May 15, 2008 / 9:54 AM / 11 years ago

UPDATE 1-Ersol wavers as Spain boosts solar peers' profits

(Adds details, shares, includes Phoenix Solar, Q-Cells, SolarWorld)

By Eva Kuehnen

FRANKFURT, May 15 (Reuters) - Solar cell maker Ersol ES6G.DE reported a weaker-than-expected rise in first-quarter operating profit on Thursday as it added capacity to keep up with peers in the race to satisfy soaring green energy demand.

Ersol’s earnings before interest and tax (EBIT) rose 79.5 percent to 7.7 million euros ($11.95 million), but missed a Reuters poll average forecast of 9 million euros.

Particularly strong demand for large-scale solar power parks in Spain, which has a support scheme for renewable energy have boosted the profits of Ersol’s German solar rivals. Ersol generates most of its revenues in Europe as well as in Asia.

Its sales doubled to 52.4 million euros, but were also below estimates. It made almost 80 percent of sales outside of Germany, with particularly strong business in Japan and China.

Ersol’s EBIT margin fell to 14.8 percent from 16.5 percent in the year-ago quarter, weighed by its solar module business as it started its thin film production, it said.

Its shares fell 3.4 percent by 0821 GMT, underperforming Germany's technology index .TECDAX, which was down 0.7 percent.

“In the solar sector, where analysts and investors are always expecting more to come, Ersol will clearly not be a favourite,” Sebastian Zank, an analyst at German bank WestLB, said.

A trader said the disappointment was spreading to others in the sector.

Shares of Phoenix Solar PS4G.DE, which reported first-quarter results late on Wednesday, fell 2 percent. Q-Cells QCEG.DE, the world’s largest solar cell maker, fell 1.6 percent after gaining about 9 percent in the previous session on forecast-beating first-quarter results.

Industry bellwether SolarWorld SWVG.DE, which covers silicon production to solar module making, fell 2 percent after it confirmed preliminary results and posted a 62 percent gain in consolidated net profit.

Ersol said it is aiming for capacity of 200 megawatt peak (MWp) at its thin-film module segment by the end of 2012 and at about 550 MWp at its crystalline solar cell segment.

It held on to its outlook and still aims for an EBIT margin of over 20 percent by the end of the year, expecting EBIT to reach 70-80 million euros on sales of 300-320 million.

For 2009, it is targeting EBIT of 90-100 million euros on sales of 420 to 440 million euros.

“Ersol will have to make a much greater effort to be able to meet its 2008 guidance,” Zank said in a note to clients.

Ersol trades at 13.6 times 2009 earnings, which compares to SolarWorld’s multiple of around 20, Centrotherm’s CTNG.DE multiple of about 19 and Phoenix Solar’s 13 multiple. (Editing by Sue Thomas)

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