LOS ANGELES/NEW YORK First Solar Inc reported a quarterly profit on Thursday that handily topped Wall Street estimates, but its shares fell in extended trading after the company said it would start offering rebates to defend its position in Germany.
The solar panel maker's shares soared more than 10 percent after it announced its results but reversed course and fell 3.2 percent after the rebate program was outlined during a conference call with analysts.
"They say they're doing it through a rebate program, but it doesn't matter what you call it, they still have to cut prices," said Kaufman Bros analyst Theodore O'Neill.
First Solar, based in Tempe, Arizona, has weathered the global recession better than many of its peers because its cadmium telluride panels are cheaper to produce than the silicon-based panels that dominate the market.
That was underscored on Thursday as three smaller U.S. solar companies, Evergreen Solar Inc, Hoku Scientific Inc and Akeena Solar Inc, said they lost money in the second quarter.
A dearth of financing for renewable energy projects has contributed to a global glut of solar panels that has sent prices falling, hurting panel makers' margins.
At the same time, prices of silicon-based panels have come closer to those of First Solar's low-cost panels, chipping away at its competitive edge.
To defend his company's market position in top solar market Germany, Chief Executive Mike Ahearn said First Solar would offer rebates to customers once solar installations were completed.
"We're the cost leader in the industry by a wide margin, and we're going to do what we have to do," Ahearn said, adding that the duration of the program would be "flexible" and depend on market conditions.
"We're willing to reduce price so long as, but not beyond when, it's necessary," he said.
Analysts said the announcement was disappointing after the company posted strong second-quarter results. Many had been expecting First Solar to raise its full-year revenue view, which it held steady. In addition, its gross margin outlook was below many estimates.
Second-quarter net income was $180.6 million, or $2.11 per share, compared with $69.7 million, or 85 cents per share, a year ago [ID:nN30351001]. Wall Street analysts, on average, had been expecting earnings of $1.65 per share, according to Reuters Estimates.
First Solar said it still expects 2009 revenue of $1.9 billion to $2 billion and gross margins of 31 to 33 percent.
The company expects to spend between $40 million and $60 million on the rebate program.
"Concerns over channel inventory and competitive pricing from some of the lower-cost crystalline module companies seem to be weighing," Canaccord Adams analyst Jed Dorsheimer said.
Evergreen Solar Inc reported a worse-than-expected quarterly loss as lower selling prices offset rising sales volumes. Its shares were down 10 percent after hours.
Evergreen also said it had signed agreements with Jiawei Solarchina Co Ltd to build a 100 MW manufacturing plant in China, for Evergreen's products.
Evergreen, based in Marlboro, Massachusetts, will invest $17 million in cash and equipment for the plant that will begin production in the first half of 2010, and receive $33 million in loans from the Wuhan government's Hubei Science & Technology Investment Co.
The Chinese government recently said it would subsidize half the investment for solar power projects as part of an effort to grow its renewable power output.
"Unless the world changes in a dramatic way, our plan is to expand in China," Richard Feldt, Evergreen's chief executive officer told a conference call.
Simmons & Co analyst Burt Chao said the Chinese expansion was a positive development for Evergreen as "they will be able to extract really low costs and they will be able to remain very competitive."
Also on Thursday afternoon, Honolulu-based solar raw material provider Hoku reported a quarterly loss and said it had taken steps to slow construction for its polysilicon plant in Idaho [ID:nBNG457935]. And, California-based solar systems installer Akeena Solar earlier in the day posted a narrower quarterly loss as it reaped the benefits of cost-cutting measures [ID:nBNG291654].
First Solar shares fell 3.2 percent to $167.98 in extended trade after closing at $173.55 Thursday on the Nasdaq, while Evergreen shares fell to $2.15 after hours after closing at $2.38 on the Nasdaq.
Hoku shares were unchanged after hours after closing at $2.15 on the Nasdaq. Akeena shares slipped to $1.30 after closing at $1.36 on the Nasdaq.
(Reporting by Nichola Groom; Additional reporting by Laura Isensee in Los Angeles Editing by Steve Orlofsky, Bernard Orr)