After a rather dismal 2009 for solar producers, demand is beginning to absorb excess supply and drive average selling prices (ASPs) upward. According to leading solar research and consulting firm Solarbuzz, the global market for photovoltaic (PV) solar cells is forecasted to more than double to 15.2 GW of capacity by the end of 2010, up from 7.5 GW in 2009 and driven by strong demand across Europe, especially in Germany. Much of the PV demand is expected to come in the last three quarters of the year as customers race to have their installations in place before FiT’s (feed-in tariffs) expire or are reduced.
One company expanding its European presence is Worldwide Energy and Manufacturing, USA, Inc. (OTCBB: WEMU), a U.S.-based manufacturing company that derives the majority of its revenues from solar module sales, marketed under the “Amerisolar” brand. In the company’s second quarter operating update released just over a week ago, WEMU revealed that of its 15 new clients this quarter, the majority are located in Germany, France, Italy, and the UK. This news builds on WEMU’s first-quarter distributor agreement with UK-based Ardenham Energy and the eligibility of its solar modules for the British government’s Low Carbon Building Program, Feed-In Tariff, and Code for Sustainable Homes projects, both of which have given it a strong foothold in the UK market.
Sales to new European customers have helped WEMU amass an order backlog currently exceeding $100 million, the great majority of which are solar module orders to be fulfilled this year.
WEMU’s solar division delivered more than $35 million in orders during its second quarter, according to last week’s operating update. Thus, in the first half of the year WEMU has made at least $61 million in solar sales, an impressive 325% increase over the first half of 2009. Based on preliminary first half solar revenues, the division is functioning at an annual run rate in the range of $120 million to $125 million for 2010, compared to actual solar revenues of $47.8 million in 2009. At this rate of growth, WEMU could easily see revenues from its Amerisolar brand increase 150% or more from fiscal 2009 to 2010, especially considering the relative historical strength of its fourth quarter. Coupled with evidence of improving industry conditions, this could be just the beginning of three quarters of solid growth for WEMU.
Shares in the industry leaders in the solar sector such as First Solar (Nasdaq: FSLR), Trina Solar (NYSE: TSL), and Suntech Power (NYSE: STP) have been trending up as much as 30% since early June. First Solar reported strong 2Q earnings just this morning, beating analyst EPS estimates by 14%, and WEMU is all but certain to follow the trend when it reports earnings in a few weeks.
With a strong cash balance (as of March 31, WEMU had $16.1 million in cash reserves and has a history, both short- and long-term, of consistently growing its cash position over time), positive operating cash flow (WEMU generated $1.2 million in 1Q operating cash flow), and upward momentum in solar peer comparable stocks, this stock is on track to shine for the remainder of 2010.
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Disclosure: WEMU is a client of RedChip