Panel price drop hits JA Solar's profits

NEW YORK Mon Aug 8, 2011 11:20am EDT

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NEW YORK (Reuters) - Steep declines in solar equipment prices and an inventory writedown charge will push JA Solar Holdings Co Ltd to a quarterly loss, the company said on Monday, sending its shares to their lowest price in nearly two years.

JA Solar's announcement follows warnings from solar companies such as Trina Solar and MEMC Electronic Materials Inc, which have said that weak prices for the equipment that turns sunlight into electricity would hurt profits.

The solar business, which has been one of the fastest growing industries in the world in recent years, has suffered a dismal 2011 in the stock market, with the MAC Solar Energy Index tumbling nearly 30 percent so far this year.

JA Solar and other solar companies have tried to increase their production of solar cells and modules, even though important markets in Europe have cut subsidies, leading to a glut of supplies on the market.

The weak average selling prices and inventory provisions will cause JA Solar's gross margins to fall to a "negative low single digit range," the company said in a statement.

Last week, First Solar reported lower-than-expected quarterly profit as prices for its thin-film panels fell 13 percent.

Second-quarter shipments would likely be about 400 megawatts, the Shanghai, China-based company said, in line with its forecast issued in May.

Gross profit margins would improve "significantly" in the second half of the year, and there are promising signs since July that orders and volume shipments have risen, said Chief Executive Peng Fang.

Germany, the United States and China look good in the second half, he said.

Separately, JA Solar said its board approved a $100 million share repurchase program.

JA Solar's U.S. shares plummeted 10.2 percent to $3.63, the lowest market since September 2009, bringing their year-to-date drop to nearly 49 percent.

(Reporting by Matt Daily. Editing by Gerald E. McCormick and Robert MacMillan)

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