Canadian Solar Inc (CSIQ.O) reported a bigger-than-expected quarterly loss and said retroactive duties on China-made solar products by the European Commission could reverse a pick-up in demand for its products in the continent.
The stock of the company, most of whose manufacturing operations are in China, fell 12 percent to a two-month low of $3.28 on the Nasdaq on Monday.
Shares of Yingli Green Energy Holding Co Ltd (YGE.N), LDK Solar Co Ltd LDK.N and Jinkosolar Holding Co Ltd (JKS.N) also fell.
"European demand has improved lately, but has the potential to become choppy due to the strong hints that the European Commission may consider implementation of retroactive duties," Canadian Solar CEO Shawn Qu said on a conference call.
The Guelph, Ontario-based company said Europe might slip to become its third-biggest market from being the biggest currently. The continent contributed about 41 percent to Canadian Solar's fourth-quarter net revenue.
The European Commission in September launched an investigation into whether Chinese solar panels were being dumped in EU markets. It started studying allegations of illegal subsidies in November.
The Commission has until June 6 to impose provisional duties on the imports if it believes they are justified. The deadline for imposing definitive duties, which would require a vote by member states, is December 5.
China, which has denied any wrongdoing, may be planning its own retaliation. Beijing is investigating whether U.S., European and South Korean imports of polysilicon, a key component in solar panels, breached anti-subsidy rules.
"Implications of trade disputes between the EU and China could also impact our results," the CEO said.
"We plan to mitigate these risks with further geographic diversification while also taking extra precautions in production shipments and credit control."
He said demand this year will be driven by the United States, Canada, Japan, China and other emerging markets.
North America made up for nearly a fifth of Canadian Solar's fourth-quarter net revenue of $294.8 million.
The company expects shipments this year to rise to 1.6 gigawatts (GW) to 1.8 GW, including panels used in its total solutions business that covers everything from making of solar cells to installation of plants.
Panel shipments were 1.54 GW last year.
The company forecast first-quarter shipments of 290 megawatts (MW) and 310 MW, below 404 MW for the fourth quarter.
Raymond James analyst Pavel Molchanov said the first quarter tends to be the slowest of the year as difficult weather in Europe and North America makes installation difficult.
Canadian Solar expects gross margin to be between 8 percent and 10 percent in the current quarter. Margin was 5 percent in the fourth quarter.
Molchanov said the improvement in gross margin was encouraging, noting that bigger peer Trina Solar Ltd TSL.N forecast a low-single digit gross margin for the first quarter.
Canadian Solar said its focus was to return to profitability this year after a loss last year. Analysts expect a profit of $1.15 per share for 2013, according to Thomson Reuters I/B/E/S.
Panel prices have remained depressed for about four years due to rapid capacity expansion in China and subsidy cuts in Europe, the biggest solar products market. Prices for solar panels slid about 30 percent in 2012.
The company's fourth-quarter net loss — its sixth in a row —increased to $105 million, or $2.43 per share. Adjusted loss was $1.01 per share.
Gross margin fell to 5 percent, from 8.7 percent a year earlier. Total operating costs rose 69 percent to $106.4 million in the latest quarter.
Revenue fell 38 percent to $294.8 million.
Analysts expected adjusted earnings of 94 cents per share on revenue of $318.5 million.
Canadian Solar shares were down 11 percent at $3.32 in afternoon trading.
(Additional reporting by Kanika Sikka; Editing by Joyjeet Das)