REC Silicon posts results, predicts a year of improvement

Norway’s REC Silicon says that the global market for silicon is looking up, despite the posting of losses in 2012 and 2013.

The company’s Annual Report 2013 shows that REC Silicon ASA saw revenues of NOK 2.45 billion ($411 million) in 2013, a slight decrease since 2012’s NOK 3 billion ($514 million). However, the company’s net loss for the total operations in those two years went from NOK 6 billion ($1 billion) to NOK 2 billion ($347 million). Likewise, REC Silicon Group, which is formed of REC Silicon ASA and its subsidiaries, posted a loss before tax for 2013 of NOK 2.5 billion ($430 million); the year before, there was a loss of NOK 7.4 billion ($1.2 billion).

Writing in the report, Tore Torvund, president and CEO, acknowledged that the outlook for the company had once been grim. Torvund said, “REC Silicon is looking back at a year of profound change. Drastically reduced polysilicon prices led to bankruptcies, shutdowns, and layoffs across the industry. REC Silicon was no exception. Debt maturities and insufficient earnings cast substantial doubt on our ability to sustain operations. We met these challenges by restructuring our operations and our capital structure culminating with the sale of the REC Solar segment in October. These changes increased our equity capital ratio and extended debt maturities into 2018.”

Overall, the report says that global demand increased between 2012 and 2013, despite over-capacity continuing to pressure polysilicon prices. The report goes on to say, “Difficult market conditions reduced capacity utilization across the value chain and forced many players into insolvency, which led to permanent closure of high cost capacity, and abandonment or delay of new capacity. Market demand for Solar panels improved during 2013. This generated higher polysilicon demand, which in turn lifted average selling prices from a historical low point at the beginning of 2013. Overall, industry analysts are estimating global Photovoltaic (PV) installations in 2013 at approximately 36 GW, up from 32 GW in 2012. While demand is stagnating in historically important European solar markets, it is growing in most other regions of the world. China remains the largest market for solar grade polysilicon. However, a number of other countries are becoming important as REC Silicon’s base is growing in Taiwan, Singapore, Korea and Japan. Towards the end of 2013 China, Japan and the US represented the strongest growth markets. Markets for semi-conductor grade polysilicon broadly follow the developments in global macroeconomic conditions. Demand is suffering from more than two consecutive years of flat growth and excessive inventories. Silicon gas markets are driven by flat panel displays, semiconductors and crystalline PV cells. Demand at year-end was robust due to strong PV markets, market share gains, and spot transactions due to industry accidents.”

Despite still posting losses, the company’s annual report strikes a hopeful if wary note note. Its authors posit that market balance is set to improve this year due to asset rationalisation and stronger solar installation markets. They also point to third-party indices that project modest increases in the prices of average solar grade polysilicon.

They add, “However, bureaucratic and administrative bottlenecks might negatively affect the pace of solar installations, and the potential for higher prices might encourage additional capacity to come on line. In 2014, industry and equity analysts are estimating global PV demand in the range of 40-56 GW, compared to an estimated 36 GW in 2013. The large range causes persistent uncertainty regarding the supply and demand balance for solar grade polysilicon due in part to potential re-starts or new capacity additions occurring in 2014. Silicon gas market forecasts project a continuation of the growth experienced during 2013, mainly driven by the crystalline PV market and a marginally positive demand in flat panel displays compared to the past two years.”