Profits of First Solar Inc., the world’s largest thin-film solar products maker, slid 33 percent in the first quarter, taking a blow from lower sale prices, increased expenses and a slowdown in the European solar market undergoing major policy changes.
The Arizona-based company reported a first quarter net income of $116 million or $1.33 a share, down from $172.3 million or $2 a share a year earlier.
Meanwhile, its net sales of $567 million were essentially flat from a year earlier, at $568 million, but down $42.5 million from the fourth quarter of 2010.
The company attributed the year-over-year decline in profits to the reduced average selling prices First Solar implemented in December last year, and higher expenses due to factory upgrades and development of new module factories.
But First Solar said it managed to pull up conversion efficiencies and module production rates while maintaining low module cost per watt.
In addition, the company plans to reel in customers with new products aimed at the small-scale rooftop solar market and offset the impact of feed-in tariff pullbacks and policy changes in Europe by expanding aggressively in other countries.
The company produced 407 megawatts of modules during the first quarter, up 26 percent year over year, with each manufacturing line producing 64.1 MW on average, a 15-percent increase from last year.
First Solar’s production costs were unchanged at 75 cents a watt, reportedly one of the lowest in the industry. The company also managed to improve conversion efficiencies compared with the same period last year, moving from 11.1 percent to 11.7 percent. The company said it will be able to boost efficiency to as much as 14 percent by 2014.
Selling to India
The company is looking to sell its cadmium telluride-based thin-film panels in India, China, Saudi Arabia and the United States as a “buffer against European uncertainty” over its policies and incentives, First Solar chief executive Rob Gillette said during a conference call.
In France, a suspension on government solar power subsidies prompted First Solar to put its plans to build a factory there «on indefinite hold,» Mr. Gillette said. He said pending changes to government solar subsidies in Germany and Italy, respectively the Number 1 and 2 solar markets, also gave the company more reason to expand and develop project in other countries.
“Ambiguity about the magnitude of Germany’s midyear [feed-in tariff] digression, lack of clarity with respect to France’s tender process and Italy’s delayed implementation of the new decree, all created uncertainties about project economics and financing,” Mr. Gillette said.
“We expect the European industry demand to go through a period of adjustment in the second and third quarter.” Mr. Gillette added, explaining that diversifying into other countries will enable the company to maintain flexibility.
Beyond Europe
First Solar, which makes solar panels and also develops and builds solar-power facilities, said it will use 450 MW to 600 MW of its panels in North American solar farms that it will build this year. Those projects and others planned will boost sales later this year should the European solar markets continue to slow down, the company said.
First Solar is also expecting significant growth in India, a relatively new market. The company believes it could ship 100 MW of thin-film solar modules this year in the country alone, up from 10 MW in 2010.
In China, the company said it is in negotiation with leading Chinese power generation companies for additional supply or construction agreements, possibly in the city of Ordos in China’s Inner Mongolian desert.
The company will also begin to offer modules for installations as small as 10 kilowatts in response to customer demand especially in Europe, having previously limited availability to 30 kW systems. First Solar said about a third of our modules are currently installed on rooftops around the world.
The company still expects 2011 net sales of $3.7 billion to $3.8 billion and profit earnings of $9.25 to $9.75 per share but has slightly reduced its outlook for operating income to $900 million from $970 million announced in its guidance issued in February.
“I think what’s driving a lot of the challenge is the uncertainty,” Mr. Gillette said, saying that it has adjusted its 2011 guidance anticipating possible price impacts of changes in the European markets.
“That’s impacting us a little bit, but we think it’s a great investment for the future in terms of the people that we’re putting there and what we’re doing to expand the use of PV in places like India and Australia, China, elsewhere,” he added.
