Trina profit soars, but '09 demand weighs on stock

NEW YORK (Reuters) - Trina Solar Ltd said on Monday quarterly earnings more than doubled on strong demand for solar energy, but its shares fell as results missed Wall Street estimates due to a foreign exchange loss and the company said it has yet to sign contracts for all of its 2009 output.

The Chinese company's stock was down $1.01, or 3.3 percent, at $29.97 in mid-day trading, although it raised its full year revenue target and increased its full-year solar module shipment expectations.

Quarterly earnings fell below Wall Street's expectations due to foreign currency exchange losses and a one-time loss related to a discontinued operation.

In addition, Trina said it has secured orders for 60 percent of its 2009 sales target -- fueling market concerns about how a pullback in government solar energy subsidies in Spain and a weakened global economy will impact demand next year, when the industry is expected to benefit from increased supplies of its key raw material -- polysilicon.

Like many solar stocks, Trina has lost more than 40 percent of its value this year.

"Until the companies are far enough along in their negotiations with customers to be able to say 'Yes, we've signed up a majority of our volume for next year at fixed prices and here is where the average selling prices fall out,' then the market's just taking a wait and see approach," Cowen and Company analyst Rob Stone said. Stone has an "outperform" rating on Trina and owns no shares.

Second-quarter net income was $17.1 million, or 68 cents per American Depositary share, compared with $7.4 million, or 32 cents per ADS, a year earlier.

Results were hurt by a foreign currency exchange loss of 24 cents per share and a loss of 8 cents a share associated with the discontinuance of its Lianyungang polysilicon project.

Analysts on average had forecast earnings of 81 cents a share, according to Reuters Estimates.

Revenue almost tripled to $204.2 million. Wall Street was expecting revenues of $202.5 million.

Last month, Trina raised its second-quarter revenue forecast to between $200 million and $205 million, citing robust demand.

At the same time, however, it lowered its gross margin forecast for the quarter to between 22.5 percent and 23.5 percent. In June, it had said rising silicon costs could pressure margins for the period.

Tight supplies of silicon have crimped expansion of the fast-growing solar sector for the past year and rising costs are expected to weigh down the industry until new silicon production capacity comes online late this year.

Trina expects its gross margins to increase in 2009 due to lower polysilicon costs.

Earlier this month, both LDK Solar Co Ltd and Yingli Green Energy Holding Co Ltd said they expected silicon prices to improve in the fourth quarter of this year.

The company expects margins to improve despite lower average selling prices for its modules. Industry experts anticipate the average selling price of modules has to fall, so as to make them more cost competitive.

Trina expects to ship between 62 megawatts (MW) and 66 MW of solar modules in the third quarter. It also expects revenue of between $250 million and $265 million in the quarter.

The company also forecast full-year solar module shipments of 210 MW to 220 MW, up from a prior view of 200 MW to 210 MW.

It also increased its full year revenue outlook to a range of $850 million to $900 million, compared with a previous range of $770 million to $808 million.

(Reporting by Euan Rocha and Nichola Groom; Editing by Derek Caney and Andre Grenon)