Bloomberg News

Renewable Energy Reports Quarterly Loss as Solar Prices Drop

October 26, 2011

(Updates with CEO comment in third paragraph, shares.)

Oct. 26 (Bloomberg) -- Renewable Energy Corp. ASA, a Norwegian maker of solar components, reported a wider-than- estimated loss in the third quarter and wrote off its wafer assets as excess capacity dragged down prices.

The net loss was 759 million kroner ($137 million), or 1.16 kroner a share, compared with the median estimate of a 112 million-krone loss, according to nine analysts surveyed by Bloomberg. The Sandvika, Norway-based company had a loss of 896 million kroner, or 0.9 kroner a share, a year earlier.

“Demand has not picked up to the extent we had expected,” Chief Executive Officer Ole Enger said in the results presentation. “Lack of financing availability is the biggest problem that we have in the solar industry.”

The company has been through some “dramatic quarters with respect to the market,” Enger said. Renewable Energy and its peers are struggling to cope with slumping demand in Europe, where Germany, France and Italy have cut subsidies to cap booming solar installations. They’re also under pressure from Chinese rivals that expanded output capacity just as demand slowed, causing wafer and cell prices to plummet.

“Estimate revision will in general be negative,” Haakon Levy, an analyst at DnB NOR ASA, said by phone. “There’s still a situation of excess capacity and I think most of the players are now waiting and trying to ride out a shakeout of the market.”

The stock dropped the most in three weeks, falling as much as 14 percent, and was down 5.7 percent at 4.97 kroner as of 1:03 p.m. in Oslo. The stock has slumped 72 percent this year.

Plants Shuttered

Renewable Energy, known as REC, seems “to be conscious of preserving cash and are able to do that quite well and that’s definitely a positive in today’s market,” Levy said.

The company wrote off the remaining 1.2 billion kroner of Norwegian wafer assets and also decided to permanently shut idled plants at Heroya, Glomfjord and Narvik, the company said today in a statement.

Units will have to produce positive cash flow on a regular basis or face shutdown, Enger said in an interview.

REC’s average selling prices for polysilicon fell 8 percent in the quarter while wafer prices slumped 17 percent and modules 13 percent, the company said.

“We are not very optimistic about 2012,” Enger said. Silicon prices will continue to fall as wafer and module prices decline.

‘More Negative Outlook’

“Not as much cost reduction as one perhaps could have hoped for, a lot of negative extraordinary items and a more negative outlook statement” are driving the share price, Levy said.

Polysilicon prices below $30 a kilo will see some producers sell assets or risk bankruptcy, Enger said. REC will avoid similar margin pressure with a cash cost of $15 a kilo, the executive said.

REC produced 4,557 metric tons of polysilicon in the quarter, lower than the 4,872 tons from the previous three months. Multicrystalline and monocrystalline wafer output was 205 megawatts, missing REC’s 240-megawatt forecast. It produced 181 megawatts of modules, more than the projected 170 megawatts. Sales fell 21 percent from a year earlier to 3 billion kroner.

A plan to expand polysilicon production has been shelved as “it wouldn’t make sense to continue investing in a period of overcapacity,” Enger said.

Earnings before interest, tax, depreciation and amortization dropped to 370 million kroner from 827 million kroner a year earlier. The company booked an 837 million-kroner gain on financial items.

--Editors: Randall Hackley, Stephen Cunningham

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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