Demand from Japan, Europe buoy REC's first-quarter results

Citing strong module demand in Europe and Japan as it seeks to carve out a larger share of the high-end market, REC Solar on Friday posted an after-tax profit of US$11 million, up nearly 2% from the fourth quarter of 2013, while revenue fell almost 4% to $175.4 million.

"We are experiencing good demand in our main markets in Europe and Japan," said REC CEO Oyvind Hasaas. "Together with our partners, we are continuously working to improve our product offering and improve our market presence. Our expansion of 300 MW module capacity through two new module lines will facilitate introduction of new technologies and broaden our product offering to our client base. This is an important step for us to strengthen our position in the ‘high end’ market segment."

Of the group’s revenue, module sales accounted for nearly $170 million, with the rest generated from its system business.

The module division’s first-quarter earnings before interest, tax, depreciation and amortization (EBITDA) was $5.2 million lower than in the fourth quarter of last year, due primarily to an increase in costs as well as to lower sales volumes. The cost increase resulted in part from a fire at the company’s cell building in Singapore last month, which resulted in a temporary closedown of two (out of eight) cell lines for six weeks. New equipment and a furnace upgrade also contributed to the higher costs.

Module production dropped 5.3% from the fourth quarter of 2013 to 216 MW. The company has approved an increase in module capacity to 1.3 GW by the second half of 2015.

Looking forward, REC cited reports that PV demand this year would reach between 46 and 49 GW, up from about 39 GW in 2013. China and Japan are expected to represent 49% of the solar panel market, Europe 21% and the Americas 19% while the rest of the world will make up an estimated 11% of the solar market in 2014. The company added that demand growth in Europe would likely be primarily related to the roof top segment while demand in Japan was expected to increase substantially in the next few years with most of the growth coming from the commercial market segment.

While the EU Commission recently reduced the minimum import price for crystalline solar modules offered by Chinese module suppliers from €0.56 cents to €0.53 cents per watt, REC said it assumes the revised price is more aligned with current solar industry price levels for large EU projects. “REC is expected to continue to receive a price premium for solar panels vs. the industry," it added.