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May 4 (Bloomberg) -- Renewable Energy Corp. ASA fell the most in five months after the Norwegian solar-components producer gave a weak market outlook and posted a first-quarter net loss because of a shortfall in financial items.

The shares slumped as much as 7.6 percent, and were down 7.2 percent at 16.95 kroner as of 2:01 p.m. in Oslo, the biggest drop since Nov. 29.

The net loss was 108 million kroner ($20 million), or a diluted loss of 0.11 kroner a share, compared with profit of 346 million kroner, or diluted loss of 0.01 kroner a share, a year earlier, the Oslo-based company said today. Sales were 4.1 billion, up from 2.4 billion kroner a year earlier.

“By the end of the quarter things have started to drop and going forward they have given quite a weak outlook,” Are Grongstad, an analyst at Agilis, said over the phone.

Earnings before interest, taxes, depreciation and amortization rose to 1.5 billion kroner from 415 million kroner a year earlier. REC was expected to have an EBITDA of 1.2 billion kroner, according to the average of 15 analysts surveyed by Bloomberg. The company posted a loss of 856 million kroner on financial items in the period.

“The quarter was very strong and the operational performance by REC on a company-specific basis was very good,” Preben Rasch-Olsen, an analyst at Carnegie ASA, said over the phone. “The problem is the solar industry is so rotten. The demand is softening; Italy is extremely uncertain and there seems to be a general slowdown in the whole industry.”

‘Turbulent Market’

Uncertainty about a subsidy program in Italy reduced demand in the first quarter, REC said. The company is expecting pressure on profit margins for producing modules and wafers in the second quarter, while polysilicon margins are expected to remain fairly stable, the company said. “A continued weak market may lead to inventory buildup and REC may need to reduce capacity utilization,” it said in the statement.

Chief Executive Officer Ole Enger said in an earnings presentation that he was satisfied with current inventory.

“If we have a turbulent market for a quarter or two, I think we are in a good financial position to stand through the storm, said REC Chief Financial Officer Bjoern Brenna in an interview in Oslo. ‘‘I think it will be very tough for many of our competitors.’’

The financial items that pulled down the earnings were a result of currency derivative contracts and a convertible bond being marked to market, Brenna said.

REC reported that wafer and module prices fell in the quarter while average prices for polysilicon were stable.

The company produced 4,390 metric tons of polysilicon in the first quarter, higher than the 4,000 tons the company forecast in February. Multi and Mono wafer production was 351 megawatts, in line with the forecast 350 megawatts. Module production was 148 megawatts, less than the forecast 170 megawatts.

To contact the reporter on this story: Stephen Treloar in Oslo at

To contact the editor responsible for this story: Angela Cullen at

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