Bloomberg News

Solar Stocks Tumble as Canadian Solar Cuts Margin Forecast

October 17, 2011

(Updates with closing share prices in third and sixth paragraphs.)

Oct. 17 (Bloomberg) -- Solar companies fell after Canadian Solar Inc., which makes solar panels in China, said its gross margin will drop more than analysts expected.

Sales after expenses probably declined to 2 percent to 5 percent of total revenue in the three months ended Sept. 30, according to a statement today from the Kitchener, Ontario-based company. The figure was forecast to fall to 10 percent based on the average estimate of six analysts surveyed by Bloomberg.

Shares of the company dropped 14 percent to $3.27 at the close in New York, the most since Aug. 8.

Solar panel manufacturers have lowered prices as demand for their products declines because of subsidy cuts in Germany and Italy. At the same time, some companies have increased production, leading to an oversupply of panels, said Gordon Johnson, an analyst at Axiom Capital.

“Gross margins are going to be extremely weak” for many panel manufacturers, Johnson said today in an interview. “We think that there are going to be significant losses over the next couple of quarters.”

The Bloomberg Global Leaders Solar Index dropped 3.1 percent. Hanwha SolarOne Co. declined 9.4 percent, Trina Solar Ltd. fell 6.7 percent and Yingli Green Energy Holding Company Ltd. slid 7.4 percent.

“Pressure on average selling prices throughout the solar supply chain” and a “weaker than normal financing environment” led Canadian Solar to cut its forecast, the company said in the statement.

Multicrystalline solar module prices have fallen 40 percent this year, according to Bloomberg New Energy Finance data.

Canadian Solar’s gross margin was 17 percent in the third quarter of 2010. The company said Aug. 17 that gross margin would decrease to 9 percent to 12 percent this quarter.

--Editors: Will Wade, Charles Siler

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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