SunPower Making Panels at Full Speed, May Boost Capacity

SunPower Corp. (SPWR), the second-largest U.S. solar manufacturer, is selling panels as fast as it can make them and is seeking ways to expand production capacity in anticipation of increasing global demand.

The company reached “full manufacturing utilization” in the second quarter, Chief Financial Officer Chuck Boynton said during a conference call yesterday. It’s considering expanding a production joint venture with the Taiwanese electronics maker AU Optronics Corp. (2409) or building new fabrication facilities.

SunPower is mulling an expansion as the rest of the industry contends with a global oversupply of panels that’s driven down prices and margins. Chief Executive Officer Tom Werner is seeking to position the company to gain share, especially in Asia.

“We’re fully allocated,” Werner said in an interview yesterday. “There are times you wish you could build a new fab.”

SunPower’s sales in Asia doubled in the second quarter to $101.9 million from $48.2 million a year earlier, driven by surging demand in Japan where the government is promoting wider use of solar panels to replace electricity from shuttered nuclear power plants. The company estimates is has about 10 percent of the country’s residential panel market.

The company expects to be profitable in Europe this year, and is developing financing mechanisms to spur demand for rooftop projects in the U.S.

“The speed of international development is a sign of many positive things,” Werner said. “When things turn on, they tend to turn on very quick, very fast.”

Capital Efficiency

Other solar companies are unlikely to follow SunPower’s lead by expanding capacity, Sanjay Shrestha, an analyst at Lazard Capital Markets in New York, said yesterday in an interview. The global oversupply of panels has had less of an impact on SunPower because demand has remained strong for its products, which are among the most efficient in the industry.

The company will probably seek manufacturing partners before it opens a new factory, he said.

“They’ll probably look at ways of being capital-efficient in terms of expanding manufacturing, likely looking at contract manufacturing,” he said.

The company shifted to a profit in the quarter, beating estimates. Net income was $19.6 million, or 15 cents a share, compared with a net loss of $84.2 million, or 71 cents, a year earlier, San Jose, California-based SunPower said in a statement yesterday. Revenue slipped 3.3 percent to $576.5 million.

Beating Estimates

Including $73.5 million in revenue from utility power plants the company is building, and excluding some restructuring expenses, earnings were 48 cents a share. That beat by 37 cents the average of 13 analysts’ estimates compiled by Bloomberg.

SunPower shares have more than quadrupled this year, the strongest performance on the WilderHill New Energy Global Innovation Index. The company last reported a profit in the fourth quarter of 2010.

The company expects earnings this year of $1 to $1.30 a share, compared with a May forecast of 60- cents to 80 cents a share, on sales of $2.45 billion to $2.55 billion.

SunPower is benefiting from higher prices in Europe and surging demand in Japan, Ben Kallo, analyst at Robert W Baird & Co. in San Francisco, said in an interview before the earnings were released. He raised his price target to $34 a share from $24 in a July 30 research note.

“I think the market is improving across many regions and many sectors,” Kallo said. “Because of their diversification I think they’ll benefit.”

First Solar Corp. is the largest U.S. solar manufacturer.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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