# Trina Solar: Earnings Up, But Silicon Woes Remain

With Trina Solar’s (TSL) announcement this morning that its quarterly earnings had more than doubled, you’d expect to see the solar cell maker’s shares at least rise slightly this morning. Not so much. There’s still that little problem of the rising cost of polysilicon, which has been plaguing solar-cell manufacturers that rely on silicon supplies, including LDK and SunPower, all year.

Instead, Trina’s shares dropped $3.81 to$45.91 (almost 8 percent) this morning on the news that its profit margins would narrow in the second quarter due to higher silicon costs. The company estimated its gross margin for the second quarter to be between 23 percent and 25 percent and operating margin to range between 13.5 percent and 15.5 percent of total net revenues; the AP noted that was a potential loss of 3 percentage points. Back in November, rising polysilicon costs drove Trina’s margins down to 20.6 percent from 26 percent.

The stock dropped despite strong earnings that beat expectations. The company reported a first-quarter net income of $12.9 million compared with$4.8 million a year earlier, and revenues almost tripled to $120.7 million. But that pesky silicon! It’s been the same problem with the stocks of other solar manufacturers that rely on silicon. In April SunPower saw its stock slide 13 percent on its earnings, even though its revenue nearly doubled to$274 million in the first quarter. In May, LDK said the rising price of polysilicon meant a lower margin forecast, which sent the company’s stock down almost 6 percent, despite strong first quarter earnings with a net income of \$49.8 million.

While solar makers are increasingly looking to other materials to reduce costs (a key motivation for thin film solar), the industry is expecting the solar silicon supply crunch to abate over the next few years. Trina itself had been planning on building a polysilicon manufacturing plant but decided that the supply conditions looked favorable enough to scrap that plan. So, it’s going to get better, but for now solar makers will just have to weather the storm.

Image: Trina Solar stock over 6 months, courtesy of Yahoo Finance.