Hanergy Thin Film Posts Loss Four Times Bigger Than Revenue

  • Solar manufacturer writes down goodwill, loses customers
  • Auditors raise concern about Hanergy's ability to continue

Hanergy Thin Film Power Group Ltd., the once high-flying Chinese solar equipment maker whose shares dropped 47 percent on a single day in May, posted its first annual loss since 2009 as revenue plunged and auditors expressed doubts about its ability to stay in business.

The net loss was HK$12.2 billion ($1.58 billion), compared with net income of HK$3.2 billion a year earlier, the company said in a statement to the Hong Kong stock exchange on Thursday. Revenue tumbled 71 percent to HK$2.81 billion. Auditors said they couldn’t determine whether the company will be able to collect all of its receivables.

The loss underscores the extent of the turmoil at Hanergy. The company’s shares have been suspended from trading since May 20, when their decline wiped out almost $19 billion in capitalization. In the year before that, the shares surged more than sixfold, riding a wave of enthusiasm fueled by Chairman Li Hejun’s promises of what the future held for solar power -- and thin-film technology Hanergy sells.

Hanergy’s affiliates have withheld payments to Hanergy Thin Film, leading to receivables of HK$2.6 billion. Auditors said future adjustments to that amount may increase the company’s loss for 2015, according to the statement.

“We were unable to obtain sufficient appropriate audit evidence about the recoverability of the trade receivables,” the auditors wrote in a note in the statement. The 2015 loss also “indicates the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.”

A significant portion of the loss came from a HK$7.92 billion writedown of goodwill.

At the peak of Hanergy’s ascent, the company’s market value exceeded HK$300 billion, making it more valuable than Sony Corp. or Twitter Inc.

Even before the collapse, some investors and analysts had questioned Hanergy’s business model and its relationship with its parent. About 61 percent of the revenue for the listed unit of Hanergy came from Beijing-based Hanergy Holding Group and its affiliates in 2014.

The publicly traded entity makes factory equipment that produces thin-film solar panels. Closely held Hanergy Group makes the panels, though it has never disclosed its production output. Hanergy Thin Film also buys photovoltaic panels from its parent company to make into finished solar parks.

The Hong Kong Securities and Futures Commission confirmed it was investigating the company after the shares were suspended.

Since the share plunge and the investigation, the company has faced a series of challenges. Hanergy’s sales to its parent company and affiliates dropped by 96 percent last year, to less than HK$200 million, compared to HK$5.96 billion in 2014, it said last month. 

In November, Ikea Group said it wouldn’t renew a contract to fit homes with solar panels.

In August, Hanergy Thin Film said that some 2,000 positions at its headquarters, business units and regional offices would be cut. At the end of 2015, however, the company disclosed that employment increased by 848 jobs.

Hanergy has appointed China International Capital Corp. to look for strategic investors, Reuters reported earlier, citing two unidentified people familiar with the matter.