Is the Solar Earnings Slump Easing Up?

By Ucilia Wang

Solar seems to be recovering, but confidence remains skittish and not everyone is on the rebound.

That mixed message is at the heart of earnings reports this month. After reporting devastating losses earlier this year, some solar companies have seen their sales improve. But those companies and their investors say its still too early to declare a turnaround.

Two Chinese companies, ReneSola (SOL) and JA Solar (JASO), both reported their second-quarter financial results Wednesday, and investors weren't impressed with the numbers.

ReneSola managed to narrow its second-quarter loss, posting $3.6 million, or 5 cents per ADS, which beat the Street consensus of 6 cents per ADS. But its revenue of $82.6 million fell short of the expectation of $90 million

The Chinese company, which makes silicon wafers, cells and panels, recorded a net loss of $30 million, or 44 cents per ADS for the first quarter of this year. For the second quarter of 2008, when market demand was strong, ReneSola posted a net income of $23.3 million, or 38 cents per ADS.

ReneSola's shares fell 4.43 percent to reach $5.4 per share in recent trading.

JA Solar, meanwhile, reported a wider second-quarter loss. The Chinese solar cell maker posted a loss of $28.5 million, or 18 cents per ADS, compared with a loss of 28.3 million, or 18 cents per ADS, in the previous quarter. The company recorded a net income of $46.6 million.

JA Solar, which replaced its chief executive Samuel Yang with its chairman Baofang Jin earlier this month, generated a second-quarter revenue of $88 million, which more than doubled the first quarter revenue of $33.9 million. But it still fell 51 percent from $180 million in the second quarter of 2008.

JA's shares fell 12.4 percent to reach $4.60 per share in recent trading.

Another Chinese company, wafer-maker LDK Solar, is due to announce its earnings this afternoon.

A rapid decline of prices for silicon and related components that go into making solar panels, coupled with low market demand and the credit crunch, have pummeled solar energy equipment makers worldwide. The slump started last year and got worse as 2009 dawned. But recently, key players in the market have expressed some optimism that the market conditions will improve later this year.

Executives at both ReneSola and JA Solar said they expect the market conditions to improve. ReneSola said its revenues should grow by 60 percent to 70 percent from the second quarter.

Applied Materials (AMAT), a factory equipment maker in Santa Clara, Calif., also narrowed its losses for the second quarter. But the company said the solar market remains volatile.

Some companies have managed to turn around their finances in the second quarter. San Jose, Calif.-based SunPower (SPWRA) posted a net income of $24.17 million after recording a loss of $4.79 million for the first quarter (see SunPower Posts 2Q Profit, Feels Upbeat About Future).

First Solar (FSLR) in Tempe, Ariz., also produced strong second-quarter results. In fact, the company has recorded profits in recent quarters while many of its competitors posted losses.

The company posted $180.6 million in net income, or $2.11 per share, for the second quarter, compared with $164.6 million, or $1.99 per share, for the first quarter and $69.7 million, or $0.85 per share, in the year-ago period.

But First Solar's plan to offer rebates to its customers doing business in Germany showed that competition from silicon-based panel makers is growing stronger. Most of the panels on the market today are made with silicon, but First Solar makes cadmium-telluride panels (see First Solar Fears Competition From Silicon Panel Makers).

Comments

[Jigar Shah:]

The solar industry is focused so much on price that it has forgotten the problems with its industry -- project finance. You would think that they would do more than fly around the world pitching people. They would actually pay more money to their trade assoctiations and create a formidable force that can get big investors like insurance companies and sovereign funds to get in. The lack of well funded non-profits to support the solar industry to solve these structural problems shows a real lack of maturity in the industry -- it is always every man for themselves. While I am a capitalist and support this in some cases, in other cases it is better to pool your resources together and start solving the fundamental market blockers.

Aug 13 05:23 PM