Expert analysis: Back in black: SolarWorld provides optimistic outlook for 2016

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The fourth and final quarter in 2015 can be considered a historic landmark for SolarWorld. Following 14 consecutive quarters of operating losses, the company was able to report an operating profit on a full quarterly basis.

When releasing its preliminary 3Q15 figures at the end of October 2015, the company highlighted that in September 2015 it had been able to achieve a positive operating result on a monthly basis for the first time since the beginning of 2012.

Yet at the same time, SolarWorld had to give up its original target for 2015 to achieve a break-even operating result for the full year as, by the end of the first nine months, its operating losses amounted to more than €18 million.

In 4Q15, quarterly shipments of modules in excess of 350 MWp reached a new all-time record level for SolarWorld, and the operating profit of €8 million earned in the quarter corresponds to an operating margin of +3.5%.

For the full year 2015 SolarWorld shipped 1.16 GWp of PV components to customers, corresponding to a growth in volumes by 33% year-on-year. Half of SolarWorld’s shipments went into the U.S. PV market, giving the company an impressive combined market share for the U.S. residential and commercial PV market of the order of 18%-20%, assuming that less than 10% of SolarWorld’s module shipments in the U.S. were destined for utility-scale projects.

On the back of a strong order book, SolarWorld guides for a sales increase in 2016 in the range between +20% and +30%. At the upper end of its guidance the company would reach €1 billion in annual sales. With the operating leverage resulting from the increased production volumes envisaged by SolarWorld for 2016, the company’s target of reaching a “positive EBIT in a two-digit million amount” in 2016 does not appear to be overly ambitious.

The medium-term outlook for SolarWorld is less clear, however. On the one hand, the ITC extension for another five years passed by Congress in late December last year paves the way for a continued growth of U.S. residential and commercial PV demand for the foreseeable future, which is a clear positive for SolarWorld.

On the other hand, the U.S. and Europe combined account for close to 90% of SolarWorld’s turnover. In both markets, a SolarWorld-led coalition of local manufacturers was able to convince regulators to impose import duties/minimum prices on cells and modules manufactured in China or Taiwan. It is yet unclear if these regulations will be extended beyond the end of 2016.

Any relaxation of these tariffs would lead to a higher price pressure in these key markets for SolarWorld and could result in market share losses or a lower profitability as a consequence of more pronounced ASP declines (or a combination of both), representing the biggest threat to SolarWorld’s continued economic recovery. SolarWorld will release its annual report for 2015 on March 17, 2016.