Price collapse and overcapacity hit solar sector results

www.environmental-finance.com
13 August

Falling prices and demand for solar cells and modules is causing pain for the largest companies in the solar sector, who may have to wait until 2010 to feel the benefit of renewable energy stimulus packages. Germany's Q-Cells, the world's largest crystalline silicon cell manufacturer, today announced a restructuring programme that would cut 500 of its 2,600 workforce and shut down older, high-cost production lines at its site in Thalheim, Germany.

It reported first-half sales of €366 million ($523 million), down 37% on the same period last year, and losses of €47 million – despite keeping production steady at 272MW. Citi analyst Andrew Benson said the firm's orientation towards utility-scale solar plants is a high-risk strategy, since these installations are having trouble finding financing. "The problem is that too many of its customers have relied on the growth of the ground-mounted market, which has been badly damaged by the credit crunch."

Q-Cells shares, listed on the Frankfurt Stock Exchange, traded at €13.04 this afternoon, down 7% on the previous day's close. REC, the largest of the integrated solar firms, reported further deterioration of the market in the second quarter of 2009. It blamed the general economic downturn, reduced availability of funding for solar installations and a sharp reduction in demand from Spain, which had buoyed the market in 2008. While there were "certain signs" of improving sales volumes, REC noted "continued significant pressure on module prices due to considerable overcapacity" in its results statement on Tuesday.

The Norwegian firm had cut its wafer production capacity by 35% in the second quarter, and its cell/module capacity by 50%. For the first six months of 2009, revenue increased year-on-year by 11% to NKr4,321 million ($717 million). But it slipped to an operating loss of NKr97 million in the second quarter, compared with NKr716 million profit in the same quarter of 2008. Oslo-listed REC traded at NKr46 today, up 1.8% on Monday's close of NKr45.16.

Meanwhile, German integrated producer SolarWorld shipped 239MW of wafers and modules in the first half of 2009 – an increase of 26% on the first half of last year. It bucked the negative trend since its area of focus, European rooftop installations, was the only solar segment to grow strongly this year.

However, it also noted that installation prices had dropped by 25% compared with last year, and its first-half sales revenues dipped 6% to €402 million while its earnings margin fell to 20.7% from 25%. SolarWorld shares traded at €16.30 this afternoon, down 5% on yesterday's close. Citi's Benson said he expected government incentives and improved credit conditions "will not have much impact in the second half of 2009, but will help from 2010".