UPDATE 2-Canadian Solar profit hurt by hedging loss

Wed May 11, 2011 5:10pm EDT

* Q1 EPS ex-items 44 cents vs Street view 41 cents

* Revenue $443.4 million vs Street view $423.49 million

* Net income included $17.2 mln currency loss

* Reiterates full-year shipment view of 1.2-1.3 GW (Adds analyst comment, forecasts, byline)

By Nichola Groom

LOS ANGELES, May 11 (Reuters) - A hefty foreign exchange loss hurt solar panel maker Canadian Solar Inc's (CSIQ.O) first-quarter profit, and shares fell 2 percent in extended trading.

The company backed its shipment forecast for the year and said it saw "significant declines" in raw material costs this quarter which would help lessen the impact of falling prices on solar modules.

Canadian Solar has been expanding in-house production of solar cells used to make modules to cut costs and expand profit margins. But the company forecast gross margins of 13 to 15 percent in the second quarter, about the same or lower than the first quarter's 14.7 percent.

"They are not as low-cost a producer as a Trina (TSL.N) or a Yingli (YGE.N) or even a Jinko (JKS.N)," Wedbush analyst Christine Hersey said. "In the near term, the margin profile is probably a bit of a concern."

Net income was $5.9 million, or 13 cents per share, compared with $1.5 million, or 3 cents per share, a year ago.

Excluding a $17.2 million loss from foreign exchange hedging, the company earned 44 cents a share. On that basis, analysts were expecting a profit of 41 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 31.6 percent to $443.4 million, above analysts' estimate of $423.49 million, according to Thomson Reuters I/B/E/S.

The Ontario, Canada-based company -- which has most of its manufacturing in China -- said in March that first-quarter shipments would be in line with the fourth quarter's 237 megawatts. The company at the time also forecast gross margins of 14 to 15 percent for the period.

On Wednesday, Canadian Solar reported shipments of 244 MW and a gross margin of 14.7 percent.

For the full year, Canadian Solar still expects shipments of 1.2 to 1.3 gigawatts.

In the second quarter, the company said shipments would be between 245 MW and 255 MW.

Sales volumes to Canada would nearly double this year, while Japanese demand, hurt by a devastating earthquake, will return to normal levels in the third quarter, said Canadian Solar Chief Executive Shawn Qu.

Shares of the company were down 2 percent at $9.60 in after hours trading after closing at $9.80 on the Nasdaq. (Reporting by Nichola Groom; Editing by Tim Dobbyn and Robert MacMillan)

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