UPDATE 2-Q-Cells 2007 sales rise, to start Asia production

(Adds details, background, share price, analyst comments)

By Eva Kuehnen

FRANKFURT, Feb 19 (Reuters) - German solar cell maker Q-Cells (QCEG.DE) reported strong full-year results and said it plans to invest more than 1 billion ringgit ($263.2 million) in its first production site in Asia.

Q-Cells, which said on Tuesday it had become world's largest solar cell producer by volume, said it plans to build a factory in Malaysia to take advantage of new growth markets and protect against currency fluctuations.

Solar companies around the world are expanding production capacity rapidly to meet growing demand for green energy to counter global warming.

Q-Cells said 2007 sales rose 59 percent to 858.9 million euros ($1.26 billion), which is more than its own target of least 800 million euros.

Q-Cells kept its growth targets for 2008 in place, expecting sales of about 1.2 billion euros ($1.77 billion), which analysts said was a conservative estimate.

Full-year earnings before interest and tax (EBIT) rose 52 percent to 197 million euros, leading to an EBIT margin of almost 23 percent.

"This is impressive since wafer sourcing costs increased while cell selling prices declined. This shows that Q-Cells is very capable of reducing production costs and we see much more still to come," said Benjamin Kluftinger, analyst at Citigroup.

Q-Cells shares, which have fallen more than 30 percent since the beginning of the year after almost tripling in 2007, closed flat at 67 euros in Frankfurt, compared with Germany's technology index .TECDAX which was down 0.2 percent.

Delays at its thin film units dented Q-Cells 2007 performance with a loss of around 8 million euros, the company said. Sales at the new technologies units came in at 0.4 million euros.

WORLD CHAMPION

Q-Cell's net income rose 69 percent to 148.2 million euros which was below its initial target, mainly due to a lower contribution from its roughly 17-percent stake in Norway's solar energy group Renewable Energy Corporation (REC) (REC.OL).

"Q-Cells is staying conservative due to the ramp-up of thin film modules this year which should have a dampening effect on the Group's EBIT margin," Peter Wirtz, analyst at WestLB wrote in a note to clients.

Construction of the polycrystalline solar cell production factory in Malaysia will start in the second quarter of this year and the plant will reach a production capacity of more than 300 megawatt peak (MWp) over several phases of expansion, Q-Cells said.