UPDATE 3-Slowing demand pushes MEMC to cut jobs, capacity

Thu Dec 8, 2011 11:10am EST

* Sees Q4 charge of $700 mln

* In Q4, sees adj. loss of $0.05/shr-$0.10 EPS

* Cuts adj Q4 sales forecast to $789-$861 million

* Shares up 3 pct

By Swetha Gopinath and Krishna N Das

Dec 8 (Reuters) - MEMC Electronic Materials Inc slashed its outlook for the current quarter and said it will cut jobs and reduce capacity as the silicon-wafer maker grapples with lower demand.

The company will cut more than 1,300 jobs, or a fifth of its workforce, and will be idling some of its facilities, as it looks to lower costs amid a severe downturn in the renewable energy sector.

MEMC, like its solar-wafer rivals LDK Solar and Renesola, has seen a sharp decline in its margins and sales as prices for renewable energy systems fell by 40 percent. A number of solar companies have gone bankrupt and a host of them have cut capacity.

MEMC will reduce capacity at its Portland, Oregon crystal facility. It also plans to idle its polysilicon facility in Merano, Italy and may close it unless "dramatic feedstock, power, and other cost reductions are achieved in the near term."

"We expect capacity related actions in solar materials to lower the average cost of our modules for our downstream solar energy systems and provide greater manufacturing flexibility in the future," Chief Financial Officer Mark Murphy said on a conference call with analysts.

MEMC said about 250 of the positions to be eliminated are in the United States. An estimated 41 percent are in its semiconductor materials segment and 47 percent in the solar materials segment.

The company expects to take a related charge of $700 million in the fourth quarter.

"The company is chasing a moving target as Chinese companies continue to add capacity and lower prices. The actions do nothing to put the company out of the way of relentless downward pressure on solar prices," Wunderlich Securities' analyst Theodore O'Neil wrote in a note.

SUN SETS ON SOLAR WAFERS?

MEMC, whose main business supplies silicon wafers to the solar and semiconductor industries, branched out into solar project development through its acquisitions of SunEdison and the U.S. arm of Fotowatio Renewable Ventures.

"They have almost completely exited the solar wafer business. You could see them exiting it completely at some point," Kaufman Bros' analyst Jeffrey Bencik said. "They'll continue to focus on the SunEdison business and the semiconductor business."

For the fourth quarter, MEMC expects an adjusted loss of 5 cents per share to a profit of 10 cents. It had earlier forecast a breakeven or 20 cents per share.

Analysts, on average, were expecting a profit of 8 cents, according to Thomson Reuters I/B/E/S.

The company lowered its adjusted sales forecast to $789-$861 million, from $800-$1.1 billion earlier. Analysts had expected $961.9 million.

The company's shares, which had lost about two-thirds of their value this year, rose 6 percent to $4.47 in early trade on Thursday on the New York Stock Exchange.

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