7 August 2013

First Solar’s sales fall 31% to $520m in Q2

For second-quarter 2013, First Solar Inc of Tempe, AZ, USA – which manufactures thin-film photovoltaic modules based on cadmium telluride (CdTe) as well as providing engineering, procurement & construction (EPC) services – has reported net sales of $520m. This is down $235m (31%) on $755m last quarter (due mainly to lower systems business project revenues as well as lower module-only sales volume to third-parties) and $438m (46%) on $957m a year ago (due mainly to lower systems business project revenue as initial revenue recognition for AVSR [Antelope Valley Solar Ranch] and the sale of Silver State North were both achieved in Q2/2012, partially offset by higher sales volume to third-party module-only customers in Q2/2013).

As a previously highlighted possibility, the sale of the ABW (Anherstburg, Belmont and Walpole) projects in Ontario, Canada was not completed in Q2/2013, although it is expected to complete in second-half 2013.

On a non-GAAP basis, net income was $35.3m ($0.39 per fully diluted share), down from $61.5m ($0.69 per share) last quarter (due mainly to lower revenue recognition for AVSR and lower sales volumes to third-party module-only customers) and $111m ($1.27 per share) a year ago (due mainly to lower systems business revenue recognition, partially offset by higher manufacturing utilization and higher module sales to third-party customers).

Cash flow from operations was $222m, compared to $66m last quarter. During the quarter, cash and marketable securities rose by $273m to $1.3bn. Net cash grew by $580m to $1bn.

First Solar also announced the acquisition of all of GE’s cadmium telluride (CdTe) solar intellectual property and entered into a technology collaboration agreement with GE, with the aim of advancing thin-film solar cells and modules. Under the agreement, First Solar acquired GE’s CdTe solar intellectual property, and in exchange GE received 1.75 million shares of First Solar stock.

Also, First Solar has acquired a 1.5GW pipeline of US and Mexico development assets from Element Power. The portfolio includes geographically diverse projects in various stages of development.

Additionally, First Solar has updated its full-year 2013 financial guidance ranges to reflect the following: (1) a reduction in expected net sales associated with the decision to hold two system projects through construction and selling such projects after construction is completed, which is expected to result in improved project economics; (2) incremental cost at AVSR due to delays related to the county approval process for materials used in construction, partially offset by an improvement in gross margin due to better-than-expected project economics for ABW, Campo Verde and Imperial Valley; (3) the impact of expected higher operating expenses associated with the newly announced GE technology partnership; and (4) the per-share impact associated with the 18 June closing of the equity offering of 9,747,000 common shares and the impact of the issuance of 1,750,000 common shares to GE as part of the IP acquisition.

The updates to the guidance are as follows: net sales reduced from $3.8-4bn to $3.6-3.8bn; gross margin increased from 20-22% to 22-23%; operating expenses increased from $380-400m to $390-410m; operating Income reduced from $430-460m to $405-435m; and earnings per share reduced from $4.00-4.50 to $3.75-4.25 (or $3.50-4.00, including the equity offering and GE shares). Guidance remains the same for operating cash flow of $0.8-1bn; capital expenditures of $350-400m; and an expected decrease in working capital of $50-200m.

“Although we worked diligently in the quarter to close the sale of the ABW projects, the sale was delayed and consequently, as we highlighted on our first quarter of 2013 earnings call, such delay caused a decline in our net sales and earnings for the second quarter from expectations,” says CEO Jim Hughes. “We still expect the closing of the ABW sale to occur in the current year, resulting in a corresponding increase in net sales and earnings in the second half of 2013," he adds. "The acquisition of GE’s CdTe intellectual property and the formation of the new strategic collaboration partnership with GE, coupled with the growing pipeline of potential booking opportunities and continued improvements we are making on our module technology, provide incremental value and confidence for our shareholders and demonstrate the progress we are making in achieving our strategic goals of delivering industry-leading PV power solutions to sustainable markets globally.”

See related items:

First Solar reports Q1 sales up 52% year-on-year to a more-than-expected $755m

First Solar’s sales grow 22% to $3.4bn for 2012

First Solar reports Q3 sales down 12% to $839m

First Solar sales almost double to $957m in Q2 as projects reach revenue recognition

Tags: First Solar Thin-film photovoltaic CdTe

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