SunPower to post second-quarter loss, shares dive

LOS ANGELES Mon Jul 25, 2011 6:33pm EDT

LOS ANGELES (Reuters) - SunPower Corp warned on Monday that it lost money in the second quarter because of subsidy cuts in Italy and one-time charges for an inventory writedown, contract cancellations and its strategy of shifting panel sales to areas of greater demand.

The company's shares fell 7.1 percent following the announcement.

However, the U.S. panel maker said revenue would be in line with a forecast it gave last month.

"While we met our revenue goals for the second quarter, our gross margin and bottom-line performance was impacted by market conditions in Germany and Italy," SunPower Chief Executive Tom Werner said in a statement.

SunPower, which is majority owned by French energy company Total SA, forecast a net loss of $1.50 per share to $1.55 per share. Excluding items, the company expects a loss of 19 cents to 20 cents a share. It previously forecast results before items of a loss of 5 cents a share to a profit of 10 cents a share.

Cuts to generous government subsidies for solar power in Italy, the world's No. 2 solar market behind Germany, have caused a glut of solar panels in the market and sent prices into a tailspin.

SunPower's panels are the most efficient in the industry at transforming sunlight into electricity, and therefore command a pricing premium over the competition. However, one analyst said the company could afford to streamline its costs.

"At the end of the day their costs are still not that competitive," Morningstar analyst Stephen Simko said. "With how bad things are in the industry right now and how much pricing has fallen, it makes sense that SunPower is losing money."

SunPower has said it was addressing the weakened Italian market by reallocating sales toward less profitable residential and commercial systems, where demand is greater, and away from utility-scale projects. That strategy resulted in a $29.3 million charge in the second quarter.

On Monday, the San Jose, California, company also said it canceled some contracts with third-party manufacturers if the prices were above the market, a move that resulted in a $32.5 million charge.

SunPower will also record a $13.1 million charge related to Total's successful tender offer last month for 60 percent of the company's shares.

SunPower forecast second-quarter revenue of $590 million to $595 million, in line with its outlook of $550 million to $600 million.

Gross margins, excluding one-time items, are expected to be between 12 percent and 13 percent, compared with the company's prior view of 15 percent to 17 percent.

Including items, gross margins are expected to be between 3 percent and 4 percent, SunPower said.

The company will report second-quarter results and update its 2011 outlook on August 9, it said.

SunPower shares fell 7.1 percent to $19.40 in extended trading after closing at $20.88 on the Nasdaq.

(Reporting by Nichola Groom; editing by Robert MacMillan, Andre Grenon and Gunna Dickson)