JA Solar Holdings Co. Ltd. said Tuesday that its fourth-quarter net income and revenue surged as customers around the world bought up its photovoltaic cells for massive new solar-power installations.

However, investors displeased with a drop in profit margins sent the volatile stock down 10 percent.

JA Solar manufactures photovoltaic cells used to convert sunlight into electricity. Its customers combine them into modules and market the modules in Europe, North America and other regions that seek to generate more solar power. Demand for solar energy has remained strong despite a decline in European incentive programs that had been expected to put pressure on the industry.

The company, based in Shanghai, China, increased its quarterly net income to $118.7 million, or 59 cents per American Depository Share. JA Solar did not include a dollar figure for its 2009 net income in the latest release. A year ago, it had reported quarterly earnings of $22.3 million, or 14 cents per American Depository Share. Shares of some foreign companies listed on U.S. exchanges are known as ADSs.

The latest period includes a gain of 20 cents per share on the sale of Lehman Brothers notes, a loss of 2 cents per share from discontinued operations. An accounting move to cover the change in the value of some derivatives reduced earnings by 13 cents per ADS. Excluding these items, the company would have earned 54 cents per ADS.

The company’s quarterly revenue more than doubled, to $584.3 million from $246.5 million a year earlier. JA Solar’s soaring revenue and net income show how quickly the company has grown. Total shipments during the fourth quarter doubled from a year earlier to 463 megawatts (MW).

However, operating expenses also increased, to $22.7 million from $13.4 million a year earlier. Gross margin slipped to 19.2 percent from 20.6 percent in the fourth quarter of 2009 and 22.5 percent in the latest third quarter.

Analysts surveyed by FactSet expected the company to earn 49 cents per ADS on revenue of $574.2 million. Analysts’ estimates typically exclude one-time items.

JA Solar’s net income for the year 2010 was $266 million, or $1.61 per ADS, compared with a loss of 18 cents per ADS in 2009. Revenue more than tripled to $1.8 billion from $572.5 million. For the year, shipments increased nearly three-fold over 2009.

The company said it expects to boost total shipments in 2011 by 50 percent, to 2.2 gigawatts (GW) from 1.46 GW. Sales contracts signed to date for 2011 delivery amount to more than 2GW, representing approximately 90 percent of the company’s expected shipments for 2011.

“With demand for our products currently well ahead of what we can produce, we intend to quickly ramp up production capacity in 2011,” said CEO Peng Fang in a statement. “In particular, we intend to increase solar cell production capacity to more than 3GW, while module capacity is expected to increase to 800MW and wafer capacity to 600MW by year-end.”

The official results were presented in Chinese yuan. JA Solar converted key figures into U.S. dollars for readers’ convenience, using the exchange rate on Dec. 31, 2010.

JA Solar’s ADSs fell 86 cents, or 10 percent, to close at $7.66 Tuesday.

source: bloomberg