Writedowns push Q-Cells into heavy Q2 loss

FRANKFURT Wed Aug 10, 2011 11:16am EDT

FRANKFURT (Reuters) - Plunging prices for solar cells and writedowns on its plants and inventories led German solar company Q-Cells to reveal a gigantic loss in the second quarter, sending its shares tumbling.

"We've been hit very hard by the market environment," Chief Executive Nedim Cen said in a conference call on Wednesday, pointing to weak demand in Germany, the world's No.1 solar market, and resulting low capacity utilization.

Solar companies are struggling with the fallout from lower government subsidies on which the industry depends -- solar power is up to eight times more expensive than conventional forms of energy.

Sector leader First Solar last week blamed falling prices for cells, as a result of lower incentives in key markets Germany and Italy, for its profit warning.

Q-Cells' second-quarter net loss was 355 million euros ($505 million), almost seven times the 48.3 million euro average forecast in a Reuters poll of analysts, the company said in a statement two days ahead of its official reporting date.

Q-Cells, once the world's largest maker of solar cells, also lowered its 2011 outlook, and now expects sales to drop about a quarter to roughly 1 billion euros, after previously aiming for stable sales versus 2010.

It sees an operating loss in the "hundreds of millions of euros" in 2011.

"The Q2 results and outlook are disastrous, and way below any expectations," said DZ Bank analyst Sven Kuerten. "The company is in huge operating trouble and will, in our view, be in severe financing trouble in 2012 at the latest."

Q-Cell shares plunged as much as 24 percent to a record low, and were down 16 percent at 0.78 euros at 10:51 a.m. EDT, putting them among the biggest decliners among German stocks.

Management forecast that stricter cashflow discipline, including job cuts, would leave the company with some 300-350 million euros in cash by the end of this year.

Q-Cells said it aims to post a profit before interest and tax (EBIT) for next year.

Investors will look for further clues about the state of the industry when Germany's two largest solar companies, SMA Solar and SolarWorld, report quarterly results later this week.

(Additional reporting by Josie Cox; Editing by David Hulmes)