Canadian solar Inc. (Canadian Solar) has reported net revenues of $49.5 million for the first quarter of 2009, compared with the net revenues of $171.2 million in the year-ago quarter. It has also reported a net loss of $4.8 million, or $0.13 per diluted share, for the first quarter of 2009, compared with the net income of $18.6 million, or $0.57 per diluted share, in the year-ago quarter.

First Quarter 2009 Results:

Shipments for the quarter were around 18 MW, including 1.2 MW of solar grade e-Modules and 1.6 MW of solar cells and specialty solar application products.

Non-GAAP net loss for the quarter was $0.10 per diluted share, compared to non-GAAP net income of $0.64 per diluted share for the first quarter of 2008 and non-GAAP net loss of $1.35 per diluted share for the fourth quarter of 2008, in all cases excluding stock based compensation costs.

Shawn Qu, chairman and CEO of Canadian Solar, commented: ‘Our results for the first quarter were in line with our expectations, as we continued to exercise prudent financial management in response to the global economic downturn and the resulting pressure on all levels of the solar industry value chain. We are working closely with our supply partners to make sure that our cost structure remains competitive. The Company ended the quarter with a strong, liquid balance sheet providing our customers and banking partners with confidence in our ability to honor our long term commitment to our products. We exercised a conservative shipment strategy in order to minimize channel inventory buildup. Consistent with our positive long-term view, over the past five months, we have doubled the size of our sales force, with further additions planned in Europe, North America and Asia. We have started to see success in our strategy as demonstrated by our increased sales into a few non- traditional markets such as Korea and China.’

Arthur Chien, CFO of Canadian Solar, noted: ‘Cash and cash equivalents changed from $115.7 million as of December 31, 2008 to $92.6 million as of March 31, 2009. The change was primarily due to increases in working capital commitments and long-term prepayments. The moderate increase in inventories was attributable to support for anticipated customer sales over the next few quarters. Restricted cash increased from $20.6 million as of December 31, 2008 to $113.1 million as of March 31, 2009. The increase was mainly due to pledges of cash to support outstanding short-term borrowings.’

Recent Developments

Based on an updated assessment of long-term demand for solar products and in order to improve margin structure, the company resumed the Phase II expansion of solar cell facility. This is expected to increase total solar cell capacity from 270 MW to 420 MW by the middle of Q3 2009. The company expects to spend around $18 million to complete this expansion.

The company plans to continue to expand internal ingot capacity to 200 MW from the current 120 MW to 150 MW level in order to better control the supply chain and improve margin structure.

The company expects to maintain module capacity at the current 620MW level. We expect to stay on course with flexible vertical integration model and continue to strengthen strategic partnerships with long-term wafer and cell suppliers. At the same time, the increased level of internal ingot, wafer and cell capacity is expected to help us improve overall margin structure.

The company successfully renegotiated long-term supply contract with a major Chinese polisilicon and wafer manufacturer. The recently signed amendment reduced silicon and wafer purchase obligations for 2009 and reset the price to the current market level. The amendment also provided a flexible mechanism to allow both sides to adjust the price for the future year according to market conditions.

The company signed an amendment to the long term supply agreement with another major China based wafer company to allow both sides to continue the supply relationship on a basis that reflects current market conditions, while also opening discussions on the long term supply contract between the two companies.

As part of the company’s sales force growth, the company is pleased to announce that Yan Zhuang, will become vice president, sales and marketing effective June 1, 2009. He will resign from Canadian Solar’s board of directors where he has served as an independent director since September 2007. Zhuang has worked in corporate branding, sales and marketing positions with, or provided consulting services to, a variety of multinational companies for over 20 years. He previously served as senior vice president, sales and marketing, and head of asia for Hands-on Mobile Ltd. Before joining Hands-on Mobile, he held various marketing and business operation positions with Motorola Inc., including as its Asia Pacific Regional Director of Marketing Planning and Consumer Insight. Mr. Zhuang founded and until recently served as CEO of K’s Media. Zhuang holds a Bachelor of Electrical Engineering degree from Northern Jiao-Tong University, China, an MSc in Applied Statistics from the University of Alberta, Canada and an MSc in Marketing Management from the University of Guelph, Canada.

Outlook

Within the first quarter, shipments increased sequentially month over month. This positive trend continued into Q2 and the company expects further increases in Q3. Offsetting this positive trend, however, customers, especially those in US, continue to face an uncertain financing environment. Additionally, recent inventory clearance efforts by some of competitors have resulted in declining module ASPs, which may cause delays in project purchase decisions by customers. The company expects that these issues may ultimately lead to some order reductions or push-outs into 2010. As a result, the company is taking a more conservative outlook and now expects full year 2009 shipments to be around 200 MW to 220 MW, with previously issued net revenue outlook adjusted accordingly.

The company expects that its Q2 shipment level will be significantly higher than that of Q1, reflecting improved solar installation levels around the world and increased demand for high-quality and cost-competitive solar products. The company also expects that it will achieve greater market diversification as the company has order booking to sell into Germany, Spain, Italy, the Czech Republic, France, Korea, the US, China, Japan and several other countries in Q2.

Shawn Qu continued: ‘Canadian Solar has achieved the scale and cost structure to be a long-term player in the solar industry. We currently have one of the most complete crystalline solar module product lines, consisting of high-efficiency mono-crystalline solar modules, multi-crystalline solar modules and medium power but low cost e-Modules. Our high-efficiency crystalline solar products compete favorably with competitors, while medium power e-Modules supplement high-efficiency product line by offering the quality and durability of crystalline products at prices approaching those of thin-film products.

Our processing costs remain very competitive. We expect that this benefit coupled with declining raw materials costs and increased internal capacity from ingot to cell, will allow us to offer favorable pricing to maintain and hopefully build share in 2009. Overall, we remain positive in our outlook and in our long-term prospects for profitable growth and industry leadership.’