First Solar Panel Production Swells 39% Amid Strategic Shift

  • New CEO Widmar focusing on growth from selling panels
  • Company took charge to close polysilicon panel factory

First Solar Inc.’s new strategy is starting to show results after incoming Chief Executive Officer Mark Widmar shifted focus to selling panels over developing vast power plants.

The biggest U.S. solar company reported adjusted earnings of 87 cents a share in the second quarter as production swelled 39 percent, in part from higher sales of panels to third parties, according to a statement Wednesday. That beat the 54-cent average of 18 analysts’ estimates compiled by Bloomberg.

Widmar, who served as chief financial officer from 2011, succeeded Jim Hughes as CEO on July 1. First Solar has developed some of the world’s biggest solar farms, and has focused in recent years on building vast power plants and then selling them to utilities. That’s now shifting and the company has said it expects to see more of its growth coming from selling panels to other companies as global demand for clean energy swells.

“We’re getting more and more business from customers we haven’t worked with before,” Widmar said on a conference call Wednesday. “They’re coming to us.”

Sales in the quarter increased to $934.4 million, from $896.2 million a year earlier and the company produced 785 megawatts of panels, up from 563 megawatts. Widmar said 20 percent of sales in the quarter came from sales of panels, and he expects that share to increase in the coming quarters.

Falling Prices

The company may face challenges from other panel makers, especially in China, that are looking to increase shipments to other regions as installation slows in the world’s biggest solar market, according to Pavel Molchanov, an analyst at Raymond James Financial Inc.

“Just as First Solar is becoming more of a manufacturer and less of a developer, prices are falling off a cliff,” he said in an interview Wednesday.  

Average panel prices have dropped 11 percent since First Solar announced its shift to selling them to other developers on April 27, more than they fell in all of last year. The spot price on Wednesday was 47 cents a watt, down from 55 cents a year earlier.

A key driver for First Solar’s shipments will be its Series 5 panel, introduced earlier this year, which it will deliver mainly to customers while installing its Series 4 product at its own solar farms. The company expects to produce as much as 1 gigawatt of the new product next year. 

Profit Margins

The Series 5 is more profitable, and the company increased the low end of its forecast for gross margins this year, to 18.5 percent to 19 percent, from an earlier prediction of 18 percent to 19 percent. 

First Solar’s average efficiency in the quarter, the amount of energy in sunlight converted to electricity, was 16.2 percent, up from 15.4 percent. The best product line at the end of the quarter was even higher, 16.6 percent, driving down costs, according to a presentation posted on the company’s website.

One of Widmar’s first moves was to announce plans to shut down production of the company’s TetraSun panels, a high-performance polysilicon technology it acquired in 2013. While the vast majority of the photovoltaic industry uses polysilicon, First Solar’s main product has always been panels that use a thin film of cadmium-telluride sandwiched in glass.

The factory in Malaysia that had been making the TetraSun product is shifting to the Series 5 panel, and the transition led to a one-time charge of $86 million in the second quarter. Including that charge, net income was $13.4 million, or 13 cents a share, down from $93.9 million, or 92 cents a share, a year earlier.

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