SunPower warns of a loss for Q2

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Credit: Gigaom

Brace yourself for reports of lackluster sales and profits for solar companies for the second quarter. SunPower (s SPWRA) did just that on Monday by warning that it expects to post a lower gross margin and a loss for the period.

The company’s second-quarter gross margin will likely end up being 12-13 percent, which will be lower than the 15 percent to 17 percent forecast the company issued previously. The solar cell and panel maker now expects to post a net loss of $1.50 to $1.55 per share.

SunPower issued preliminary results ahead of the Aug. 9 release of its full financial performance for the second quarter.  The company still expects the second-quarter revenue to come somewhere between $590 million and $595 million, which would correspond with its previously issued outlook of $550 million and $600 million.

The announcement echos what several other solar companies have issued in recent weeks. Last week, Norway-based Renewable Energy Corp (REC) reported a net loss of 6.7 billion kroner ($1.2 billion) for the second quarter. Average selling prices of its wafers and panels fell 21 percent and 14 percent respectively from the previous quarter. In May, the company announced it would cut the production of silicon wafers, cell and panel and lay off about 500 employees, though the company said the layoffs might be temporary.

German company Centrosolar blamed the faster-than-expected dive in prices for cutting its 2011 sales forecast last Friday. The company sells solar panels, inverters and other solar equipment.

Solar struggles

SunPower & Flextronics Factory in Milpitas, CA

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 particularly, 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.

Gross margins for solar panel makers tumbled 25 percent worldwide in the first half of this year, said IMS Research. Solar panel makers have had to cut their prices by around 15 percent in the last six weeks alone, and the prices are falling faster than manufacturing costs, the market research firm said.

To cut costs, SunPower said it had to reduce its inventory and get rid of contracts it signed to buy solar cells. In the past, the company, which has its own fleet of solar cell factories, would buy cells from others when demand for its products was high. SunPower assembles the cells into panels and sells panels to distributors and power generation project developers. It also runs its own solar project development business.

The company’s second-quarter results will include a $32.5 million charge from inventory write downs and termination of those cell contracts, as well as a $13.1 million expense from its sale of a 60 percent stake in the company to French oil giant Total. In the deal, Total promised to support SunPower by guaranteeing up to $1 billion in credit support over five years to support SunPower’s power plant development business.

SunPower CEO Tom Werner said in a statement on Monday that SunPower has started negotiating with banks to use that credit to get loans. SunPower’s A and B shares dropped 4-5 percent in after hour trading.

Photo courtesy of SunPower

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“Gross margins for solar panel makers tumbled 25 percent worldwide in the first half of this year, said IMS Research.”

And, so it begins….the Solar Ice Age.

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