First Solar delivers Q4 and FY 2011 financial declines


First Solar experienced a rough 2011, and a particularly rough fourth quarter (Q4), as did many of its peers. Mike Ahearn, Chairman and interim CEO stated, "First Solar's performance … was impacted by an aggressive competitive environment, an uncertain regulatory environment, warranty-related charges, and restructuring costs incurred to help position our business for the future."

Despite this, and the fact that 2012 guidance has been lowered, he is confident that the company can continue to compete. "We continue to make strides reducing manufacturing costs, increasing module efficiency, and successfully building out our captive project pipeline. These improvements, combined with our recent restructuring and strategic repositioning, enhance our competitive position in a very challenging environment."

2011 financials

For Q4 2011, First Solar’s net sales tumbled by $345 million from Q3 2011, to hit $660 million, "primarily due to the timing of revenue recognition in our systems business and lower volume for module-only sales". They were, however, just up from the $610 million seen in Q4 2010. Meanwhile, for FY 2011, they rose slightly, having reached $2.76 billion, up from $ 2.56 billion in 2010 and $2.06 billion in 2009. Of this, revenue from modules represented $2.06 billion and revenue from its EPC business reaped $699.8 million. The 2011 figures, while up on 2010, did miss the company’s guidance, which had already been lowered in Q3 2011, of between $3 billion to $3.3 billion.

Overall, total operating expenses spiraled, from $364.96 million in 2009 and $435.94 million in 2010, to reach a massive $1.04 billion last year. This can be attributed to the $393.36 million paid out in goodwill impairment and the $60.36 million restructuring costs, neither of which the company paid out in the previous two years.

In a statement released, the thin film manufacturer explained, "The fourth quarter of 2011 was impacted by pre-tax charges of $393 million (reducing EPS by $3.90) associated with a non-cash goodwill impairment for our components business, $164 million (reducing EPS by $1.67) related to warranty and cost in excess of normal warranty expense, and $60 million (reducing EPS by $0.43) related to restructuring activities, as announced in December 2011."

Q4 2011 EBIT was hard hit, having dropped from $222.7 million in Q3 2011, to $-485.3 million. For the FY, it also dropped, from a respectable $748.9 million in 2010, to $-68.7 million in 2011, thus representing a massive 393 percent decline on the previous year. Q4 and FY EBITDA also fell significantly. Sequentially, it declined from $274.8 million to $-434 million, and annually, from $905 million to $131.8 million.

FY gross margin, on the other hand, was said to be 35.1 percent, a big drop from 2010’s, which achieved 46.2 percent, while photovoltaic module production volume fell two percent quarter-on-quarter to 540 megawatts. While Q4 utilization was 94 percent, 2012’s has been lowered to between 60 and 70 percent, from a previous guidance of 80 percent. Gross profit, meanwhile, fell from $1.18 billion in 2010, to $971.8 million in 2011.

FY 2011 pretax income was also hard hit, having fallen from a positive $762.07 million in 2010, and $686.31 million in 2009, to a very negative $-53.71 million. This resulted in a net loss of $39.49 million in 2011, compared to a net income of $664.20 million in 2010 and $640.138 million in 2009.

2012 guidance

For FY 2012, First Solar has reduced its net sales guidance from $3.7 billion to $4 billion, to $3.5 billion to $3.8 billion. It also aims to reduce its operating cash flow from $0.9 billion to $1.1 billion, to $0.8 billion to $0.9 billion.

For Q1 2012, the company expects to reap revenues of $657.5 million, $394.4 million of which is projected to come from module sales, while the remaining $266.7 from its EPC business. EBIT, meanwhile, is forecast to hit $53.2 million and EBITDA, $105 million.

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