ReneSola Ltd (SOL) Q1 2012 Earnings Call Transcript

Hello, ladies and gentlemen. Thank you for standing by for ReneSola Ltd. First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to your host for today, Mr. Tony Hung, ReneSola's Vice President of International Corporate Finance and Corporate Communications. Please proceed, Mr. Hung.

Hello, everyone, and welcome to ReneSola's First Quarter 2012 Earnings Conference Call. ReneSola's first quarter 2012 earnings results were released earlier today and are available on the company's website, as well as on Newswire services. You can follow along with today's call by downloading a short presentation available on the company's website at www.renesola.com. On the call today are Mr. Xianshou Li, our Chief Executive Officer and Mr. Henry Wang, our Chief Financial Officer. Mr. Li will discuss ReneSola's business highlights and strategy and Mr. Wang will go through the financials and guidance. They will both be available to answer your questions during the Q&A session. Before we continue, 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 inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's annual report on Form 20-F and other documents filed with the U.S. Securities and Exchange Commission. ReneSola does not assume any obligation to update any forward-looking statements except as required under applicable law. Before I turn the call over to Mr. Li, please be reminded that unless otherwise noted, all figures mentioned during this conference call are in U.S. dollars. It is now my pleasure to introduce Mr. Xianshou Li, CEO of ReneSola. Mr. Li will give his remarks in Mandarin and I will translate into English. Please go ahead, Mr. Li.

[Chinese]

Thank you for joining today's 2012 first quarter earnings call.

[Chinese]

If you have downloaded our presentation, please turn to Page 3 for our company highlights.

[Chinese]

Despite persistent challenging global solar market conditions, which are marked by oversupply and declining ASPs, we delivered a record shipments and continue to lower our cost for both modules and wafers. We continue to develop our strengths in research and development and have made strong progress in our Virtus wafers and modules. As such, we have been able to withstand the difficult pricing condition and the resulting margin pressure, which should position us well once market conditions normalize. While we have maintained our leadership position in wafer manufacturing, we have increasingly focused on our module business, which is growing in large part due to our regional sales teams.

[Chinese]

I will now quickly review our shipments. Please turn to Page 5 for a snapshot of our shipments and financial progress.

[Chinese]

Total solar product shipments in the first quarter of 2012 were 466 megawatts, wafer shipments rose 52.9% quarter-over-quarter as a result of strong demand for our wafers from Europe, especially Germany, ahead of the expected cost in the country's [indiscernible] tariff. Module shipments also remained strong at 90.9 megawatts.

[Chinese]

ASP is strong significantly throughout the quarter, where wafer ASPs dropping to $0.33 per watt and module ASPs dropping to $0.84 per watt in the first quarter. First quarter revenues were $211.5 million, up 12.7%, from a $187.7 million in the fourth quarter.

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Please turn to Page 6 for an update on our research and development.

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We are continuing to improve and develop our proprietary Virtus technology and are transferring the high conversion efficiency advantages of our Virtus wafers into our Virtus modules. Our high-efficiency Virtus wafers are now exhibiting conclusion efficiencies of 18.2% and our high-efficiency Virtus modules are generating outputs of 245 to 255 watts. In addition, we have recently developed new in-house polysilicon recycling techniques, which will further reduce polysilicon cost. We're also continuing research and development into carbon composite materials and are continuing to invest in developing low oxygen concentration solar wafers. We have also begun producing diamond-steel wires and begun using them in-house with our own wafer manufacturing and are planning to market the diamond-steel wires for sale soon. In conclusion, we remain committed to our research and development to advance our technology and manufacturing methods, as well as to lower our overall cost. We are looking forward to formally announcing our high-efficiency modules and diamond-wire products on May 17 at the SNEC PV Power Expo.

[Chinese]

Please turn to Page 7 for an overview of our module business.

[Chinese]

We have gradually improved our module business, which has been substantially impacted by Europe's financing environment and rapidly evolving solar policy. Through our strong research and development, the transfer of our technological advantages in producing Virtus wafers into producing Virtus modules and increased sales and marketing efforts, we have delivered module shipments of 90.9 megawatts and expect to ship 150 megawatts to 170 megawatts of solar modules in the second quarter of 2012, of which 55 megawatts are expected to be Virtus modules. Despite what remains a challenging market flooded with oversupply, we have sold out our current capacity and have accumulated a backlog of solar module orders. We anticipate selling 600 megawatts of modules for the full year 2012, of which approximately 200 megawatts will be Virtus modules, as we expect to see strong demand for our high-efficiency, high-quality products. Due to the strong demand, we are increasing our capacity to 1.2 gigawatts by the end of second quarter 2012. In addition to our technological advantages and expertise, as well as our new sales and marketing strategy, we also improved upon our low processing cost. Our total module manufacturing cost is now $0.74 per watt, and we expect a decrease on our total module manufacturing cost to under $0.70 per watt in the second quarter of 2012.

[Chinese]

Please turn to Page 8 for an overview of our wafer business results for the quarter.

[Chinese]

Demand for our wafers was strong in the first quarter of 2012, doing no small part to the high demand for our high-efficiency Virtus wafers, which are exhibiting conversion efficiencies of 18.2%. In addition, we have further reduced blended processing cost in $0.19 per watt. However, our margins has been significantly impacted by declining ASPs, which were down to $0.33 per watt in the first quarter. Fortunately, we have been able to reduce our processing cost further. At present, our blended wafer processing cost is about $0.18 per watt. We will continue to execute on our strategy to lower our cost, which should position us well, very well once macro conditions stabilize. We expect to lower our blended wafer processing cost to $0.17 per watt by the end of the second quarter 2012 and $0.15 per watt by the end of this year.

[Chinese]

We'll also continue to invest in research and development to improve the technology and manufacturing process of our wafers. With the primary goal of improving wafer efficiency, our R&D will not only enhance our wafer business, but also improve our module business as wafers are the key component of our modules.

[Chinese]

Please turn to Page 9 for an update on our polysilicon production.

[Chinese]

Our polysilicon plant's progress remains on schedule and essential to our long-term manufacturing cost reduction strategy. In the first quarter, production cost increased due to upgrades and maintenance on a state-owned power grid connected to our plant. This impacted our production cost for the quarter. In the first quarter, we're produced approximately 900 metric tons of polysilicon. Above expectations but lower than our fourth quarter production of 1,089 metric tons. Production costs were up to $33 per kilogram in the first quarter, compared to $30 per kilogram the fourth quarter. As of April, our production cost has dropped back down to $30 per kilogram. We expect our production cost to decrease further this year, reaching approximately $25 per kilogram by the end of the second quarter, or a cash cost of $18 per kilogram due to the development of several in-house cost reduction techniques. Also upon completion of Phase 2 of our polysilicon plant, we expect to expand polysilicon production capacity to 10,000 metric tons by the end of the year, with total blended cost for both phases at $22 per kilogram and under $20 per kilogram for Phase 2 on a stand-alone basis.

[Chinese]

I will now turn the call over to Henry, who will discuss our financial results for the quarter.

Thanks to Mr. Li. Please turn to Page 11 to 14 for a look at our financial progress. As Mr. Li mentioned earlier, our revenue and margins we have gained are partly by the decline in solar wafer and module ASPs. We also took a new inventory write down of $12.2 million in the first quarter, primarily to reflecting the decline in the price of polysilicon and these resulted in net in gross margin. Result in the inventory write-down, our gross margin would have been 2%. Margins for the March period [ph] however, are quite [ph] given the low ASPs and they were about 9.5% [ph] in the fourth quarter. This is due largely to our cost reduction strategy which have helped lessen the impact of the decline in prices for both modules and wafers although we delivered a net effect gross margin in the first quarter. We are confident our cost reduction will enable us to generate gross profit in the second quarter. Now, I then run through all the details of our financial results. Net revenue for the first quarter with $211.5 million exceeding our guidance under a sequential increase of 2.7% from $187.7 million. Primarily due to strong demand from Europe, particularly Germany, for our solar products offset it by decreases in ASPs. Gross loss for the first quarter was USD $8 million compared to a gross loss of $43.4 million in the first quarter, primarily due to the lowering costs and the improving margins on our solar product, offset it by an inventory write-down of $12.2 million, primarily as a result of the decline in price of polysilicon. Without the inventory write-down gross profit would have been $4.2 million. Gross margin for the first quarter of 2012 was negative 3.8%, compared to a gross margin of negative 23.1% in the fourth quarter of 2011. Without the inventory write-down, gross margin would have been 2%. Operating loss for the first quarter was $37.8 million compared to an operating loss of $52.7 million in the fourth quarter of 2011. Total operating expenses for the first quarter were $29.8 million up 220.4% from $9.3 million in the fourth quarter. Sequential increases in the operating expenses were primarily due to the onetime gain of $13.5 million arising from the forfeiture of a prepaid resulting from the breach of a wafer by one of the company's clients in the fourth quarter of 2011, and to a bonus [ph] accrual reversal in the fourth quarter of 2011. Operating expenses presented 14.1% of total revenues in the first quarter of 2012, a decrease from 5% in the fourth quarter of 2011. Operating margins for the first quarter 2012 was negative 17.9%, compared to an operating margin of negative 28.1% in the fourth quarter. We recommend the tax benefit of $6.2 million for the first quarter, compared with a tax benefit of $13.1 million in the first quarter. Net loss attributable our holders of ordinary shares for the first quarter of 2012 was $40.2 million compared to a net loss of $36.7 million for the first quarter of 2011. This represents basic and a diluted loss per share of $0.23 and based on a diluted loss per American Depositary shares or ADS, for $0.47. On the balance sheet, as of March 31, we had increased our overall debt to $800.8 million, excluding $111.6 million due to senior convertible notes. Total bank of borrowings increased about $85.2 million sequentially with short-term borrowings increase from $570.9 million at the end of fourth quarter to USD $662.6 million at the end of first quarter. At the end of March 2012, short-term borrowings consisted of $239.6 million in trader finance, $334.4 million in the short-term facilities and $88.6 million of the short-term portion of the long-term debt. Our net cash and cash equivalent position was $338.9 million and the total cash including restrictive cash was $388.3 million at the end of the first quarter, compared to a net cash and a cash equivalent relation of $379 million and the total cash including restricted cash of $437.4 million at the end of fourth of 2011. Our CapEx plans remains relatively conservative for the year. We expect to spend $70 million in the second quarter to expand our solar module and polysilicon production capacity, as well as to improve our manufacturing process. Now, listen to our guidance which could be found on Page 15. We expect the overall solar market to remain challenged in the same quarter of 2012. We expect the shipments to be the range of 460 megawatts to 480 megawatts and the revenues to be in the range of $200 million to $220 million. We're also expecting positive gross margins through further cost reductions in the second quarter assuming there are no additional units or write-offs. At this time we are happy to take in your questions. Operator, please.

[Operator Instructions] Your first question comes from the line of Philip Shen of Roth Capital Partners.

LDK recently discussed that they announced some substantial layoffs. Are you guys conducting any layoffs at all and if not, are you contemplating them?

[Chinese]

[Chinese]

So, I'm not sure if you understood that, but we're not going to have any layoffs and there are no plans for a layoff, so on the contrary actually, we're going to increase the number of our employees by about a thousand and this is due primarily to increases at our module division.

Great. Can you tell us what your utilization is currently for your ingot capacity and then also for your wafer capacity. I'd like to get a sense for -- are the utilization rates balanced between the 2 segments in the value chain?

[Chinese]

[Chinese]

[Chinese]

[Chinese]

Okay. So, Phil, as Mr. Li just indicated, right now pretty much for everything were running at 100%. And in the case of wafers, it's running at exactly about 100%, poly as well. I know you didn't ask this but also for our sales in modules, we're actually running above 100% as we are doing some outsourcing.

Squeezing one more. What was your average poly price in Q1? And we've been hearing that poly suppliers such as Wacker are -- they're maintaining contract pricing but for marginal volume, they're pricing at potentially as low as $10 per kilogram. Are you guys experiencing anything like this?

So do you want our internal total blended cost or do you want the cost that we bought poly at, on average in the first quarter?

The latter? So the external purchase price.

Okay. [Chinese]

$28 dollars from the external.

And so, Phil, that would be the average for the first quarter, which as I'm sure you know, started off a bit higher and ended it up a bit lower.

Right, right. And then what do you think you're seeing today?

[Chinese]

$24 to $26, right?

[Chinese] Yes, that's correct, what Henry said, $24 to $26 external poly pricing.

Your next question comes from the line of Satya Kumar of Crédit Suisse.

What was the geographical mix of your shipments for modules in the March quarter? And what do you expect the shipment mix to be in June by geography for modules?

Okay. So for the March quarter -- so basically, you're asking for the first quarter and the second quarter geographical mix? Okay. [Chinese]

[Chinese]

Okay so Satya, Mr. Li said that for the first quarter, we're looking at something like 70 megawatts to Europe and about 20 megawatts to Australia. And for the second quarter, we're looking at something like 130 to 150 megawatts to Europe, and another 20 megawatts to Australia.

Okay. Do you have a sense as to what portion of the European shipments are to Germany? What visibility do you have for module orders from specifically, your German customers? And when do you expect the shipments to perhaps go down in Germany, which month of the year? Because I have a feeling that have got to take effect at some point.

[Chinese]

[Chinese]

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[Chinese]

Okay. Yes, Satya, so Mr. Li indicated that for the first quarter, the shipments to Germany was about 30 [ph] megawatts, the remainder to places like Eastern Europe, Italy, et cetera. For the second quarter, about 40% of the European shipments will be to Germany and the rest to Italy and other places in Europe as well as other places in Eastern Europe rather. And overall, we're seeing strong demand out of those other places in Europe in the second quarter. Although in terms of the visibility, right now what we think we're seeing is that there's going to be relatively weaker shipments in Germany in June. And then after that, it may drop further.

Okay, and then on polysilicon, basically your cost numbers that you gave out, that's $25 for Phase 1 and Phase 2, looks to be close to $20. I'm just taking the average and estimating that. Is that the gross or cash cost? And right now, the polysilicon spot price seems to be at or below the $25 level. If poly stays there or get a little weaker, would you look to scale back production partially in Phase 1 and run the Phase 2 more?

For the first question, I can answer that. That's definitely the fully loaded number that includes depreciation. For the second part, let me direct that to Mr. Li and the team. [Chinese]

[Chinese]

Okay. Yes, so Satya, Mr. Li indicated that obviously, the market price is a cash prize, so that's $24 to $26 cash prize. So at something like $25 as noted, that's $18 cash cost for us. So if the poly spot price drops to below our cash cost, then we would strongly consider shutting down our Phase 1, but otherwise, no, we will continue to operate it.

Okay. And just one quick module question on capacity. It sounds like module capacity is going from 1 to 1.2 by the end of the year. Versus your cell capacity, any plans to change that? And what are you seeing in terms of tolling costs for the cells? It looks like you're tolling some of your purchase wafers to sells.

[Chinese]

[Chinese]

Okay. So Satya, with regards to the cell capacity, no, there's no plans to increase the capacity there. I think the market recognizes that there's not as much value there. In terms of the tolling cost, it's about $0.16, but for Virtus, yes, it's going to cost a little bit more, like maybe $0.01 more.

Your next question comes from the line of Kelly Dougherty of Macquarie.

The revenue guidance of $200 million to $220 million implies that the ASP pressure remains pretty intense. So just wondering if you can give us a sense of what you're expecting for the second quarter? And then maybe even a little further out, any thoughts for where wafer and module pricing go over the next few quarters?

[Chinese]

[Chinese]

[Chinese]

[Chinese]

Okay. All right, Kelly, for the second quarter, we're predicting $0.75 per watt on modules. For wafers, we are predicting $0.30 per watt. And for further out, we're going to have to take a pass on that as the market conditions continue to make it challenging to make predictions on ASPs.

Understood. Maybe let me ask it a little bit differently. We're hearing chatter in the market about wafer ASPs back to be well below $0.25 by the end of the year. Maybe, can you tell us how you price relative to some of your peers? Maybe what kind of premium are you able to command for Virtus and for the mono wafers?

Okay. [Chinese]

[Chinese]

Yes, so Kelly, in terms of our premium, typically, our premium would be something like 5% to 10% over the market. So in essence, we have always priced above that. So even if something goes lower, we'll probably still command that premium. Now overall, in terms of where we stand in the market, I mean obviously, we're going to use a lot of wafers ourselves, but we also produce a lot of mono wafers now. So that will back our pricing as well as our processing cost. And of course, we have more high-efficiency products and we're in the process of developing even higher efficiency products.

Okay. So that 5% to 10% includes the higher efficiency? Or on an apples-to-apples basis, you can sell 5% to 10% higher, and then maybe it's even more because you offer higher efficiency products?

Yes, let me -- I think I know the answer to that, but let me double check. [Chinese]

[Chinese]

Yes, Kelly, Mr. Li's saying that, and I think this is something that you know, that we've converted our capacity to producing only high-efficiency wafers. As a result, we don't really have lower efficiency products in general. So I suppose, to answer your question more directly, the premium would be our high-efficiency products which typically is our only products over the products in the market.

Okay. Great. And maybe on OpEx. As you continue to focus on high-efficiency on the R&D side and then transition more into the module business, how should we think about OpEx trending? I don't know if you have a target percent of revenue or maybe an absolute dollar amount we can think of for this year and maybe even as we look ahead.

Sure. Let me check with Henry and Mr. Li. [Chinese]

Okay. Actually, we invest a lot of our expenses on R&D and we, I think were, for our projection we were capable of about almost the USD $1,000 [indiscernible] per quarter that were out of the USD $40 million per year for R&D expenses.

[Chinese] but operating cost.

For the overall operating expenses, currently we're almost about USD $30 million per quarter. We almost keep [ph] the same level throughout the year, but there probably may be $1 million or $2 million or more in the second half of the year or quarter.

I guess, Kelly, one other thing we're pointing out is that we already spend a lot on R&D, so right now, we'll spend a little bit more. But basically, our level has already been historically pretty high.

Okay. Great, that's helpful. And then just one last clarification question, it's on the 20-Fs as those mentioned of some financial covenants associated with the long-term debt, can you give us any detail on what those covenants are? And given what's going on in the pricing environment if there's any concerns about being at risk to breach them?

[Chinese]

Currently, we have 2 kinds of -- and this will be long-term loan. One from foreign bank, different [ph] bank into loan of about $35 million but if you look at it, the breach covenant it will be -- they're determined to see some really not so tight and at this moment I don't think we will trigger any covenant. And then the other long-terms from the local banks and one they're related as their solely poly producing plant and the terms also related there, the average in marketing price, so it will also not trigger these kind of terms.

Okay. Can you just give us an idea what the metrics are that those covenants are based on? Coverage ratio, ASPs, or?

Yes. There's no ASP limit, it's just the average price such as the price we offered to the poly plant cannot be lower than the average marketing price. And such as your -- before they allow the ones we cannot open any bank account with the other banks, [indiscernible] those kind of terms.

[Operator Instructions] Your next question comes from the line of Ahmar Zaman of Piper Jaffray. W. Karen Tai: This is Karen calling on behalf of Ahmar. I had a question on your cost reduction effort. You did a great job on reducing your cost down to $0.74 for your total module costs and then your target being $0.70 next quarter. Can you just give us a breakdown on your dollar module processing cost in addition to the wafer processing cost target that you gave out?

Sure, it's no problem. [Chinese]

Actually, the cost reduction for the module, there's almost a $0.02 from wafers and another $0.02 from the module. And doing the -- for the module, cost reduction contribution, there's a $0.01 from in a external material as a reduction and $0.1 from our internal efficiency improvement

[Chinese]

Yes, so it will probably be something like in the second quarter, something like $0.14 plus maybe $0.24, $0.26. W. Karen Tai: Okay. And then, some of your peers are going further downstream on the total solutions or the systems business. Are you guys also considering that with the projects going down to projects? Can you elaborate on what your strategy is?

Sure, let me check with the team on that. [Chinese]

[Chinese]

Yes, Karen, I think you understood that. But just for everyone, what Mr. Li said is that as everyone knows from our prior announcements, we have a 20-megawatt project in Qinghai. We've also done some work recently in Bulgaria. But the project business is not our primary focus. We're doing it to gain some better understanding of our end markets and was certainly not going to be developing a lot of power plants in the near future. But we will be taking a look at the business. But no, there's no big plans if you will, to go further downstream. W. Karen Tai: Okay, and then can you talk about the tolling in the quarter and the other revenue that comes from other?

Sure. By tolling, are you referring to our wafer tolling or some of the cell tolling that we do, as in we have others do our cell tolling? W. Karen Tai: Your wafer tolling, revenues from your wafer tolling.

Okay. [Chinese] So, we actually don't have any wafer tolling for this past quarter. For your other question, on the other materials or other sales, I can say that it's probably some slurry and if you will, other waste materials, byproducts that we can sell. But let me double check with the team here. [Chinese] So yes, Karen, I checked with the team and that pretty much confirms that. Yes, the other sales which is something like, I think $10 million or so, that's primarily if you will, other materials. W. Karen Tai: Okay. And then what about in the second half of the year when you're trying to ramp up your diamond wire business, and can you just elaborate on what you're trying to do on that side?

Sure. [Chinese]

[Chinese]

Yes, so I think, Karen, you understood that. Again, what Mr. Li is saying is that because it's a very new product, it's something that we're experimenting with and we're going to go out in markets, so it's a little hard to say at this stage.

Your next question comes from the line of Aaron Chew of Maxim Group.

First, I'm wondering if you could just provide a little color on what's driving the discrepancy in growth, at least in terms of 1Q on the wafer and module front? I mean you clearly had much more sizable growth in the wafer end than on the module end. And more like your 2Q guidance suggest that may revert to the mean a bit, just wondering if there's an explicit change in strategy there that's driven by a large customer or just representative of end-user demand. And secondly, could you just clarify your earlier response, I believe to Kelly's question, on the price premium of 10%? I assume that's in reference only to wafers. Is it safe to assume your modules' probably priced with a slight discount to the Tier 1 guys, and roughly, what discount is that?

Sure. [Chinese]

[Chinese]

As for the discrepancies on the growth, the reason is actually something very fundamental. There is a lot of demand out there for quality, high-efficiency products. So as a result, we saw a very, very strong demand for our quality high-efficiency wafers, which other people then made into quality high-efficient modules. And in the second quarter, we'll be taking more of our quality high-efficiency wafers and making them into our own high-quality efficiency modules and selling those. So that's basically the funny discrepancy if you will, on growth. On the second question, let me ask the team now. [Chinese]

[Chinese]

Okay. So, Aaron, on your second question, to clarify on the wafers, yes, there's the premium. It's a premium because of our high-efficiency products. On the modules, there's a discount, and as you know in the second, in first quarter rather, we sold it at $0.84 per watt, and part of that may be due to the fact that we sell more to middle year -- middle tier, rather, customers. But as we become more familiar with the module selling environment, we think that while there is a discount, it's a little unclear what that discount really is, or even if there is one. Because apparently, some of our competitors in the module space, they sell through distributors or other third-parties, or sell with contracts that have certain future price adjustments, and those price adjustments might hit the SG&A line as opposed to the gross margin line later on. So we're not clear exactly what the final ASPs look like, but we suspect that the premium they have over us may, in fact, be not significant.

Okay, that's fair. If I could just have one quick follow-up on that. I understand the reluctance to forecast pricing following June, but following your pretty famous or now famous prediction of $1 a watt in fourth quarter made in the second quarter last year, could you at least maybe speak generally to what you think happens in second half? I mean, if you're already seeing modules maybe around $0.75 per watt, maybe generally, what do you think happens following the cuts in Germany and Italy at June 30? I mean, is there some type of floor you see? Are you seeing another 10% plus decline? I mean, where roughly do you think things should get by year end?

Sure. I think this is one that, thanks to the prediction, as of last year, we'll get that every once in a while. [Chinese]

[Chinese]

Yes, Aaron, so Mr. Li has a guess and he's saying that in essence, based on what we know right now at the current level of techniques, the bottom floor on pricing is probably something like $0.65 to $0.70. So there might not be too much room, if any, after that.

[Operator Instructions] Your next question comes from the line of Pranab Sarmah of Daiwa Capital.

My first question is on Q1, out of 375 megawatt worth per shipment, how many percentage were on Virtus wafer?

Okay. [Chinese]

[Chinese]

About 1/3 of the wafer shipped were Virtus.

And how do you expect Virtus wafer will fan out in second quarter and maybe end of the year?

[Chinese]

[Chinese]

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[Chinese]

Yes, so Pranab, Mr. Li has indicated that the trend is probably going to continue in the same way. And the actual trend is about 1/3 Virtus, 1/3 mono and about 1/3 more regular multi. Yes. So obviously the second quarter as well as for the full year.

Full year, quite 1/3, got it. And second question is on your diamond wafer side, you indicated like your diamond wire cut based wafer will be available in the market. Is the diamond wafer is in-house built or it is externally sourced at this point?

You mean the diamond-wire, it's definitely in-house.

Diamond wire is in-house, right?

Yes, we make our diamond wires in-house.

And when do you think that cost will be competitive compared to normal wafer cutting versus diamond wafer cutting?

I think we do, but let me get the more official answer from the team. [Chinese]

[Chinese]

Okay. So, Pranab, what Mr. Li is saying is that right now, based on our work and experiments and the R&D that we've done, we think that we can sell our version of the diamond-steel wires at a price that is the same as regular steel wires, so obviously that would make it very competitive and it should make things something like 15% more efficient.

I guess, I add the one comment to Mr. Li's comments. What Mr. Li mentioned is the same cost from the common wire and the diamond wire which means that for the cutting expenses, that is the cost for the diamond wire and the common wire own because the importance. Yes, yes.

Your next question comes from the line of Amy Song of Goldman Sachs.

I just have a one follow-up question on the demand visibility. Can you talk about -- I believe you talked about Germany, but what about any other country and regions? Maybe as early as the next month or starting from quarter, please?

Is there, I guess any particular market you would like us to talk about, or maybe should we just go to the usual ones Amy, like Europe and China?

Yes, U.S. and also Japan and in Australia, it seems like you guys are already penetrating into, too so, please.

Okay, let me direct that to the team. [Chinese]

[Chinese]

Yes, Amy, I'm sure you understood that, but just for everyone else on the call. Mr. Li views the world market in this way. There's Europe, U.S, places like Japan and Australia which we view as good markets, that we'll focus on. We've done well in Europe, historically and now. We're hoping to do better in the U.S. very, very soon. We've done very, very well in Australia as announced earlier on this call, and we're in the top 3 there, and we're hoping to make progress in Japan later in the year, maybe in the fourth quarter. Now for other markets such as China, India, Thailand, South America, we view that as new markets and markets that are unfortunately not as good and hence, we will not focus on those markets as much.

So do you have a particular forecast? Or any -- those countries that you mentioned mod [ph], I'm sure you have an internal model just like everybody else does. So do you have some numerical figures, can you share with us?

Sure, let me ask the team. [Chinese]

[Chinese]

[Chinese]

[Chinese]

Okay, so Mr. Li has indicated that the view here is that the European market should be something like 15 gigawatts, U.S, 2 to 3 gigawatts, Australia we're thinking 600 and 800 megawatts, Japan is a little uncertain, but it's looking like it's going to be pretty good. Now, China, the numbers are very unstable and there's all sorts of things being announced overtime. But based on what's out there, people have been saying 9 gigawatts. But again, it's a bit unstable. There some similarly big numbers, but perhaps not nearly as big announced out of India, South America, Thailand, even South Africa. And if you put all those together from these markets, are not as good. There might be something like 20 gigawatts that's announced out there but we're not sure about how reliable that demand really will be. So that's the view, if you will, from here, Amy. Amy, does that answer your question?

And your final question comes from the line of Cheng Yang of China International Capital.

This is Cheng from China International Capital Corporation on behalf of Stephen Zhang. Well, I just have one quick question on the convertible ops. I mean over the past quarters you guys done a good job in terms of the nonoperating measures, where I mean, you've repurchased like over $90 million convertible, and recall [ph] , of dividends on the bond repurchased. So I mean given that the bond is trailing at roughly 60% of its face value in the market, I'm just wondering what's your strategy going forward? I mean maybe you guys can give us some color on the -- on to what extent you guys would consider the nonoperation measures in terms of bond repurchase?

Sure, let me direct that to the team. [Chinese]

[Chinese]

Yes, actually and let me answer this question. Actually, we buy a lot of common bonds before. Until now, we already buy back about $80 million -- $89 million. And after that, starting from this year, we do -- first in line is that we don't see any more -- a lot of chance to buy back the convertible bond. And then the second line is that we also consider the cash. Actually, we try to -- we still have a few project ongoing for further financing. So if we get more money and even there's some chance for a higher discount in convertible bond we will try to buy back further.

We are now approaching the end of the conference call. I will now turn the call over to ReneSola's Chief Financial Officer, Mr. Henry Wang for his closing remarks.

Thanks, everyone. In conclusion, we continue to experience several pricing pressure as a result of the macro conditions and the marketing oversupply. Once decline ASPs to occur in our margins, our cost reductions have allowed us to maintain a reasonable margins under the [indiscernible]. Furthermore, our increased sales and the marketing efforts are starting to show their value with recent success of our module business. We will continue to invest heavily in our module business. As we expect to grow substantially this year, we will also invest in the R&D to improve our technology and the manufacturing process as well as lower cost. We are confident our strategies have positioned us and it will allow us to deliver positive returns to our shareholder once the marketing conditions pickup. Thank you again for joining us today. If you have additional questions, please do not hesitate to contact us.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.