the market conditions remained increasingly difficult due to continued module over supply and global economic weakness. During these difficult times we remain focused on our core business and have worked to maintain the performance and the reliability as our high quality modules are known for across the globe. As we compete globally, our result in the second quarter demonstrate the effectiveness of our strategy. Through this strategy reached total shipments of 302.1 megawatts of solar products during the second quarter of 2012, representing the sequential increase of 21.3% from 249 megawatts in the first quarter, of which 223 megawatt were solar modules, total revenue were $194.9 million or RMB1.2 billion. We were able to maintain our industry leading position in terms of cost structure through efficiency improvement and our substantially reduced non-silicon costs, which are rapidly approaching our target for the end of the year. We have successfully managed to bring down blended silicon cost around $25 per kilo or $0.14 per watt, and reduced non-silicon costs to $0.62 per watt in the second quarter of 2012 from $0.58 in the first quarter. This is primarily due to the decrease of cost of consumable materials and increasing efficiency of our production. We are very confident that we can achieve our year-end target of less than $0.50 non-silicon costs per watt and keep improve our gross margin. This allow gross margin to improve sequentially despite falling ASP. As we work to further strengthen our Company’s brand equity and quality of services, we anticipate that going forward the falling ASP will slow down and begin to stabilize. In-house gross margin improved to 11.2% in the second quarter of 2012 compared with 10.8% in the first quarter. To support the strengthening of our brand equity and quality of services, we launched JinkoSolar Priority Solar Club partner program for our strategic customers in this past month with over 140 customers, we’re now active in 21 countries, which demonstrates our global rich and appeal for our brand as well as our reliability as a partner. We understand that brand image and price to a large extend driven by the quality of our products and services. The success of our partner is critical to our future [growth] by rewarding customer loyalty by providing our partners with strong marketing support, product training and technical services. Through this we hope to create a powerful partnership that will strengthen our brand and help us to expand geographically. This initiative is aided by the solid technological innovation that’s behind our high quality solar products. I’m pleased to announce that the Company’s polycrystalline modules passed the potential induced degradation test at 85 degrees centigrade and 85% relative humidity. This achievement has made JinkoSolar the first company that has passed both forward and reverse bias voltage test under double 85 conditions, and was awarded with Anti-PID certification by TUV-SUD, 85 degree centigrade and 85% relative humidity, the hottest test condition of the PID test. Anti-PID certification demonstrates the high quality selected materials and components we use. As we establish strict quality control during the production process. Our consistent investments, R&D contribute directly to our success imparting this stringent PID test and ensuring the stable output of JinkoSolar’s PV system of 25 plus year life time. Our global customers are increasingly aware of the importance technology plays in the quality of solar modules and we’re committed to providing them with world’s best. We are confident that our modules will continue to give recognition from our customers and significant to the boost of module sales. Our global presence continued to expand as we diversify risk away from Western Europe by seeking out opportunities in new emerging markets. Shipments to the Germany and Italy were particularly strong this past quarter as customer anticipated the upcoming reduction in the feed-in tariff. With the demand from Italy and Germany is expected to be reduced as we move into the third and fourth quarters, we continue to push deeper into Eastern Europe where sales continue to show strength as they do in Greece, Canada, Australia, Brazil, and Japan. Our strategy allows us adapt to the different environments and conditions of our diversified markets and locations and to nurture long-term relationships. China remains on track to deliver increasing opportunities as we continue to project development of solar power plants as well as increase module shipments. We recently signed substantially supply agreements with a number of large state-owned utility group in China as we continue to strengthen our relationship with them. With the existing subsidies and market conditions in China, we also have more than 200 megawatt of government approved project development plans in the pipeline this year along, which will provide opportunity and prospects for our downstream project business. Having worked diligently during the first half of the year, we expect to see benefits from these projects and record revenue in the second half of the year. Looking forward I believe that by leveraging our industry leading cost structure, wide rich in brand name and global presence, strong balance sheet, and flexible decision making process, we will be able to take full advantage of our strengths to achieve future sustainable growth. For the third quarter of 2012, we expect total solar market shipment to be in the range of 250 megawatt to 280 megawatt as compared to the 223 megawatts of module shipment in the second quarter of 2012. We reaffirm our full-year 2012 guidance, with the total solar market shipments are expected to be in the range of 800 megawatts to 1000 megawatts and total projected development scale is expected to be in the range of 100 megawatts to 150 megawatts. The Company expects that its in-house annual silicon wafer solar sale and solar module production capacities will remain at approximately 1,200 megawatt each by the end of 2012. Arturo Herrero, our Chief Marketing Officer, will now discuss our major achievements in the sales and marketing for the second quarter in further detail, as well as our strategy and the market outlook for the third quarter and second half of 2012 in key countries and regions. Thank you.

Thank you, Mr. Chen. Good morning and good evening to all of you. I mentioned during our earnings call in Q1 that – at that time we were seeing encouraging signs of recovery compared to the previous quarter. Our Q2 results have to now to be much better and we’re confident that (indiscernible) China’s as we see a good recovery of the demand after such difficult previous two quarters. In Q2 we managed to deliver more than 300 megawatt, reached almost $200 million in revenues and registered a prominent increase in customers and brand recognition. Despite the challenges in the PV industry and the global financial crisis, we managed to get better resource, thanks to our consistent strategy to adapt to changes in the PV environment by reinforcing the loyalty of our existing partners, substantially increasing our customer portfolio, entering new emerging markets and successfully switching from larger scale projects to more residential and commercial roof topping solutions. We are resisting successfully in a very hard period, one of the most challenging for the PV industry. Due to the impact of very negative market conditions, including the worsening financial crisis in Europe, which has resulted in very hard restrictions in borrowings from banks and even cancellations of loans to invest those in several PV projects. We’re also suffering the consequences of further reductions in feed-in tariffs in the most important PV market and the cancellation of subsidies in markets such as Bulgaria and Belgium. The current over supply situation coupled with aggressive competition has created a sharp decrease in PV module market prices. However, we have benefited from some recovery market though in second quarter mainly in major markets such as Germany and Italy due to the upcoming feed-in tariff cuts. Sales reached a historical high in Germany exceeding 120 megawatt while sales in Italy increased strongly allowing us to maintain our leading position in Italy as a major crystalline PV module supplier. In Spain we are seeing good results in terms of brand recognition after renewing our sponsorship of the Valencia Football Club. We have continued our sales to Spanish customers who are focused on distribution in the Spanish PV market and also in emerging markets especially in South American countries such as Chile, Argentina, Mexico or Brazil. We have continued to sell in Bulgaria, Canada, Australia and Greece and entering into new countries such as Slovenia, Chile, Japan and Brazil. In the USA we achieved a quarterly record of 16 megawatt that were not subjected to the anti-dumping tax. Due to our lower shipments to the U.S. in Q1, we were not much affected by the uncertainty anti-dumping taxation on imported Chinese cells. We have developed a strategy to overcome such import taxes by producing cells from our own wafers outside China. In line with our prudent and focus expansion and diversification strategy, we continued to strengthen our global sales and marketing teams while closely controlling our cost. We are especially reinforcing our presence in Asia Pacific countries. In China in anticipation of the booming demand we established a Beijing team. We are now seeing good results for the second half of 2012 with contracts for more than 200 megawatt. Thanks to both the feed-in tariff for larger scale projects and the Golden Sun program for roofs, we expect the total market to reach around 4 gigawatt in China during this year 2012. We expect our efforts in emerging markets to be successful in the coming quarters, especially in markets such as India, South Africa, Australia, Canada and South America. In South Africa we have finished the first PV system with JinkoSolar PV modules. This is just the first step. We have managed to gain the trust of customers, local authorities and financing banks to succeed in being selected for several projects in the first and second round of the public tender for PV solar large scale projects. These projects in South Africa in the first tender will be the largest in South Africa, but also in the African continent with a size of 81 megawatt nominal and shipments starting at the end of this year. We are continuously growing our market share reaching over 3% in the major 15 PV countries and keeping our position as the top six of the world crystalline module producers according to the IMS Research Institute. During Q2, 2012 the number of new and existing customers reached a new record exceeding 140 customers in over 20 different countries. In line with our strategy in mature PV markets as we anticipated the new market trend, we’ve been moving from large scale projects to many commercial and residential installations. We have been successful in switching our focus to wholesalers and EPC contractors dedicated to roof installations. The second quarter has been much stronger than the first quarter in this market. With respect to marketing our primary goal over the last two years has been to broaden the appeal of our brand around the world, particularly in various important markets of Europe, but also in the USA, Asia Pacific and African market. We have achieved this goal while controlling our budget and spending much less for marketing than our peers. Valencia Football Club will be playing the European Champions Cup adding to all major European football clubs and they already started the Spanish League with good results against Real Madrid. During the second quarter we actively attended SolarExpo in Verona in Italy, Intersolar in Munich in Germany, SNEC in Shanghai, China and Renewable Energy Asia in Bangkok, Thailand. For Q3 we’ll be also attending major PV exhibitions in Israel, USA and Australia. We probably announced the launch of the Jinko VIP program called Priority Solar Club focused on strategic partners to increase loyalty, from our most important customers. More than 40 customers have already registered and we aim to get 100 customers have the benefit of being our VIP partners. We also promoted during this quarter our new development (indiscernible) WING series is the second generation solar module. It represents a great technical achievement as it is a PV module designed for roof installations, lighter, thinner and with higher efficiency and round corners to reduce handling risks. We have worked hard to rebuild our Company image and we believe that the progress we have made was responsible for the improvements of ASPs versus our peers from Q4 last year to Q2 this year. As of today more than 40 banks have been financing PV systems with our modules in 10 different countries and we are still in discussions with more than 60 banks in 12 countries. Despite the difficulty environment during the first-half of the year, we have established a basis for a good second half and much better 2013. We are in the list of the tier first PV manufacturers and our module are being included in most of the big tenders for 2012 and 2013 with important well known developers, EPC and installers. With that now I’d like to turn the call over to Zhang our CFO, who will introduce our financial results and guidance for the second quarter. Thank you.

Thank you, Arturo. Good morning and good evening to everyone on the call. First I would like to walk you through our financial results for the second quarter of 2012 followed by third quarter and full-year 2012 guidance. As Mr. Chen mentioned earlier, total solar product shipments in the second quarter of 2012 were 302.1 megawatts. Total revenues in the second quarter of 2012 were $194.9 million, an increase of 16.8% sequentially and a decrease of 45.5% year-over-year. The sequential increase was primarily due to the increase in the sales volume of the Company’s solar modules which was partially offset by the decrease in ASP. Gross margin was 8.4% in the second quarter of 2012 compared with 0.7% in the first quarter of 2012 and 25.4% in the second quarter of 2011. In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 11.2% in the second quarter of this year compared with 10.8% in the first quarter of 2012 and 30.5% in the second quarter of 2011. Gross margin and in-house gross margin improved from the first quarter of 2012 primarily due to the continued reduction in costs for our polysilicon and auxiliary materials and the improvements in our operating efficiency, which was partially offset by the declines in the ASPs of the Company's solar modules. Loss from operations in the second quarter of 2012 was $13 million, compared with a loss from operations of $48.6 million in the first quarter of 2012 and income from operations of $63.4 in the second quarter of 2011. Total operating expenses in the second quarter of 2012 were $29.3 million a decrease of 45% sequentially and an increase of 11.8% year-over-year. The sequential decrease was probably due to a provision for the advance to suppliers of $20.6 million in the first quarter of this year. The Company's operating expenses represented 15.0% of its total revenues in the second quarter of 2012, representing a decrease from 29.5% sequentially an increase from 7.3% year-over-year excluding non-cash charges for the provision for the advance to suppliers for the first quarter of 2012. The operating expenses represented 17.3% of total revenues in the first quarter of 2012. Operating margin in the second quarter of 2012 was a negative 6.7% compared with a negative 28.9% in the first quarter of 2012 and a positive 18.1% in the second quarter of last year. Net interest expense in the second quarter of 2012 was $8.6 million a decrease of 6.8% sequentially and an increase of 19.9% year-over-year. We recorded a foreign currency exchange loss of $28 million in the second quarter of 2012, primarily due to the exchange loss of $19.7 million and a loss in fair value of forwarded contracts of $8.3 million. We recognized a loss of $0.5 million in change in fair value of Convertible Senior Notes and Capped Call Options. The Company recognized an income tax benefit in the second quarter of 2012 of $1.6 million. The Company did not recognize any tax benefits in the first quarter of 2012 and an income tax expense of $7 million in the second quarter of 2011. Net loss in the second quarter of 2012 was $48.9 million, compared with a net loss of $56.6 million in the first quarter of this year and a net income of $36.4 million in the second quarter of last year this translates into basic and diluted loss per ADS of $2.20. Non-GAAP net loss in the second quarter of 2012 was $46.8 million, compared with non-GAAP net loss of $52.5 million in the first quarter of 2012 and a non-GAAP net income of $44.3 million in the second quarter of 2011; this translates into non-GAAP basic and diluted loss per ADS of $2.11. As of June 30, 2012, the Company had $97.0 million in cash and cash equivalents and restricted cash. Operating cash flow in the second quarter of 2012 was $24.6 million. Capital expenditures during the quarter were $6.9 million. As of June 30, 2012, total short-term borrowings, including the current portion of long-term bank borrowings, were $366.5 million, compared with $380.2 million as of March 31, 2012. Total long-term borrowings were $43.3 million as of June 30, 2012, compared with $27.4 million as of March 31, 2012. As of June 30, 2012, the Company's working capital deficit was $174.7 million, compared with a deficit of $141.8 million as of March 31, 2012. Now let me turn to our guidance. For the third quarter of 2012, we expect the total solar module shipments to be approximately 250 megawatts to 280 megawatts. We expect the Company’s in-house annual silicon ingot, wafer, solar cell and solar module production capacity each expected to be approximately 1.2 gigawatts by the end of 2012. At this moment we are happy to take your question. Operator?

(Operator Instructions) Your first question comes from the line of Satya Kumar with Credit Suisse.

Hi, this is Brandon Heiken speaking on behalf of Satya Kumar, thanks for taking the question. You guys mentioned that you think that prices may decelerate and their declines and that they may even stabilize. Do you have a timeline of when you think that will happen and what gives you confidence that prices, the declines maybe decelerating?

We are seeing obviously very little room for decrease on prices due to the situation in this industry that is affecting and impacting strongly most of our peers. So, I don’t think the sustainable other decrease in the pricing. However still we are seeing some room for improvement in cost reduction both in silicon and also in the process. This is why we think that probably prices in the market will be – especially in the second half of the year reduce from the first half but not dramatically, so it will be a small reduction until we are seeing less oversupply and then the prices will be stable during the next year 2013.

Okay. And it sounds like the second quarter shipments were pretty strong to Germany and Italy, you mentioned I think 120 megawatt to Germany out of the 233 total, is that right?

Yeah, that’s right. Yeah, so 120 has been Germany including most of our major customers.

Okay. And so I assume that makes for shift more towards China in the second half, how would that affect Jinko gross margin?

Well I can tell you – I'll pass to Zhang before that I can tell you that in China we foresee a big booming and I said totally in my speech and also our CEO was mentioning, we have over 200 megawatt in contracts, but we will not know how many will enter into Q3 or into Q4. And then with the gross margin Zhang will respond to that.

I think one, as you can see our second quarter, our comprehensive gross margin – actual gross margin is 8.4%, and our vertically integrated in-house gross margin is 11.2%. So as you can see that our silicon and non-silicon cost together is $0.66, so it’s easier for you to see the ASP how much reselling. Even in the second quarter you see reselling in China is almost 11% and we so far – we in the second quarter our China selling ASP is only maybe around $0.01 to $0.2 below the average ASP. For the further you have to consider that. We also starting down streaming to the projects as I mentioned last time we have 30 megawatts of project is going to finish, so its saleable in the second quarter or maybe sell in third quarter or even in fourth quarter, that also will help us to improve gross margin. More important in the (indiscernible) projects we will not own the projects, but we also participate in the EPC projects so that also happens, it not only bring our gross margin from module sales, we also got revenues from the EPC construction service. So we believe the third quarter the gross margin compared with second quarter where we got to more improve.

Okay. And just to clarify again, the 800 megawatt to 1000 of module shipments for the year, does that include module shipments into the project development that you’re doing as well, is that 100 – the 150 megawatt?

No, no that’s [beside] that.

Those are separate, okay. Thank you.

Your next question comes from the line of Vishal Shah with Deutsche Bank.

Hi, Vishal. Looks like he’s in mute.

Hello, Vishal.

Shah, your line is open.

Hi, can you hear me?

Yeah, Vishal. Good morning.

Hi, yeah, thanks for taking my question. I wanted to understand what you think about the China market this year, I mean how big do you think it’s going to be, and you said 200 megawatts for 2012, and now if that’s the case what was the first half shipment’s in China?

Well, this is Arturo again, I will respond for the shipments. In fact we have been doing more of the work for opening our business here in China with our team in – in our office Beijing. So, we are having a lot of preparation, so we have not been selling actively so much in this few quarters, I mean during this half. So, in total it has not been more than, yeah around 35 megawatt. But the important thing is that we have 200 coming from now to the end of the year and this is where we foresee quite enthusiastic on the Chinese market.

Yes, Vishal this is Sebastian.

Okay, so total 235 megawatts – total 200 megawatts in the second half, 35 megawatts in the first half. How big do you think the market will be this year?

The market will be around 4 gigawatt, we predict.

Okay, great, that’s helpful. You said 120 megawatts in Germany in the second quarter, how many megawatts do you expect to sell into the Europe and German market in the second half?

How about the second half for Germany and European market?

Yeah, for European markets mainly we will see a decrease in terms of the total percentage of the distribution and portfolio in our Company in terms of sales, especially with the reduction in the feed-in tariff in Germany or a monthly basis and also the reduction in the feed-in tariff in Italy that will be implemented with the new law at – in the 27 of August, so we predict that the market will be lower in the these two countries. However we are seeing Eastern Europe starting especially in Romania where we have quite a lot of development going on and also in Ukraine. So in Eastern Europe we will see a rebound apart of Greece that there are things in market we need to focus also. And then our major focus will be in major markets outside Europe, such as India for example I think we will be very strong, and also some countries in South America, Australia, Canada, and at the end of the year South Africa.

That’s very helpful. One of the competitors recently talked about 10% price decline in the third quarter and historically you guys have sold at – somewhat of a discount to some of these competitors. Where do you think prices are going in the third quarter? Are you talking about low $0.70 per watt in Europe?

Well let me clarify that. We don’t have so much discount in ASP versus our competitors. I think Q1 and Q2 last year we need to have that mainly because of the impact on the Hanin incident but not anymore in Q2 I think the ASP has been quite better, much better and if you see the earnings from Canadian Solar the average selling price was at CAD$0.75, if I am not wrong and we were at CAD$.0.74. And also the main reason is because we didn’t have so much impact in the U.S. market where ASPs is higher than in Europe. So our ASP is not discounted versus our peers. And then for your second question, yeah probably we will see a reduction in ASPs around 6% to 10% I would say in the second half of the year.

That’s very helpful. Thank you.

Your next question comes from the line of Pranab Sarmah with Daiwa Capital.

Thank you for taking my questions. First of all could you elaborate a bit like what will be the ASP of your product in China versus you’re selling in outside in second half?

Basically, I just mentioned that in the second quarter our ASP and selling in China the period of module price is around $0.01 to $0.02 below the Europe. So, for the third quarter we think the pricing will be more closing, because the reason even $0.01 to $0.02 below but also the shipping cost, the transportation, the timing, deliver, it also help us. so basically – but selling in China you have to be aware of that, it’s not only we’re selling module, but we also can generate revenue from the EPC projects that we now own then also we were down streaming to our own solar projects. So, this all helps us to increase our revenue and improve the gross margin. But definitely we would justify which project, especially the solar projects when we start we have to justify the IR and (indiscernible) possibility and et cetera.

Thank you. And you have decreased your non-polysilicon production quite nicely on second quarter, how much we can expect by end of the year, by 4Q will you be able to be non-polysilicon production cost and from which directions you’ll be able to bring it, whether it will be module material or some other materials you would like to use some more domestic conductive paste?

Okay, first of all in the second quarter and our non-silicon cost total is $0.52, and our silicon cost is $0.14 and together it’s a total of $0.66. And our target by the end of this year is $0.60. So our target from a silicon cost will reduce from right now second quarter $0.14 to around $0.12. So the non-silicon cost from right now second quarter is $0.52 down to $0.48. The major I think the cutting on the non-silicon cost side, why is the efficiency continuing to improve, secondly is consumable products in our costs. So all these I think add together especially I think the consumer products including the (indiscernible), silver paste and all those stuff, then also on the wafer, a cost saving segment we have to continue to reduce the cost on the profile, packing liquid, also use the diamond saw so this will help us I think continue to down to $0.48, but our target is $0.60 by the end of this year.

Okay. Now my last question is on your accounts payables, that I have seen like – that account payable to third party has gone up quite nicely three times roughly. Could you elaborate like whether you’re getting this credits from polysilicon makers or who is giving those credit?

Okay, basically well now that, if you look at Jinko today our first quarter and second quarter all is a cash flow positive. What we are doing is we are managing its not only because the market is tough today. If you look at the European situation on the accounts receivable side it’s very tough right now the collection also the DSO also is going – Jinko in the second quarter is still 140 base, we’re still in a very consistency with the first quarter. So we only have to improve the cash also to control on accounts payment side. Yes, most accounts, the material supplies come from local, from the Chinese supplier. So that’s why we are also shooting from another side to save some cash payments, yes. From accounts payable side we increased a lot, but we still got pretty good I think negotiating on the price side and in the payment terms.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Rob Stone with Cohen & Company. Rob Stone - Cohen & Company: Good evening gentlemen, thanks for taking my question. I want to follow-up Zhang on the accounts receivable situation, this is because the customers are having trouble with financing or to what do you attribute that and do you see a risk of charge-offs between now and the end of the year?

Rob, I think to answer your question, very luckily see, we will not allow or compare peers just so we have accounts receivable I think in the second quarter. We are aware of these accounts receivable actually in the first quarter. We already see some clients especially Italy, I think the payment flow, also phase of financial situation. So if you look our first quarter we, I think on the accounts receivable provision we raised a lot and so that’s why I think we – very prudent on the clients, especially in the Europe, in Italy and Spain and those countries. So if you look our accounts receivable this quarter our (indiscernible) $1.6 million and its basically we look at all our due accounts receivable and we have – the general provision then plus some specific clients, the accounts receivable we go ahead also to step – to write-off some accounts receivables. So we’re very comfortable on today on our accounts receivables, the quality and the credible.

Right, this is Sebastian to follow Zhang’s comments, I think we are mainly affected by some big Italian clients who have a little bit trouble in financing. And our current new clients in the (indiscernible) however stable with normal period – payment periods. Rob Stone - Cohen & Company: Okay. A question for Arturo with respect to project development opportunities, I think most of what you’re doing up to now is in China, one of your peers was talking about an aspiration to grow downstream business from maybe 10% in the next year or two as much as half of their revenues by 2015. How do you think about project development opportunities for Jinko? Thank you.

Well, this is Arturo. Let me clarify that, the project development in China is obviously much easier for us because we can control much better the market and we’re here in Shanghai, we have the team of engineers and we can do the start of understanding how to do engineering the planning and the installation finally. So, once we have experienced this good achievement in China, I think we will be starting to develop other markets nearby like Thailand, like Indonesia, or Asia Pacific, even India. And all the energy market that we’re seeing right now will be mainly needed -- they will need it then support from the supplier directly from the manufacturer. In Europe, however, we don’t want to compete and in fact I think it was a better strategy for some of our peers that they bought -- acquired some EPC contractors and then more for the customer they had before, they had to look for other suppliers and they come to Jinko, we’re happy for that. So when we’re not doing this to compete, to do our own development in countries like in Europe or in the USA, we still believe that we have to go together with our close partners.

Rather also I just put, you know, some -- add some, on downstream projects, we’re very, I think cautious and especially overseas so far we still didn’t starting any, I think, our own solar projects. In China, we were (indiscernible) still 30 megawatt. We have 80 megawatts four projects right now, all got approved. Not only the project is approved, but also feed-in tariff is approved. So, we’re also very [crucial] is the financing and also the location and also in the future you see who is going to buy. So we were justifying and in a [feasible] study all those situations and we’re starting the projects. The reason because is we have to manage the cash flow. So that’s most important. The cash flow is key to us. Rob Stone - Cohen & Company: Right. Final question, Zhang if I may, how do you think about your FX exposure for Q3? I guess, Q2 is relatively big change in the value of the euro, so how are you thinking about it for this quarter?

That’s a good question. I think if you look our focus -- the foreign exchange, I think for the contract, I think the fact [is loss] and the majority of still is the euro depreciation against renminbi. And the forward contract only loss is $80 million, I think that in the future, I think it will be maybe zero or maybe even positive. So what I think is for the second quarter maybe around -- if the euro continue against renminbi depreciation, I think it maybe around $5 million to $10 million as part of foreign exchange loss, yeah. Rob Stone - Cohen & Company: Great. Thank you.

Your next question comes from the line of Ben Schuman with Pacific Crest Securities.

Hi Zhang just a follow-up on the payrolls, do you think that this level is sustainable for the next couple of quarters or are we going to need to see some kind of reversal, if that was probably the biggest source of cash for you guys in the quarter?

For the accounts payable, I think in today’s scenario the balance will continue I think, stick on that. If our revenue continue to increase especially the downstream projects continue to going on, I even think the accounts payable will be the [DPR] whatever the accounts payable period maybe even longer. So that’s the – we manage I think also these are the partnership with our suppliers and that’s we have the ability to do that.

Okay, great. And then can you comment on maybe your outlook for standalone wafer sales over the next couple of quarters? Is the Q2 level, a sustainable level and then what are you seeing right now in terms of wafer pricing and costs?

Okay. First of all, our medium of products is module. For the wafer and the cell as you understand, because of the U.S. anti-dumping and countervailing taxes we have to outsource our cell to Taiwan. Then also because temporary – some over supply on the – maybe the capacity where we try to using you see, so that’s why we’re selling some – also you see different the converting efficiency based on market demand. Sometime will maybe produce the high efficiency cells more than the demand – our side demand, clients is less, so we have to sell some to outside. All these is unbalanced, yes we sell some wafer and cell, but that only account for revenue is less than 10%. So our major selling is module. So for the wafer, if you want another price I can tell you, see the wafer price in second quarter is – ASP is around $0.28, the cell is $0.42.

Great. Thanks.

Your next question comes from the line of (indiscernible).

Thank you first for taking my question. Can you give us some color about your ASP for wafer, cells, modules for the second quarter and the [trend] for third quarter?

I think you maybe – I think – we for the module price, I think we already have said, I think our total module cost in-house cost is 56 …

Yeah, we can calculate based on the total module cost and gross margins and …

Yeah.

… how about the cell and the wafer price?

Okay, the wafer is – on the second quarter it is based on our ASP is the wafer is $0.28, the cells $0.42.

Okay.

We think of the second quarter, the wafer price will be slight up, wafer and the cell price should be little slight up.

For the third quarter, right?

Yeah.

Okay. Thanks. And a follow-up question as you developed the total projects in China and if you don’t sell them we (indiscernible) in your balance sheet?

Okay. First of all, if you look right now, the focus on a construction is our projects. If we [not sold] then if we’re going to collect the deficit revenue, yes we were more to the fixed assets, yeah.

Okay. Yeah, thank you.

Thank you.

And there are no further questions at this time. I would like to hand the call back to management for any closing remarks.

All right. Again, thank you for joining us today. If you have further questions, please do not hesitate to contact us, all the contact details on our IR website at www.jinkosolar.com. Thank you, everyone. Bye, bye.

Thank you.

Thank you.

Thank you for participating in today’s call. You may now disconnect.