First Solar issues Q3 results early; slashes Q4 guidance

Speculation is rife that First Solar’s hand was forced due to the sudden departure of CEO Rob Gillette. A company note issued by Jeffries, for instance, was titled "OK 3Q, Terrible 4Q Guide – Now We Know Why CEO was Dismissed".

With respect to Rob Gillette’s departure, First Solar’s chairman and founder, Mike Aheran commented, "We thank Rob for his service, but the Board of Directors believes First Solar needed a leadership change to navigate through the industry turmoil and achieve our long-term goals."

Financial results

Although the company has posted fairly respectable Q3 figures, it has drastically reduced its Q4 guidance. The analysts at Jefferies responded by writing, "It is impossible to know if the weakness is attributable to revenue recognition on projects or module sales volume, likely a both are responsible, but we think lower project revenue recognition of AVSR1 and Agua Caliente is mostly responsible.

"We are not sure if project revenue is weak in 4Q because of contract terms/accounting (similar to Dessert Sunlight) or if construction has been delayed. The company is lowering capex for 2012, an indication that module sales will also be weak, which is mostly expected."

The details

Getting down to the specifics, First Solar achieved net sales of USD$1,006 million in Q3, thus representing an increase of $473 million from Q2 and rising from $798 million in Q3 2010.

EBIT, while positive at $223 million, still fell short of the company’s previous guidance for the quarter (around $300 million).

At $196.5 million, net income in Q3 2011 did increase from the same period last year, which saw $176.9 million. However, when the first nine months of 2011 are compared with the first nine months of 2010, it has fallen from $508.2 million to $373.6 million.

First Solar’s Q4 results, as already mentioned, have been cut almost by half. As such, while its guided EBIT was previously $440 million, this has now been changed to $290 million.

Full year 2011 revenue guidance, meanwhile, has shrunk from an expected $3.6 billion to $3.7 billion, to an expected $3 billion to $3.3 billion. Operating guidance expectations have also taken a hit, with projections decreasing from between $900 million to $960 million, to between $650 million to $760 million.

While the news is not rosy, Götz Fischbeck of BHF Bank believes that with its 2.5 gigawatt peak project pipeline, the company is amongst one of the "best positioned" photovoltaic companies to "weather the current storm".