The change from the Renminbi is looking smart for a couple reasons:
1) TSL's geographic diversification (26% market share in Italy, 25% of projected second half sales see: Solar: Arrivederci Germania, Viva Italia!) includes a push into the U.S. where they are currently one of three Chinese manufacturers with U.L. certification, U.S. business will be 6% of shipments in the second half, up from zero.
2) For European business, the company will benefit to the extent that the dollar is stronger vs. the euro. The dollar is up 4% since its April 22 all-time-low.
That said, management stated that the currency reclassification will be a $3 million negative in the current quarter.
From Seeking Alpha:
...[Ricky Lu] – Deutsche Bank SecuritiesI would like to ask though, what is the tax rate going forward, especially for Q2 and Q3. Second question, what is the FOREX loss that we should except for Q2 and the following quarters?
Terry Wang
As I mentioned before, we’re still enjoying the Chinese tax holiday this year and the tax rate of this year annualized is going to be 4.92% and that is going [to go forward] across the end of the year. And to answer the question about the exchange of loss or gain, as we released due to the change of functional currency, we matched the obligations in the non-US dollars nominated loans and other liabilities and assets so that as long as the US dollar is depreciating, we will have against RMB and Euro and we will have continuous extensive loss, but going forward, when we look at the market in Euro and US dollars and RMB, we are pretty confident that US dollars will come back in the near future so that this currency exchange loss we will be in control and at a manageable level.
Ricky Lu with Deutsche Bank Securities
Can you give color regarding what kind of number we should expect?
Terry Wang
RMB appreciating against US dollar for Q1 is a little bit dramatic compared to the Q2 and end of Q2 so that RMB is getting slow in the pace and depreciating, so that this quarter starting we’ll have less of exchange loss than the first quarter.
Ricky Lu with Deutsche Bank Securities
Can we use $1 to $2 million US dollar loss for Q2, or do you think it’s too high or too low?
Terry Wang
You’re talking about Q2, in first quarter we had $4 million and this quarter we’re expecting around $3 million and in that range.
Ricky Lu with Deutsche Bank Securities
I’m sorry, you mean $3 million for Q2 right?
Terry Wang
Yes....
Here's the complete transcript.
