First Solar Earnings Preview: Major Revision Likely In Light of Business Shift

by Trefis Team
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First Solar (NASDAQ:FSLR) will release its Q1 earnings this quarter, which will be closely watched in light of the major subsidy cuts in European markets. While the company is expected to book big losses because of the closure of its manufacturing facility in Germany, we are looking at the impact of the changing industry conditions on the sale of First Solar’s thin film panels. The competition from Chinese manufacturers like Trina Solar (NYSE:TSL) has resulted in falling panel prices, impacting First Solar’s core panel manufacturing business. Revenues from the systems installations division should show robust growth in the last quarter.

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German market

First Solar has announced that it would reduce around 30% of its global workforce and close down its manufacturing facility in Germany. (See: Gloomy Outlook for Solar Panel Sales as Germany Cuts Support) The German government’s decision to reduce subsidies to the solar industry has had major repercussions on the industry as a whole.

Global panel demand is set to see an annual decline of 10% to fall to 24.8 Gigawatts (GW) in 2012 as major European markets cut back on support. Polysilicon based PV manufacturers have cut back on prices, hurting the cost advantage that thin panel manufacturers like First Solar enjoyed. (See: First Solar’s Downsizing Highlights Industry Challenges) In addition to lower support, the German government has also come out with new regulations on the use of arable for large scale solar installations, which could hurt First Solar’s systems installations business in the country.

Business shift

With falling demand for panels, First Solar has reduced capacity by closing down its higher cost German facility. Panel manufacturing will now be confined to its plants in Malaysia and some of the production will come from its Arizona facility.

The company is focusing on its large scale systems installations business in the U.S. where it is currently involved with projects such as the Topaz project (550 MW) and the AV Solar Ranch One (230 MW). The company’s strategic shift to the installations business highlights the better margins in the business. Installations business is set to grow in the U.S. as major utilities companies take steps to invest in solar farms to take advantage of falling costs and to meet regulatory requirements promoting clean energy.

We will be revising our estimates for First Solar following the results. Our present estimate is at a significant premium to its current market price.

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First Solar Logo
  • commented 2 years ago
  • tags: YGE FSLR TSL STP
  • The rich doesnt want help solar companies compete with Big Oil and GAs where the rich invest trillons of dollars in stocks and bonds.. The rich was just diopping toes into solar stocks and decide tha tit is too cold for them .and they dumped them.. Greed greed greed !!
    First Solar Logo
  • commented 2 years ago
  • tags: YGE FSLR TSL STP
  • Except the rich who are sooo greedy that they still want subsidy on top of the huge savings they get with solar energy because of the highest rate bracket they pay for electricity becauseo f their heavy electtricity consumption. Even at 40 cent a kilowatt usually for top rate brackets the rich lviing in mcmansions pay will be eliminated with solar energy but the rich still want tax credits to go with the former.. Greed greed greed no wonder the rich dumped solar stocks !!! greed greed !!
    First Solar Logo
  • commented 2 years ago
  • tags: YGE FSLR TSL STP
  • God, it is so difficult to post comment here.. I had contacted FCC with a complaint about all the ridculous things I need to do in order to login .. and finally post a comment.. What a goose chase!!
    First Solar Logo
  • commented 2 years ago
  • tags: YGE FSLR TSL STP
  • It would be very bad for First Solar if costs had not come down as much as now. The buyers would be less able to afford it.. This is noit true by any definition... Even with reduced subsidies from Germany and anywhere else, the buyers are actually paying less than before. overall, we are paying less and less for solar energy. Even better than that, First Solar is going to increase efficiency from 11% to 14% in next two years which mean that prices will keep coming down more with subsidies or without .. It would be nice to be still getting subsidies but solar energy is already a success story that changes everybody's math that they are starting all over again and you can bet that they wll come back to buy more solar energy than ever. We can no longer believe that fossil fuel prices will stay low forever and we need time and planning to get solar energy ready to pick up the slack the next time fossil fuel prices shoot up and it will. Everybody is actually out looking for real estate to put solar farms in which will require time to bring to fruition.. You can bet that First Solar is already quietly making deals with utilties all over America and the world . You will know when First Solar announces new manufacturing expansions .. It wont be long by then. Dont worry.. Solar energy is for real not a faddish idea..