"The Most Challenging Year Since Listing": LONGi Green Energy's Chairman Admits Multiple Decision-Making Failures in Annual Report

As the annual report disclosure season nears its end, LONGi Green Energy Technology Co., Ltd. (601012.SH), a leading PV firm, has unveiled its financial results. In the "Letter to Shareholders," Zhong Baoshen, the company's chairman, frankly admitted that reviewing 2024, LONGi Green Energy's revenue declined significantly YoY, and it incurred substantial net losses, "making it the most challenging year since the company's listing."

The financial report shows that the company achieved operating revenue of 82.582 billion yuan last year, a 36.23% YoY decrease, primarily due to the decline in prices of major products such as modules and wafers. The net profit attributable to shareholders of the publicly listed firm was -8.618 billion yuan, compared to a net profit of 10.751 billion yuan in 2023.

Zhong Baoshen mentioned in the letter that the significant decline in 2024's performance was externally attributed to the industry's supply-demand imbalance, insufficient operating rates, and the continuous decline in PV product prices. Rapid technological iterations in the industry and asset impairments due to the phase-out of PERC capacity also contributed.

Industry data indicates that in 2024, prices across the industry chain continued to decline sharply, with polysilicon prices falling by over 39%, wafer prices by over 50%, and solar cell and module prices by approximately 30%. Despite the increase in volume, the manufacturing output value and export value both declined YoY amidst falling prices.

Impacted by low prices, gross profit margins across all industry segments declined significantly. LONGi Green Energy's operating revenue, operating profit, and investment income from associated enterprises (in the PV industry) all decreased substantially, while the provision for asset impairments and credit impairments increased simultaneously.

Financial data shows that in 2024, the company conducted impairment tests on assets showing signs of impairment and proposed to make impairment provisions totaling 8.701 billion yuan. This mainly included 6.128 billion yuan in inventory impairment provisions due to the continued decline in prices of major products, 25.42 yuan in impairment provisions for long-term assets such as fixed assets, and 30.9605 million yuan in impairment provisions for contract assets. After accounting for the write-off of 7.061 billion yuan in inventory impairment provisions, the impact on total profit was -1.64 billion yuan.

He also mentioned that internally, the decline was due to the accumulation of numerous missteps in operational management, starting with the failure of new products. In the second half of 2023, the company's new products suffered from a severe disconnect between R&D, production, and sales: the HPBC1.0 product's power and cost did not differentiate it from competitors, yet it was produced on a large scale, leading to a sharp increase in the company's inventory and substantial inventory impairment losses.

In the high-margin US market, which has trade barriers, LONGi incurred significant costs for cargo detention and return due to customs clearance obstacles in the previous two years. It was also preoccupied with handling customer claims for non-delivery, and it was not until the second half of 2024 that normal business operations in the US resumed.

Zhong Baoshen stated that although the management had anticipated the market downturn in 2023, the organizational inertia was strong, and capital expenditures and budgets were not adjusted in a timely manner. It was not until the second quarter of 2024 that a thorough cost transformation began.

While reflecting on the mistakes, Zhong Baoshen further stated, "Major crises are the best catalysts for transformation and change." In terms of products, he mentioned that this year, the company successfully achieved mass production of the Hi-MO9 and Hi-MOX10 product series based on the BC2.0 platform, widening the gap with competitors.

Last year, the company achieved module shipments of over 17GW for BC products. In terms of business plans, the company expects its HPBC2.0 cell and module capacity to reach 50GW by the end of 2025. Currently, the company's HPBC1.0 production lines are being fully upgraded to N-type HPBC2.0 technology, and the yield rate of the cells that have been put into production has reached approximately 97%.

The financial report shows that in the first quarter of this year, the company achieved operating revenue of 13.652 billion yuan, a 22.75% YoY decrease, and a net loss of 1.436 billion yuan, compared to a loss of 2.35 billion yuan in the same period last year.