First Solar Q2 net soars past view, shares rise

LOS ANGELES Wed Jul 30, 2008 6:42pm EDT

LOS ANGELES (Reuters) - Solar cell maker First Solar Inc (FSLR.O) reported a 57 percent increase in quarterly profit on Wednesday, blowing past Wall Street estimates as higher-than-expected production from a new plant in Malaysia helped it meet surging demand.

The company also forecast 2008 revenue above analysts' estimates, and shares rose 6.5 percent in extended trade.

"Despite expectations being so high, they completely outdelivered again," Pacific Crest analyst Mark Bachman said. Bachman has an "outperform" rating on First Solar shares and does not own the stock.

Second-quarter net income increased to $69.7 million, or 85 cents per share, exceeding analysts' average estimate of 57 cents a share, according to Reuters Estimates.

In the same period last year, First Solar earned $44.4 million, or 58 cents per share.

First Solar has been the darling of the clean technology sector since it went public in 2006. The stock has gained nearly 7 percent this year, while most other solar stocks have logged sharp declines.

The Phoenix company's thin-film photovoltaic solar cells, which turn sunlight into electricity, are cheaper to produce than the silicon-based cells that dominate the market.

Revenue totaled $267 million, nearly three-and-a-half times revenue of $77.2 million in the second quarter of last year. Analysts, on average, had expected $217.3 million.

MALAYSIA MAKES ITS MARK

Chief Executive Mike Ahearn said on a conference call with analysts that output from the company's new manufacturing facility in Malaysia accounted for $47.4 million in sales during the period.

He said First Solar's first two production lines in Malaysia were progressing faster than expected. The first line will reach full capacity during the current quarter, while the second will begin production in the third quarter and reach full capacity by the end of the year, Ahearn said.

Gross margins of 54.2 percent, up from 53 percent in the first quarter, also exceeded expectations due to the impact of a weak dollar, lower material costs and increased efficiency in converting sunlight into electricity.

The company's conversion efficiency rose to 10.7 percent during the quarter from 10.6 percent last quarter.

Ahearn said on the call that First Solar was pursuing growth opportunities in Italy and France as Germany, a major solar market, was reducing government subsidies.

Ahearn said First Solar's exposure to Spain, which is also expected to reduce government incentives this year, was limited.

In the United States, First Solar is focusing on utility-scale projects in California, where utilities are required to generate 20 percent of their electricity from renewable sources by 2010.

Earlier this month, the company said it would supply the first two megawatts of Southern California Edison's (EIX.N) 250-MW rooftop solar generation project.

On the call, Chief Financial Officer Jens Meyerhoff told analysts on the call that the company expects 2008 sales of $1.175 billion to $1.225 billion. Analysts, on average, had been expecting revenue of $1.037 billion, according to Reuters Estimates.

First Solar also raised its forecast for solar module output to between 470 and 485 megawatts, Meyerhoff said. The company in April had forecast output of 420 MW to 460 MW.

First Solar shares rose to $303.50 in extended trade after closing at $285 on Nasdaq.

(Reporting by Nichola Groom; editing by Jeffrey Benkoe, Toni Reinhold)

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