Solar module maker Canadian Solar reported record 2023 numbers with an 89% surge in net income for the full year (FY), but profits in the fourth quarter (Q4) fell sharply as pricing pressures and lower shipments weighed on margins.

Net income attributable to Canadian Solar was $1 million in Q4 2023, down significantly from net income of $78 million last year. The revenues in the quarter fell 14% year-over-year (YoY) to $1.7 billion from $1.97 billion in the same period last year. The company cited a decline in module average selling prices as well as lower shipments.

Prices of solar modules have fallen sharply to hit all-time lows as increased competition, economies of scale, and higher production from China have created a glut in the market.

Gross profit fell 39% from the prior year to $213 million, with gross margin compressing to 12.5% from 17.4% last year. Management attributed the gross margin compression primarily to lower module pricing and inventory write-downs, partially offset by lower manufacturing costs.

Total operating expenses were flat YoY at $213 million. However, depreciation and amortization charges increased 78% to $89 million as Canadian Solar continued investing in vertical integration and capacity expansions.

Meanwhile, selling and distribution expenses declined 6% sequentially. “The reduction was driven by lower shipping costs due to the ongoing global freight oversupply with the Red Sea shipping disruption largely contained until the end of December. We foresee a slight but not meaningful increase over the course of 2024 due to the ongoing conflict,” said Ismael Guerrero, Corporate Vice President, during a post-earnings call with analysts.

Solar module shipments recognized as revenue rose 26% YoY to 8.2 GW in the quarter, while total debt increased to $3.6 billion as of December 31, 2023, versus $3.3 billion at the end of Q3 2023, driven by new borrowings for working capital and project development.

The top five markets ranked by shipments were China, U.S., Brazil, Spain, and Pakistan.

Full Year 2023

For the FY 2023, Canadian Solar achieved record revenues and profits. The company benefited from record solar module shipments and its energy storage business growth.

Net income attributable to shareholders was $274 million in 2023, up from $145 million in 2022. The increase was driven by higher revenues and gross profits resulting from higher overall shipments.

Revenues rose 9% YoY to a record $7.6 billion in 2023, supported by a 45% increase in total solar module shipments to 30.7 GW for the CSI Solar segment. The development business, Recurrent Energy, saw revenues decline to $498 million from $822 million in 2022 as the company transitioned from a develop-and-sell model.

Total operating expenses fell by nearly 9% to $827 million in 2023, driven by lower selling and distribution costs despite higher R&D spending.

While total module shipments increased 45% from last year to reach 30.7 GW, total debt also rose to $3.6 billion from $2.8 billion at the end of 2022.

The company’s net income in the previous quarter fell 71% as lower module prices hurt its bottom line. In the same month, it also announced it is setting up a 5 GW solar photovoltaic wafer production facility in Thailand to serve customers in the U.S. as the country limited imports of solar modules from China.

“N-type TOPCon cell capacity now accounts for more than half of our total cell capacity and is expected to reach near 80% by the end of this year. Alongside our expansion of TOPCon manufacturing, we also continued to make inroads in our made in the U.S. modules, increased our vertical integration, and strengthened our Thailand supply chain.,” said Yan Zhuang, President of Canadian Solar’s subsidiary CSI Solar.