March 24, 2010 / 6:32 AM / 7 years ago

UPDATE 4-Q-Cells sees growth in H1, concerned about 2011

5 Min Read

* Sees 2010 sales of 1-1.2 billion euros

* Sees improvement in operating income

* Expects strong growth in Europe in H1 2010

* Little visibility beyond H1 2010, warns on German demand

* Shares up 7 percent, down 34 pct so far this year

(Adds comments from press conference, background)

By Christoph Steitz

FRANKFURT, March 24 (Reuters) - Q-Cells QCEG.DE, the world's fourth-biggest solar cell maker, expects sales to bounce back this year after a 36 percent fall in 2009, as demand in Germany gets a boost from end-users rushing to get solar power subsidies before they are cut later this year.

But Chief Executive Nedim Cen warned on Wednesday at the company's annual news conference that demand in Germany, the world's biggest market for solar products, could collapse next year as the subsidies fall further.

Germany accounted for about half of the global market in 2009 but future demand has been thrown into doubt by government plans to cut the feed-in tariff paid to solar power producers for their output from July. [ID:nLDE62E0W0] [ID:nLDE61816B] [ID:nLDE60J0PA]

Yet demand for cells has rocketed this year as customers bring forward orders ahead of the feed-in tariff cut, because existing producers will continue to get the higher price for a fixed term of up to 20 years

"Particularly in the first six months of 2010, considerable growth in the European market is expected. Q-Cells is set to benefit from this," the company said on Wednesday, but left analysts uncertain about the firm's longer term prospects.

Giving its first real outlook for 2010, Q-Cells said it expects an improvement in operating profit and for sales to come in at 1.0-1.2 billion euros ($1.35-1.62 billion), up from 802 million in 2009 but down on the 1.25 billion generated in 2008.

According to Thomson Reuters I/B/E/S Estimates, analysts had already expected 2010 sales to come in at 1.11 billion euros.

The Q-Cells share price, was up 7 percent at 7.66 euros at 1441 GMT, outperforming the 0.2 percent drop on the FTSE clean tech index .FTET50 but marking a 34 percent drop this year.

"Few have expected that the company will give a guidance at all for this year so the fact that they've done it takes a lot of uncertainty from the market," said a Frankfurt-based trader.

"Also, the shares have lost a third since the beginning of the year, so there is plenty of room for them to rise," he added.

Worried About 2011

"Although the outlook is vague on the profit side, the sales guidance could provide some support to the share today since it is a bit better than the worst case scenarios of a few brokers and the share was under heavy pressure in recent months," DZ Bank analyst Sven Kuerten said in a note.

However, Equinet analyst Sebastian Growe kept a "reduce" rating on the stock due to the uncertain view beyond the first half of the year, while Kuerten also kept a "sell", pointing to the company's expensive products compared with Chinese peers.

Cen said that 2011 could indeed see demand dropping in Germany as further cuts are expected in feed-in tariffs paid to solar power generators and ultimately paid by consumers, on top of the big initial cut planned for this year.

"I am worried," Cen said, when asked about how demand would pan out next year.

Q-Cells, which posted a record 1.36 billion euros loss for 2009, is in the middle of a wide-ranging restructuring process that has claimed a fifth of its workforce as well as long-standing Chief Executive Anton Milner. [ID:nLDE62A1A9]

Competing with industry leader First Solar (FSLR.O) and China's Suntech STP.N and Yingli (YGE.N), it has pledged to steer its business away from being a pure maker of cells in an industry where prices have plunged due to aggressive competition.

It now wants to expand into areas with stronger margins -- such as medium-sized solar installations -- while it is also producing and marketing modules to take advantage of strong end-customer demand in Germany and abroad. ($1=0.7417 euros) (Editing by Greg Mahlich)

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