Investor splashed with red ink by European solar companies

Heavy job losses and sharp falls in revenues at European solar manufacturers brought investors in the clean energy sector down with a bump last week.

This pain, brought about by a sudden move from excess demand to excess supply in the world solar market over the last 12 months, was best highlighted in recent days by bleak employment news from German heavyweight Q-Cells and Spanish module maker Solaria Energia.

The latter said it would lay off 400 of the 500 employees at its Puertollano PV factory for 10 months, but Q-Cells, the cell maker based in Bitterfeld-Wolfen, trumped that announcement by revealing two days later that it would make 500 permanent job cuts at its older-generation Thalheim production lines.

Q-Cells also said that it would review all of its investment projects, “especially those for 2010”, and reduce its capital commitments. It said that its results for the first half of this year, published in mid-July, showed “how quickly and dramatically the markets have changed”.

This was far from an isolated, negative report last week. Other German solar equipment makers also revealed difficult trading conditions, although some appeared to be surviving a bit better than others.

SolarWorld, which extends along the solar supply chain from silicon to modules, said that sales in the first half of 2008 fell 6%. It presented this as a resilient performance, given a 25% drop in module prices. Its profit margin was down from 28% in the first half of 2008 to 21% in the first six months of this year.

Frank Asbeck, SolarWorld’s expansion-minded chairman, is pinning much hope for sales growth in coming months on the US, where it announced 15MW of civic projects in partnership with oil major Chevron.

Asbeck predicted: “As of the fourth quarter of 2009, the public funding of solar power is expected to come to the fore.” This is a reference to the anticipated approval of grants for solar projects, as part of the US ‘green stimulus’ programme.

A third German contender, Sunways, said that its sales increased 16% in the first half of 2009, although earnings moved into the red, mainly due to a particularly poor first quarter for cell and system businesses. It admitted that excess capacity worldwide meant that it faced a “high degree of planning uncertainty”.

A fourth firm, ErSol, active in silicon, wafers, cells and modules and now owned by white goods giant Bosch, published news of a “dramatic slump” of 44% in sales in the first half, and a slide into loss.

ErSol’s chief executive, Holger von Hebel, said: “This decline is mainly attributable to the slump in the overall market compared with 2008, due in particular to massive cuts in the Spanish photovoltaic market, the worst global economic crisis for decades and the considerable surplus of solar modules and cells this resulted in. This led to extreme price pressure and, ultimately, to a considerable drop in prices of up to 30% in the first six months of 2009. Furthermore, the credit crunch that persists… is curbing the global project business.”

The impact on solar company share prices last week was clear, although fairly limited since investors had been expecting poor sales and profit figures at this stage. Shares in Q-Cells dipped 16% between 12 and 17 August, while SolarWorld fell 11%. However shares in Sunways edged higher.

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