Conergy: First quarter sales increase; falling operating profits

The Hamburg-based solar company posted first quarter 2011 sales of €163.3 million, thus representing an increase of 8.6 percent from the previous year. This was in spite of the fact that sales in the German domestic market nearly halved.

It says that continued expansion of its international business helped to boost figures, with foreign sales amounting to €122.1 million, in comparison to €74.8 million in the first quarter of last year.

In a statement, the company said: "Conergy succeeded in doubling its sales in the rest of Europe to €80 million (previous year: €40.2 million). Pleasing levels of growth were also seen in North America, with an increase of around 65 percent to €15.3 million (previous year €9.3 million) and in the Asia Pacific region where sales grew by around six percent to €26.8 million."

Although this is positive news for the company, it says that its operating profits were adversely affected due to "significant price pressure in the weak German market, reduced utilization at the module factory in Frankfurt (Oder) and a restrained electronics business".

Consequently, Conergy’s gross profit margin decreased by 10.7 percent. Furthermore, the company’s EBITDA significantly slipped from €7.3 million in the first quarter of 2010 to €-12.3 million in the first quarter of this year, and EBIT fell from €0.3 million to €-18 million.

Group net income after tax also performed weakly in the first quarter of 2011, amounting to €-20.7 million, in comparison to €-5.1 million seen in the first quarter of last year.

As with the majority of solar companies this quarter, Conergy also suffered from weak demand due to regulatory changes in the key European markets.

"Despite the generally restrained start to the year in the sector, we still managed to increase our sales – particularly abroad," commented CFO Sebastian Biedenkopf. "Our early entry into the international markets has helped us to weather the difficult market conditions in Germany."

Cautiously optimistic

The company says that despite the market difficulties, it is still cautiously optimistic for the year as a whole. Whilst it expects sales to continue climbing to more than €1 billion in 2011, says it is "clear that last year’s growth momentum cannot be repeated".

In a statement, it explained: "The continuous changes in a few European countries’ subsidy programs make the sales forecast for 2011 difficult. For example, in Britain the feed-in tariff for outdoor installations was drastically reduced. Even in the world’s second largest photovoltaics market, Italy, a short-term adjustment in subsidy conditions has to be expected.

"Price pressures that are stronger than expected as well as an unfavorable product mix have led to a significantly reduced gross profit in the first quarter of 2011. This makes it more difficult to reach the earnings target for 2011."

Overall, Conergy expects its 2011 EBITDA to reach the mid-double-digit millions. The statement continues: "(…) but given the developments in the first quarter of 2011 however, this forecast is fraught with uncertainty and will depend on the further development of the market in the second quarter of 2011."