First Solar, SunPower See 2012 Gains After Quarterly Loss
First Solar Inc. (FSLR) and SunPower Corp. (SPWR), the two largest U.S. solar companies, said restructuring efforts this quarter will improve 2012 results after posting first- quarter losses that exceeded analyst’s estimates.
First Solar raised its 2012 earning forecast, due to cost savings it expects from firing 30 percent of its workforce, the company said yesterday in a statement. SunPower said its average cost of producing solar panels will drop after it closes an older plant in the Philippines this year. First Solar also promoted James Hughes to chief executive officer.
The two companies are seeking to streamline operations after increasing competition from China drove down prices for solar panels 49 percent in the past year and waning government support in Europe slowed demand, said Mark Bachman, an analyst at Avian Securities LLC in Boston.
“This quarter was difficult for the entire industry, but First Solar and SunPower are trying to right-size their operations and cut costs,” Bachman said in an interview. “This is not the market anyone was expecting a few years ago but some painful restructuring might help you survive.” He has neutral ratings on both companies.
First Solar, the world’s largest thin-film solar company, expects net income this year to range from $4.00 to $4.50 a share, up from an earlier forecast of $3.75 to $4.25, “based on reductions in our ongoing cost structure related to restructuring initiatives,” the company’s Chief Financial Officer Mark Widmar said yesterday on a conference call.
The “basic imbalance between supply and demand requires First Solar to seek a new strategy for delivering profitable growth that can be sustained over an extended period,” Chairman Mike Ahearn said on the call.
Ahearn became interim CEO in October after the company ousted Rob Gillette, is now stepping aside for Hughes. The new CEO, 49, joined First Solar in March as chief commercial officer.
The higher guidance may not signal a recovery in the solar industry, said Aaron Chew, an analyst at Maxim Group LLC in New York, said in an interview. “I think that the raised guidance just reflects the one-time savings from the layoffs and closures.”
Falling Production Costs
SunPower announced April 16 plans to shutter this year its oldest factory, in the Philippines, and shift production to facilities with more efficient equipment. The move will reduce by 2 cents a watt its average cost of producing solar panels, Tom Werner, the San Jose, California-based company’s chief executive officer, said on a conference call yesterday.
“We are confident of achieving or beating our cost target of 86 cents per watt, on an efficiency-adjusted basis, by the end of 2012,” Werner said. SunPower’s costs were $1.08 a watt in the fourth quarter
SunPower, which is 67 percent-owned by Total SA, also said gross margins are increasing. The company’s profit after production costs will be 11 percent to 13 percent in the current quarter, up from 9.2 percent in the first quarter and 6.8 percent in the fourth quarter of 2011. That’s still less than the 19.6 percent it reported for the first three months of 2011.
SunPower reported a net loss of $74.5 million, or 67 cents a share in the first quarter, exceeding by 17 cents the average of 10 estimates compiled by Bloomberg. Sales increased 9.4 percent to $494.1 million from a year earlier.
Excluding $401 million in restructuring charges and $43 million for warranty expenses, First Solar reported a first- quarter loss of 8 cents a share. The company was expected to earn 48 cents a share, according to the average of 29 estimates compiled by Bloomberg. Sales fell 12 percent to $497 million.
The companies’ efforts to adjust to slowing demand may not help, said Theodore O’Neil, an analyst at Wunderlich Securities Inc. in New York.
“Once you start restructuring in a business where everyone else is restructuring and margins are falling, you get stuck in a downward spiral,” O’Neil said in an interview. “Your move, designed to make you more competitive, only puts you on the same footing as your competitor once again. It’s a race to the bottom as every company lowers prices, restructures and lowers again in an agonizing, lather, rinse, repeat cycle.”
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