Solar firms struggle in tough first quarter

5 May 2011
Solar manufacturers have started reporting first quarter results, with policy uncertainty among the factors lowering profits and leading to a gloomy outlook for the next three months.



First Solar manufacturing plant in Perrysburg, Ohio


First Solar’s share price trades as low as $124.70 on Nasdaq yesterday, after it announced net quarterly profits of $115 million, down from $172 million in the first quarter of 2010. The share price was down more than 6% from yesterday’s close of $134.66.

The firm dampened its expectations for the second quarter, but still expects to hit its earnings target for 2011, of $9.23-9.75 per share.

Adam Krop, New York-based senior solar analyst at Ardour Capital, told Environmental Finance that he is confident the 2011 expectations can be met – although there is more risk for investors given the firm’s performance in the first three months of the year.

“They have a strong North American 2.4GW pipeline that they’re executing on,” he noted, as well as looking to additional markets such as India and Australia.

“There’s more risk there, sure,” he added. “I’m still confident.”

Yesterday also saw rival solar manufacturer REC report a NOK 84 million ($15.8 million) loss in the first three months of the year, compared to a NOK 1.1 billion profit in the previous quarter, blaming “reduced sales volumes of all products”.

Revenues dropped from NOK 4.9 billlion in the last four months of 2010 to NOK 4.1 billion in the first three months of 2011. However, 2011 started much stronger for REC than 2010, when the manufacturer reported revenues of NKr 2.4 billion.

Uncertainty over subsidies for solar projects in Italy impacted on REC’s performance, the firm said, as well as pressure to reduce solar module prices towards the end of the three-month period.

Watch out for Chinese solar results - analyst
Thomas Maslin, associate director for solar research at IHS Emerging Energy Research, said: “The solar market is still heavily reliant on subsidies so it’s at the whim of political will.”

Last week, Dutch manufacturer Evergreen Solar released a limited amount of preliminary information on its first quarter performance, reporting sales of around 18MW of capacity, priced at $1.86 per watt. This is a drop on the last three months of 2010, when Evergreen sold 47MW at an average of $1.90 per watt.

“While the first quarter has historically been slow for the industry, the sluggish demand has unexpectedly continued early into the second quarter,” said Evergreen president and CEO Michael El-Hillow. “This longer than expected slowdown, combined with the continued worldwide capacity expansion, has contributed to a significant increase in solar panel inventory throughout the distribution channel.”

First quarter results from a handful of China-based solar manufacturers will supply more information about the sector, he noted, because Chinese firms supply around 60-70% of the market.

Firms such as First Solar and SunPower offer more differentiated technology, he said. “How they’re competing with the Chinese is a really interesting dynamic to watch,” Maslin added.

Jess McCabe