Solar results reflect strong demand; shares slip
FRANKFURT/LOS ANGELES (Reuters) - U.S. solar company SunPower posted a weaker-than-expected quarterly profit on Tuesday, while German solar companies and a Chinese rival benefited from brisk demand for the renewable energy source.
But solar stocks fell across the board as good results were not good enough for investors expecting blowout sales numbers, and looming cuts in Germany's industry subsidies weighed on expectations.
"We all know that demand is strong and quite frankly, I was expecting the German players to exceed expectations," said Jon Sigurdsen, renewable fund manager at DnB Nor's Carlson, pointing to strong quarterly results from Q-Cells, Phoenix Solar and solar machine maker Centrotherm.
German photovoltaic module maker Q-Cells and wholesaler Phoenix Solar AG topped forecasts for the first quarter, as did fast-growing China-based JA Solar, which posted record quarterly sales.
By contrast, SunPower posted a weaker-than-expected profit and shares dropped 4.5 percent in extended trade as results were dragged down by rainy weather in Italy, which delayed some project construction there.
The company matched analysts' expectations on revenue, but did not raise guidance like its industry peer First Solar did late last month.
Shares across the solar sector fell as leading companies warned that demand and solar panel prices could drop after Germany, the largest solar market, cuts its subsidies later this year.
Nedim Cen, chief executive of Q-Cells, the world's No. 4 solar cell maker, said he is optimistic about business in the second half of 2010, but worries prices could fall in 2011.
European players are already struggling to digest the slump that pushed prices for modules and cells down by up to 50 percent while low-cost Asian players snatch market share.
Also on Tuesday, Shanghai-based JA Solar posted a quarterly profit and raised its outlook on strong demand for photovoltaic solar equipment that helps turn sunlight into electricity.
But some analysts had expected even stronger results from the company, which had raised its quarterly sales forecast. Its shares fell more than 7 percent.
Once spoiling investors with lavish returns, the solar sector is in the process of consolidation as governments cap support for the subsidy-dependent industry to move it closer to being economically independent.
Plans by the German government to cut so-called feed-in tariffs, which emerged in January, have caused solar stocks to tumble. The tariffs are the sector's support until there is grid parity -- the point at which solar power costs the same as fossil-fuel generated power.
As customers pile in to take advantage of the subsidies before they get slashed, sales are surging, but analysts fear booming demand could lead to oversupply and falling prices in the second half of the year.
Andreas Haenel, chief executive of solar wholesaler Phoenix Solar said he expected a drop in demand for solar products in the third quarter, once the cuts become effective.
Q-Cells, Centrotherm, Phoenix Solar and SolarWorld, Germany's largest solar company by sales, held their 2010 outlooks steady.
"None of the companies changed their 2010 guidance, despite better-than-expected worldwide demand trends in the first half of 2010, mostly due to ongoing uncertainties around the impact of second-half German feed-in tariff cuts," Bryan, Garnier & Co analyst Ben Lynch wrote in a note.
Shares in JA Solar fell 7.51 percent on the Nasdaq, while SolarWorld fell 7.3 percent, and Centrotherm's stock fell 3.9 percent. Q-Cells shares were 5.3 percent lower while Phoenix Solar shares gained a 1.1 percent.
(Additional reporting by Martin Roberts in Madrid and Matt Daily in New York)
(Reporting by Christoph Steitz in Frankfurt and Dana Ford in Los Angeles. Editing by David Cowell, Robert MacMillan and Carol Bishopric)
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