First Solar to Boost Production as Profit, Sales Climb
08/01/2012| 09:19pm US/Eastern
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--First Solar to increase manufacturing this year to meet rising demand
--Company is expanding in U.S., India, Middle East, Australia, Chile
--CEO touts advantages over rivals in oversupplied global market
(Updates with analyst comment in the 13th paragraph and other details.)
By Cassandra Sweet and Nathalie Tadena
First Solar Inc. (>> First Solar, Inc.) said it will boost production to meet rising demand, despite a glut in the global solar-panel market, and the company's second-quarter profit jumped 82%, triggering a stock rally.
The Tempe, Ariz.-based company said it plans to make 1,800 megawatts to 1,900 megawatts of panels this year, up from its plan in May to cut 2012 production by about a third, to 1,400 megawatts to 1,700 megawatts.
Shares of First Solar surged 19% to $17.60, paring earlier gains in after-hours trade as results topped analysts' expectations and the company raised its full-year guidance.
The company now sees earnings of $4.20 to $4.70 a share and revenue of $3.6 billion to $3.8 billion, up from its prior view of $4 to $4.50 a share and revenue of $3.5 billion to $3.8 billion.
First Solar Chief Executive Jim Hughes said the company is seeing more demand for its solar farms and panels and that it expects to sell two projects--one in Maryland and one in California--this year.
"We have more investors seeking to buy our projects than we have projects to sell them," Mr. Hughes said during a conference call with investors.
First Solar makes thin-film solar panels at factories in Malaysia, the U.S. and Germany, and it also develops and builds large-scale solar-power plants that it then sells to large energy companies.
First Solar Chief Financial Officer Mark Widmar suggested that the project development business has been more profitable than expected, and he said the company would start reporting financial results for that business separately from its solar-panel sales.
The company has sold nearly 2,000 megawatts of solar farms to companies such as NRG Energy Inc. (>> NRG Energy Inc), Exelon Corp. (>> Exelon Corporation) and Berkshire Hathaway Inc.'s (BRKA, BRKB) MidAmerican Energy Holdings, and has nearly 900 megawatts of projects not yet sold, according to documents the company released Wednesday. Among those is a 139-megawatt project in Imperial County, Calif., called Campo Verde Solar the company announced Wednesday.
First Solar has new supply deals in Australia and India, and is focused on expanding into South America and the Middle East, while continuing to do deals in its primary markets in the U.S., Canada and Europe, Mr. Hughes said.
First Solar and its rivals have seen their profits and stock prices slump as they have struggled against falling prices and a global oversupply of solar panels and manufacturing capacity. First Solar's stock has fallen 87% over the past 12 months as of Wednesday's close. The industry woes have driven smaller solar companies to file for bankruptcy and prompted larger companies to stop making solar panels.
Some analysts remained skeptical about First Solar's long-term prospects in an over-supplied market and its ability to compete against low-priced Chinese rivals.
"The projects are profitable, at least to next year...but earnings in the out years are virtually unknown," said Jesse Pichel, an analyst at Jefferies Group Inc.
First Solar's prospects may prove to be clearer than its Chinese rivals, which have been embroiled in a U.S. trade case and face a new trade case filed last month in Europe. Both cases were filed by Germany-based SolarWorld AG (>> SolarWorld AG), which has a factory in Oregon.
In May, the U.S. Department of Commerce slapped antidumping duties of 31% on solar cells made by Suntech Power Holdings Co. Ltd. (>> Suntech Power Holdings Co., Ltd. (ADR)), Trina Solar Ltd. (>> Trina Solar Limited), Yingli Green Energy Holding Co. Ltd. (>> Yingli Green Energy Hold. Co. Ltd. (ADR)) and other Chinese solar firms in connection with the trade case. The tariffs are preliminary and could be changed before the government makes a final decision. But the Chinese companies have spent millions of dollars to pay the tariffs for customers and their stock prices have tumbled amid uncertainty about demand for their products in the U.S. and Europe.
First Solar said earlier this year that it would close its German factory and cut 2,000 jobs there. The company later said it would extend operations at that plant until the end of this year to meet higher-than-expected demand in Europe. The company also has idled some of its manufacturing operations in Malaysia, abandoned plans to open a factory in Vietnam and put its plans for a new Arizona factory on hold.
The company Wednesday named Mr. Hughes to the board. Mr. Hughes was promoted to the top job in May, from his position as chief commercial officer, replacing former CEO Rob Gillette, who abruptly resigned in October.
First Solar reported a second-quarter profit of $111 million, or $1.27 a share, up from $61.1 million, or 70 cents a share, a year earlier. Excluding restructuring expenses and certain costs in excess of normal warranty, the latest period's earnings were $1.65 a share.
Net sales jumped 80%, to $957.3 million, primarily due to an increase in the number and size of projects under construction for which revenue could be booked in the second quarter.
Analysts polled by Thomson Reuters expected a profit of 90 cents a share on $828 million in revenue.
Write to Cassandra Sweet and Nathalie Tadena at cassandra.sweet@dowjones.com
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