Solar companies Suntech Power Holdings Co Ltd STP.N and Trina Solar Ltd (TSL.N) said their first-quarter margins were squeezed as they set aside money to offset anti-dumping tariffs imposed by the U.S. government on solar panel imports from China.
The U.S. Commerce Department set punitive tariffs last Thursday after ruling in favor of the local firms that said Chinese exporters were dumping cut-price panels on their market.
The tariffs apply to most top Chinese exporters, including Suntech Power and Trina Solar Ltd, at 31 percent.
The import duty comes at a time when solar companies are already grappling with a steep decline in margins, caused by oversupply and subsidy cuts in top European markets. Some are renegotiating raw material supply contracts, while others have cut production and even laid off people.
Suntech and Trina, however, expect margins to recover in the second quarter as they eye further cost savings and see a rise in demand.
Suntech, the world's largest photovoltaic solar module maker, sees second-quarter gross margins in the range of 3 percent to 6 percent, higher than the 0.6 percent in the first quarter.
The company said first-quarter gross profit and gross margins were hit by a provision for U.S. countervailing and anti-dumping duties.
Trina forecast second-quarter gross margin, including the impact of provisions for potential countervailing and anti-dumping duties, of about 10 percent. By that measure, margins were 5.8 percent in the first quarter.
The company expects a sequential reduction in manufacturing costs in the second quarter after it renegotiates a chunk of its long-term supply agreements for silicon, the key material that turns sunlight into electricity inside solar panels.
Trina, one of China's largest solar equipment makers, expects to lower other panel costs to 50 cents per watt by the end of 2012 from 58 cents currently.
"We will continue to streamline our wafer and module manufacturing operations, reduce cost and focus on cash management," Suntech Chief Executive Zhengrong Shi said in a statement.
Suntech expects a sequential growth of more than 20 percent in shipments in the second quarter.
Trina expects to ship 500 megawatt (MW) to 520 MW modules in the second quarter, higher than the 380 MW in its first-quarter. It expects shipments of 2-2.1 gigawatt (GW) this year, versus 1.51 GW last year.
Suntech said net loss attributable to holders of American Depositary Shares (ADS) was $133 million, or 74 cents per ADS, for the first quarter, compared with net income of $31.9 million, or 17 cents per ADS, a year ago.
The company's revenue fell 53 percent to $409.5 million.
Trina Solar's first-quarter net loss was $29.8 million, or 42 cents per American Depositary share (ADS), compared with an income of $47.7 million, or 63 cents per ADS, in the year-ago quarter.
Revenue fell 37 percent to $349.9 million.
Shares of Trina Solar and Suntech have plummeted in the last year, losing about three-quarters of their value. The broader MAC Global Solar Energy Index fell 76 percent during the period.
(Reporting by Swetha Gopinath in Bangalore; Editing by Sreejiraj Eluvangal, Saumyadeb Chakrabarty)