First Solar profit falls, cuts 2011 forecast

NEW YORK/LOS ANGELES Thu Aug 4, 2011 5:28pm EDT

NEW YORK/LOS ANGELES (Reuters) - First Solar Inc posted lower-than-expected quarterly profit and cut its 2011 forecast as slack demand in Europe hit prices for its thin-film panels.

Global solar module demand has suffered this year as declines in subsidies in key European markets hurt sales, even as First Solar and rivals such as Suntech Power Holdings Co Ltd and Trina Solar Ltd expand production.

That has taken a toll on First Solar's shares, which have dropped 17 percent so far this year and closed at their lowest level of 2011 on Thursday amid the broad U.S. market selloff.

Still, one analyst said the cut to the profit forecast was not as deep as some market-watchers had expected, largely because of the company's plans to build several large solar power plant projects.

"The full-year results actually hold up pretty well. That's based on the fact that they have a lot of internal pipeline to work with," said John Hardy, analyst Gleacher & Company.

Net income for the second quarter fell to $61 million, or 70 cents per share, from $159 million, or $1.84 per share, in the year-ago quarter.

That was well short of the 92 cents per share that analysts had expected, according to Thomson Reuters I/B/E/S.

In a conference call with analysts, Chief Executive Rob Gillette acknowledged the weak solar market picture, but maintained that business would improve.

"It was a challenging quarter for the solar PV industry, including First Solar," he said. "We are positioned for a better second half."

Earlier on Thursday, Sempra Energy announced it would buy First Solar's expansion of the Copper Mountain solar power plant in Nevada.

Revenue fell 9 percent to $533 million, also below the $582 million that Wall Street forecast.

FORECAST REDUCED

Even with its reduced forecast for 2011, the final six months of the year are still expected to generate more than three times the profits of the first half of the year.

First Solar trimmed its full-year earnings per share outlook range to between $9 and $9.50 from a previous range of $9.25 to $9.75 per share.

It also cut its sales view to $3.6 billion to $3.7 billion from a prior view of $3.7 billion to $3.8 billion.

The company is also cutting back plans for capital spending and manufacturing and factory start-up costs.

Operating cash flow for the year is expected to be between $500 million and $600 million, down from $800 million to $1 billion.

First Solar's second-quarter gross profit margin shrank to 36.6 percent from 45.8 percent in the first quarter, as its average selling prices dropped by 13 percent.

Its production of solar modules grew 19 percent to 489.2 megawatts.

The Tempe, Arizona-based company is the lowest cost producer of the photovoltaic modules that turn sunlight into electricity.

Its production cost was flat with the first quarter at 75 cents per watt, including share-based payment costs and costs to increase production.

First Solar shares fell 2.7 percent in post-market trading, after dropping 6.3 percent to $107.94 during the regular trading session.

(Reporting by Matt Daily and Nichola Groom; editing by Gary Hill, Andre Grenon and Matthew Lewis)

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