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First Solar maxed out

Demand for First Solar’s CdTe thin-film modules nearly exceeded supply in the third quarter as major projects were completed and its German rebate program came into full affect. The company expects demand to exceed supply for installations in the fourth quarter and expects to enter 2010 with low inventories. First Solar produced 292MW during the third quarter, 1% over the prior quarter as all lines including those in Malaysia were fully ramped, shipping its entire production in the quarter.

However, the company noted that during the quarter, it started to decommission line one in Perrysburg, Ohio to enable higher production capacity as a four-line configuration. The Ohio line expansion remains on plan to ramp in the first quarter of 2010, company executives said during a conference call with financial analysts.

Production improvements continued in the quarter as First Solar’s current 22 lines' annual line run rate was 53MW, up 2.5% over the second quarter due to improved throughput and conversion efficiency improvements. The thin-film leader noted that average conversion efficiencies had reached 11% in the quarter, up 0.1% compared with the previous quarter.

Cost-per-watt produced also declined slightly to $0.85 down $0.02 or 2.3% sequentially, due to lower material cost as well as the impact from higher throughput and conversion efficiencies seen in the quarter.

With the completion of ramps in Malaysia and the reconfiguration of the Ohio line, First Solar guided full-year capital expenditure at between US$260 million to US$275 million. CapEx for the fourth quarter was said to be in the range of US$50 million to US$65 million.

However, thye did not give any indication on its next round of potential capacity additions or CapEx guidance for 2010. In the call, President Bruce Sohn noted that the company was continuing to evaluate the timing of further expansions and that a decision would be made in December.

Executives also noted that the recently announced 2GW projects in China would ultimately result in First Solar establishing a manufacturing base in China, though initial installations would come from its existing plants.

Financial results

Based on continued demand, First Solar raised net sales guidance for 2009 to a range of between US$1.975 to US$2.025 billion, the high end of its previous guidance. Third quarter revenue was US$480.9 million. Revenues were US$525.9 million in the second quarter and US$348.7 million in the third quarter of fiscal 2008. The decline in revenue from the previous quarter was attributed to increased module shipments to EPC sites most notably to the Sarnia project in Canada, which was not signed off in the quarter.

Gross margin for the third quarter was 50.9%, down 5.8 percentage points over the prior quarter, due to the competitive pricing environment and rebate program in Germany. 

Based on continued demand, the company raised net sales guidance for 2009 to a range of between US$1.975 to US$2.025 billion, the high end of its previous guidance.


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