Yingli quarterly profit tops Wall Street view

NEW YORK (Reuters) - Chinese solar company Yingli Green Energy Holding Co posted higher-than-expected second-quarter earnings on Thursday, but fears about weakening solar panel prices next year knocked its shares lower.

The company, which is adding polysilicon production to its portfolio of wafers, cells and photovoltaic modules, has been helped by strong European sales ahead of planned cuts to green energy subsidies there.

That helped keep average selling prices for its products firm, the company said, and lift second-quarter gross margin to a record 33.5 percent.

Even with an expected dip in margins likely in the second half of 2010 when the company brings new polysilicon production on line, it raised its full-year gross margin forecast by a percentage point to a range of 28 to 30 percent.

While demand was likely to remain strong into 2011, company executives told a conference call, average selling prices could fall by the "high single digits" in percentage terms.

Concerns about 2011 demand, as well as the costs to ramp up the output of polysilicon, weighed on the company's shares, which were down more than 3 percent.

"I think the major concerns for the industry in general are around the pricing outlook for the first half of 2011," said John Hardy, analyst with Gleacher & Co, who has a "hold" rating on the shares.

The company could produce up to 400 metric tonnes of polysilicon this year and 2,000 metric tonnes in 2011. During the production ramp up, its costs are likely to be as high as $65 per kilogram, but that figure will drop to $40/kg upon completion, and to $25 after nine months of production.

Prices for polysilicon, the key raw material that turns sunlight to electricity inside most solar modules, have been hovering near $55/kg in recent weeks.

But those prices have seen wide swings in recent years, prompting many companies to seek to produce their own supplies.

LET THE SUN SHINE

Net income for the second quarter was $32.1 million, or 21 cents per share, compared with a year-earlier net loss of $57.6 million, or 44 cents a share.

The results topped the 19 cents a share that analysts on average had forecast, according to Thomson Reuters I/B/E/S.

Revenue rose 81 percent to $398.1 million.

Like other Chinese solar companies, Yingli was hurt by the weakness in the euro versus the U.S. dollar and Chinese renminbi, recording a currency loss of $23.4 million.

Earlier this week, Yingli's larger Chinese solar rival Suntech Power Holdings reported a net loss of $174.9 million, or 97 cents per American depositary share, as it took one-time charges to shut down its thin film business and for an investment.

Shares of Yingli were down 3.5 percent at $10.86 on the New York Stock Exchange on Thursday morning, bringing their year-to-date loss to 30 percent.

(Reporting by Matt Daily; Editing by Lisa Von Ahn and Matthew Lewis)