First Solar Preview: Manufacturing Costs, Project Order Book In The Spotlight

by Trefis Team
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First Solar (NASDAQ:FSLR), one of the world’s largest solar panel manufacturers and project developers, is expected to release its fourth quarter 2013 results on February 25. During Q3 2013, the company’s revenues stood at around $1.26 billion, up by around 50% year-over-year, while operating income nearly doubled to around $207 million. [1] For the fourth quarter, we expect the company’s earnings to be  influenced by revenue recognition on its Desert Sunlight project as well its improving manufacturing efficiencies. Here is an overview of what to expect and some of the factors we will be tracking  when the company reports.

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Desert Sunlight  Project Will Power Results, Watching For New Project Orders

First Solar’s project business now accounts for over 80% of the company’s revenues.  For this quarter, we expect the 550 megawatt (MW) Desert Sunlight project, which the  company is building in California, to contribute significantly to revenues and margins. While the company has been executing its existing project orders relatively smoothly, we will be watching its progress in improving its new order book. At the end of the third quarter, the company’s total outstanding bookings stood at around 2.7 gigawatts (GW),while bookings in terms of expected revenues were about $7.8 billion (including contracted module sales), which is slightly below the December 2012 value. [2] However, the company has indicated that it has potential project opportunities to the tune of 7.7 GW, of which around 1.4 GW of the opportunities are in the mid to late stages. [3] We will be watching the company’s progress in converting these leads into project orders.

Panels Manufacturing Costs And Efficiencies

Although First Solar’s standalone panel sales remain small when compared to its systems sales , the company’s panel technology is an important factor in driving its competitiveness in the solar power systems business. Over the third quarter, the company took some significant strides in reducing its core panel manufacturing costs (excluding freight, recycling and warranty charges) by around 12% sequentially to $0.49 per watt, which is the lowest in the solar industry. The company also increased the conversion efficiency of its panels by around 30 basis points to about 13.3%, while the efficiency for its lead production line touched 13.9%. For this quarter, we will be watching the company’s progress in bringing down its manufacturing costs further and also its progress in replicating its lead line conversion efficiency gains across its other production lines.

Trefis will be updating its model and price estimate for First Solar following the earnings release.

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Notes:
  1. First Solar Form 10-Q []
  2. First Solar Q3 2013 Slides []
  3. Seeking Alpha []
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