Trina Solar sees bright future in new markets

BANGALORE Tue Aug 23, 2011 12:14pm EDT

BANGALORE (Reuters) - China's Trina Solar Ltd shrugged off last quarter's demand slump in Germany and Italy -- the solar sector's largest markets -- to forecast a stronger second half helped by increasing orders from new markets.

The company said it expects to benefit from higher shipments driven by growth in Europe and improved demand from the United States.

"We see opportunities in promising markets such as Japan, Australia, India and the Middle East for the rest of 2011 and beyond," a company executive said on a conference call.

Trina's stock fell to its lowest in about two years early on Tuesday morning, but recouped losses to trade up 13 percent at $14.77 at midday, making it one of the top percentage gainers on the New York Stock Exchange. The MAC Solar companies index was up 7 percent.

Solar companies are looking at China, India and the United States to drive future growth. Kleinwort Benson Investors predicts China will be the biggest solar market in three years, followed by the United States.

North America accounted for about 15 percent of the company's sales volume in the second quarter, and Trina expects this to increase further.

The low-cost solar panel manufacturer expects to ship 480-520 megawatt (MW) of PV modules this quarter, up from 396 MW in the second quarter -- echoing the brighter outlook from peers Suntech Power Holdings Co Ltd, Yingli Green Energy, JinkoSolar Holding Co and ReneSola Ltd.

"Trina is trying to send a message that although they are still trying to compete on price and margins, they are starting to see a bottoming in their business and that demand is starting to pick up," Avian Securities analyst Mark Bachman said.

Trina said it is seeing the market stabilizing and mature prices bottoming out, and expects to raise in-house ingot and wafer production capacity to about 1.2 gigawatt (GW) from 1 GW as of July 31.

However, Solar companies like JA Solar Holdings Co Ltd, MEMC Electronic Materials Inc and First Solar Inc have warned the industry's rapid price declines will further hurt business.

MARGIN SQUEEZE

Trina, which posted a sharp decline in second-quarter profit, saw second-quarter margins slip to 17 percent.

They are not likely to let up in the third quarter, when the company expects gross margins in the mid-to-high teens. Trina had margins above 30 percent for all of 2010.

Solar companies are struggling with high costs as the price for polysilicon, the main raw material in the industry, has risen in recent months as supplies remain tight.

On Monday, Suntech Power Holdings Co Ltd, which gave a strong shipments outlook, also said it expected margins to remain tepid.

Solar subsidy cuts earlier this year triggered a global glut of solar panels and drove down prices sharply, denting profits and stock prices at leading solar manufacturers.

(Reporting by Vaishnavi Bala in Bangalore; Editing by Viraj Nair, Roshni Menon)

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