Strong U.S.-led SolarWorld results lift sector

FRANKFURT Mon Feb 7, 2011 3:28pm EST

The logo of SolarWorld AG is pictured at the reception in a plant in Freiberg near Dresden December 17, 2008. REUTERS/Hannibal Hanschke

The logo of SolarWorld AG is pictured at the reception in a plant in Freiberg near Dresden December 17, 2008.

Credit: Reuters/Hannibal Hanschke

FRANKFURT (Reuters) - Strong results from German solar energy firm SolarWorld and its upbeat assessment of the U.S. market raised hopes for the whole sector and lifted shares of European as well as U.S. peers.

Profits from the industry number two in Germany, the world's biggest solar market, beat analysts' forecasts by about 17 percent. The company also predicted higher sales this year, with strong U.S. demand making up for the overcapacity and worries over the future of state subsidies in Germany.

The results and a higher dividend boosted its shares by almost 11 percent in morning trade and the stock stood 9 percent higher at 9:35 a.m. EST.

Shares in German peers Q-Cells, Roth & Rau, Centrotherm and market leader SMA Solar were also higher, with some reaching their highest level since November.

The news also lifted peers with U.S.-listings. Shares in China's Suntech, the world's largest solar cell maker, rose 2.2 percent, while First Solar, the world's No.1 solar company by market value, gained 0.8 percent.

"I think demand in the United States is picking up," Jon Sigurdsen, fund manager at DnB Nor Group unit Carlson, said and also pointed to U.S.-based solar material supplier MEMC, which earlier this month gave a bullish view for 2011.

"And the U.S. was the clear driver," Sigurdsen added.

Estimates on growth in the U.S. market differ vastly. HSBC puts new installations at 1,500 megawatts (MW), while Goldman Sachs says they could reach 3,000 MW in the most favorable economic environment.

The positive news also chimed with Norwegian peer Renewable Energy Corp which last week signaled demand for its products was strong, lifting shares of peers across Europe and the United States, but said it still expected prices for its products to decline.

Analysts at WestLB raised their stance on SolarWorld to "add" from "neutral" and Credit Suisse also raised its rating.

"We expect the U.S. to develop into the main growth driver for the company in 2011, accounting for up to 30 percent of (the) company's shipments in 2011," said Karsten Iltgen, analyst at Credit Suisse.

HARD HIT

SolarWorld Chief Executive Frank Asbeck, nicknamed the "sun king" for his outgoing nature, was only cautiously optimistic.

"In the current environment, giving a sales outlook is tough," he said, warning of an expected drop in prices for modules and cells, the solar industry's main products.

"(However), we are confident that we can increase sales (this year), he said, adding that business in the United States saw a strong start in 2011.

Lavish sector subsidies have helped Germany to become the world's largest market for solar modules, accounting for about half of global module installations last year and 41 percent of SolarWorld sales.

But the industry was hit hard last year when Germany announced steep cuts in the so called feed-in tariffs (FiT), the sector's lifeline as long as solar power is more expensive to produce than electricity from conventional sources.

Further cuts this year are expected to cool down demand, forcing solar companies to reduce their exposure to Europe's largest economy.

SolarWorld said 2010 earnings before interest and tax (EBIT) reached 193 million euros ($262 million), above the Thomson Reuters I/B/E/S estimate of 165 million, and proposed a 2010 dividend of 0.19 euros a share, up from 0.16 euros for 2009.

SolarWorld said sales reached 1.305 billion euros, also beating analysts' expectations. Based on Thomson Reuters I/B/E/S, 2011 sales were seen at 1.515 billion euros.

Asbeck said that his aim was for the share of group sales from outside Germany to rise to about three quarters in the next two years from 59 percent currently.

(Additional reporting by Anneli Palmen in Duesseldorf; Editing by Erica Billingham and Andrew Callus)