3 August 2010


First Solar revenue grows just 3.5% to $587.9m in Q2

For second-quarter 2010, First Solar Inc of Tempe, AZ, USA, which manufactures thin-film photovoltaic modules based on cadmium telluride (CdTe) as well as providing engineering, procurement and construction (EPC) services, has reported net sales of $587.9m. This is up 12% on $525.9m a year ago, driven by increased production volumes and systems revenue, partially offset by a decline in pricing and lower euro exchange rates. It is also up 3.5% on $568m last quarter, due mainly to increased turnkey system sales (EPC system sales rose from 7% of total sales to 15%).

Production shipments totaled 344MW, up 7% on last quarter due partly to annual capacity per line rising 6% (equating to adding two new production lines) to 59MW. This boosts current and announced capacity from 2.1GW to 2.2GW by 2012 (compared to 1.4GW current capacity). The Malaysian facility’s Plants 5 and 6 are on track to start shipments in first-half 2011. The firm also recently announced the addition of a new four-line plant in Frankfurt (Oder), Germany, where shipments will begin in fourth-quarter 2011.

However, gross margin fell from 49.7% last quarter to 48.3%. This was due to the increased (lower-margin) EPC system mix, lower module ASPs and accrued module replacement costs, offset by module manufacturing cost per Watt being cut by 13% year-on-year and by 6% from Q1’s $0.81 to $0.76 (benefiting from higher throughput rates, improvement in conversion efficiency to 11.2%, lower material costs and the decline in the euro).

Net income has fallen from $180.6m a year ago and $172.3m last quarter to $159m, due mainly to operating expenses rising $12.8m . Capital expenditure was $134m, including Plants 5 and 6 in Malaysia, the Frankfurt (Oder) Plant 2, and the new plant in France.

First Solar’s 2.2GW of captive projects provides a buffer against potential demand fluctuations in the European market. “We continue to work with our partners to expand the business in Europe,” says CEO Robert Gillette. In Q2 the USA became First Solar’s number-2 market, but it was closely followed by continued growth in France and Italy as the firm diversifies its country mix. Germany’s portion of net sales fell year-on-year from 71% to 50%, despite strong module demand ahead of the German government lowering its feed-in tariff (FiT) on 1 July.

Module pricing has therefore been set for Q3 to ensure sell-through at the new German FiT, and for Q4 to position channel partners for sales for 2011 in anticipation of further FiT declines. In Italy, the level of support will be cut by 23–27% over the next four quarters (depending on the type of installation) but is expected to continue to enable investor returns and encourage demand growth in second-half 2010 and into 2011.

For full-year 2010, First Solar expects net sales of $2.5–2.6bn. This is up on 2009’s $2.07bn but a reduction from late April’s forecast of $2.6–2.7bn. Because the firm expects to remain capacity-constrained in second-half 2010, it has reallocated module capacity from its EPC & Systems business to meet stronger module demand from Europe.

Total capital spending should be $575–625m (more than double 2009’s $280m, but down on late April’s forecast of $625–650m). First Solar has also lowered its guidance for plant start-up costs from $27m to $20m (mainly from Malaysia Plants 5 and 6 in second-half 2010).

The firm has also lowered its expectation for operating cash flow generation from $725–775m to $575–625m (down on 2009’s $675m) due to investments in the development of project assets from the NextLight Renewable Power LLC acquisition completed on 12 July (including 530MW of projects in North America). First Solar plans to increase Systems project construction from 175MW in 2010 to 500–700MW in 2011 as it looks to service its 2.2GW pipeline of projects stretching out to 2015.

Correspondingly, First Solar is currently adding a total of 14 new module production lines (capacity of 826MW at current annual run rates) in the coming years. In addition, through increasing efficiency, the goal is to raise the annual capacity per line from 59MW (in Q2/2010) to 80MW by 2014. This is critical to continuing the reduction of module manufacturing cost per Watt (which has halved from $1.59 in 2005 to $0.76 in Q2/2010) to the targeted $0.52–0.63 in 2014.

See related items:

Cd PV maker First Solar’s profit rises in Q1 despite 11% dip in sales

First Solar grows 33% sequentially, but project development hits profits

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