Solar company results reflect weak global market

By Nichola Groom and Matt Daily

LOS ANGELES/NEW YORK (Reuters) - First Solar Inc reported a quarterly profit on Thursday that handily topped Wall Street estimates, but its shares fell in extended trading after the company said it would start offering rebates to defend its position in Germany.

The solar panel maker's shares soared more than 10 percent after it announced its results but reversed course and fell 3.2 percent after the rebate program was outlined during a conference call with analysts.

"They say they're doing it through a rebate program, but it doesn't matter what you call it, they still have to cut prices," said Kaufman Bros analyst Theodore O'Neill.

First Solar, based in Tempe, Arizona, has weathered the global recession better than many of its peers because its cadmium telluride panels are cheaper to produce than the silicon-based panels that dominate the market.

That was underscored on Thursday as three smaller U.S. solar companies, Evergreen Solar Inc, Hoku Scientific Inc and Akeena Solar Inc, said they lost money in the second quarter.

A dearth of financing for renewable energy projects has contributed to a global glut of solar panels that has sent prices falling, hurting panel makers' margins.

At the same time, prices of silicon-based panels have come closer to those of First Solar's low-cost panels, chipping away at its competitive edge.

To defend his company's market position in top solar market Germany, Chief Executive Mike Ahearn said First Solar would offer rebates to customers once solar installations were completed.

"We're the cost leader in the industry by a wide margin, and we're going to do what we have to do," Ahearn said, adding that the duration of the program would be "flexible" and depend on market conditions.

"We're willing to reduce price so long as, but not beyond when, it's necessary," he said.

Analysts said the announcement was disappointing after the company posted strong second-quarter results. Many had been expecting First Solar to raise its full-year revenue view, which it held steady. In addition, its gross margin outlook was below many estimates.

Second-quarter net income was $180.6 million, or $2.11 per share, compared with $69.7 million, or 85 cents per share, a year ago [ID:nN30351001]. Wall Street analysts, on average, had been expecting earnings of $1.65 per share, according to Reuters Estimates.

First Solar said it still expects 2009 revenue of $1.9 billion to $2 billion and gross margins of 31 to 33 percent.

The company expects to spend between $40 million and $60 million on the rebate program.

"Concerns over channel inventory and competitive pricing from some of the lower-cost crystalline module companies seem to be weighing," Canaccord Adams analyst Jed Dorsheimer said.