Declining solar subsidies in key European markets such as Italy and Germany have disrupted sales for many solar companies, and SunPower in particular has been hit quite hard. The company widened its second-quarter losses to $147.9 million, or $1.51 per share, from $6.2 million, or $0.07 per share, for the year-ago quarter, SunPower said on Tuesday.
At the same time, SunPower reported $592.3 million in revenue for the third quarter, up 54 percent from $384.2 million in the year-ago period.
The company warned investors of the poor second-quarter financial results when it released preliminary numbers two weeks ago that showed declining gross margins and losses. The second-quarter losses reflected a $32.5 million charge for getting rid of solar cell manufacturing contracts and inventories.
SunPower hired manufacturers to produce solar cells when its own factories couldn’t produce fast enough to fulfill orders. SunPower also recorded charges of $29.3 million that had to do with its changing its strategy to target the residential and commercial rooftop market segments, which offer higher incentive rates.
“Those results are unacceptable,” said SunPower CEO, Tom Werner, during a call to discuss the earnings on Tuesday afternoon.
Werner said the company is on a cost-cutting path and plans to boost its own production capacity while cutting manufacturing expenses. The San Jose, Calif., company makes and assembles solar cells into panels and sells panels to distributors and power-generation project developers. It also runs its own solar project development business.
SunPower plans to set up a panel assembly plant in Mexicali, Mexico, because its North American market has been growing. The company expects better financial performance in the second half of this year, primarily because of the demand for its solar panels and services in the commercial and utility market segments in the U.S. and Canada.
SunPower also intends to climb back to profitability with the help of the French oil giant Total, which bought a 60 percent stake in SunPower earlier this year. That deal came with a promise by Total to guarantee up to $1 billion in credit support for SunPower over five years for its power project development business. As a result, Werner said the company just signed an agreement on Tuesday that will give it access to $200 million in cash. The two companies also will work together in research and development.
Weak solar market
Two big developments have pummeled the solar market this year: the declines of government subsidies in the world’s two largest markets, Germany and Italy, and the resulting piling up of solar panels that forces their owners to sell more cheaply.
Italy in particular took longer than expected to decide on its subsidy cuts early this year. That wait put solar power projects on hold and lowered sales for many companies, including SunPower. SunPower posted net loss for the first quarter of this year. Italy was SunPower’s largest market in 2010, accounting for about 40 percent of its revenue, according to its annual report. The U.S. followed with 29 percent of revenue and Germany with 11 percent.
SunPower isn’t alone in feeling the sting. First Solar also reported lackluster second-quarter financial results last week.
Although Italy announced the new solar incentive policy in May, the details of how the policy will be carried out weren’t considered clear enough by banks, Werner said. As a result, the banks haven’t been lending at the same rate as they did previously, and that has caused installation paces to slow down, he added.
“Once we have clarity, the good news is the market is going to come right back,” Werner said.
Photo courtesy of SunPower