Over a month ago, Macquarie slashed its rating on Canadian Solar (CSIQ) and said it had lostcredibility in management due to another EPS revision lower due tocurrency exchange losses. Today, that credibility takes another hitalong with the price of its stock. The company announced after the bell today that it has been issued a subpoena by the SECrelated to sales transactions last year. As a result, they’re delayingtheir earnings results which were due tomorrow and are retaining outside counsel and forensic accountants to review the transactions inquestion. The company may revise Q409 numbers and defer them to Q1/Q22010 to recognize sales only after receiving full cash payment fromcertain customers and to account for certain return of goods after thequarter end.
While the company will delay issuing official Q1 earningsresults, they did announce that they shipped an estimated 186.4MW during the quarter which is below the previous guidance of 189 – 191MW. CEO Shawn Qu, didn’t comment on the SEC subpoena, but did comment on the record shipments during the quarter.
“Market demand was very strong in the first quarter. We reachedrecord-high shipment levels in Q1, which we believe demonstrates thesuccess of our diversified sales channels and our strong brand namerecognition. Our performance also reflects the advantage of our flexible vertical integration model, which allowed us to quickly tap oursuppliers in order to capture sales opportunities. On the other hand,the unexpected depreciation of the Euro combined with a higher ratio ofexternal purchased cells put pressure on our margins. We have takensteps to stabilize and improve our margin structure.”
Looking ahead to next quarter and the full year, the company seesstrong demand continuing. They see shipments in the range of 170 –180MW for Q2 and see the 2nd half being stronger than the first despitefeed-in-tariff cuts in Germany. They are raising their full yearguidance from the previous 600 – 700MW to 700 – 800MW.
Shares of CSIQ were halted after hours, then slammed after resumingtrading, down close to 30% at one point. They have since recovered some and are down around 15% and hanging in around the $10 level which is an important support area around the July 09 lows.
It’s always difficult to say how these accounting irregularity casesaffect a stock, but in most cases it’s a big weight for awhile. Fundamentally, this is a company that is still a top China solar playespecially if you factor out the recent forex hits which it plans tohedge against better in the future, but it’s probably best to remain onthe sidelines until better visibility into forex and accounting issues.
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