Canadian Solar (CSIQ) recently reported improving results and would have you believe that the trend is up and away. After all, we are solving the world’s energy crisis.
What the company did not point out is that, despite the corporate name, they hardly have any operations in Canada. Most of its revenues come from Europe (well over 85% last quarter), but most of its manufacturing is in China. The revenues in Asia are anaemic. Asia needs to become energy efficient also so you have to wonder about the marketing strategy.
Speaking about marketing, there is no discussion on how they manage the distribution channel. Is it direct sales, distributors or some form of agency agreement? How do they know they are making the right deals? You cannot rely on the market place just beating a path to your door.
The earnings release headline trumpets an 87% increase in revenues Q3 over Q2 but they neglect to mention year-over-year is a decrease. Accounts receivable net stood at $227 million, which is still larger than the entire quarter's revenue, which is supposedly 87% greater than the comparable quarter. They are not collecting their receivables.
Value added tax recoverables doubled to $31 million, or 15% of the quarter's revenue. Just seems huge, if you know what I mean.
Short Term borrowings tripled to $322 million, which explains where all the cash is coming from. No explanation about their banking relationships or structure.
Payables have jumped from $30 to $157 million. When your payables are equal to 50% of the quarter’s revenues you have to wonder about operating difficulties and tough guys knocking loudly on your door. Accrued warranty costs jump 40% to $14 million, with no explanation about warranty issues, policies or any other danger signals.
All this was enough to drive the stock to its 52-week high. Hmmm... Where is the SEC in all this.