Energy Conversion Q3 profit falls sharply

By Adveith Nair

BANGALORE (Reuters) - Energy Conversion Devices Inc on Monday reported a 81 percent drop in third-quarter profit due to weak demand for solar power in the United States, and the solar company declined to provide outlook for the fourth quarter, citing poor visibility.

Skyrocketing demand for solar power was a bright spot in the global economy last year until a pullback in solar subsidies in Spain and frozen credit markets dried up access to project financing and choked off demand.

ECD makes lightweight, flexible solar laminates for rooftops and buildings. The so-called thin film solar products are made from amorphous silicon and, unlike traditional solar panels, do not rely on costly crystalline silicon as their primary raw material.

"The global market continues to be difficult, with the biggest challenge being the sufficiency of project financing and our customers' continued access to capital," Chief Executive Mark Morelli said in a statement.

On a conference call with analysts, Morelli said the company had lower-than-anticipated product sales and higher-than-expected inventory levels at the end of the quarter. Customer access to project financing remained tight and a number of projects were delayed, Morelli added.

"These trends are continuing hampering our visibility into timing of sales. As a result, we will not provide guidance for the fourth quarter," Morelli said. He, however, said production will range from the high teens to about 20 megawatt (MW) during the fourth quarter.

Raymond James analyst Pavel Molchanov said the fact that the company did not offer any guidance suggested visibility remained bad.

"Their news last week further adds to the perception that demand is very, very poor," he said, adding that revenue estimates for the June quarter and for fiscal 2010 will need to come down 'quite considerably'.

Last week, Rochester Hills, Michigan-based ECD said it had begun a temporary production furlough to bring supplies in line with weak demand and save $6 million in the June quarter.

Analysts are currently looking for revenue of $76.1 million for the fourth quarter, and $487.6 million for 2010, according to Reuters Estimates.

LOWER EXPENSES HELP RESULTS

Net income for the fiscal third quarter ended March 31, 2009 was $1.3 million, or 3 cents per share, compared with $7 million, or 17 cents per share, a year ago. Wall Street analysts, on average, had been expecting earnings of a penny per share, before items.

Results for the latest quarter include preproduction costs of 3 cents a share and restructuring costs of less than a cent a share, the company said.

Raymond James' Molchanov said lower selling, general and administrative (SG&A) expenses helped results.

For the latest third quarter, the company reported SG&A of $12.3 million. For the second quarter ended December 31, 2009, operating, general and administrative expenses came in at $17.2 million.