Q-Cells to restructure again after warning of losses of €395.8 million in 1H2011

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Updated: Despite a significant increase in sales in the second quarter of 2011, Q-Cells has warned that losses reached €395.8 million in the first half of the year, due to price declines, inventory write-offs and other one time issues. A major restructuring will be undertaken, including cutting manufacturing operations in Germany by 50%. Q-Cells guided full-year results would reach approximately €1 billion but losses would be in the three-digit million euro range.

This is the second major restructuring exercise Q-Cells have undertaken in the last few years. Q-Cells said it would be focusing production at its Malaysian site, while solar cell production capacity at its Bitterfeld-Wolfen headquarters would be permanently reduced to 50%. Q-Cells noted lower utilization levels and a reduction in production during the second quarter; however, the restructuring plans go much further.

Administration costs would also be slashed by 25-30%, but the company said it wants to avoid compulsory redundancies when streamlining the organisational structure and adjusting production levels.

Significant write-offs included impairment charges on tangible fixed assets at its German production sites amounting to €139.7 million. Inventory was written down in the second quarter to the tune of €73.2 million. Impairment charges hit €43.6 million, which were associated with long-term delivery contracts. However, one-off items, which were not disclosed, amounted to €256.5 million.

In addition to one-time effects, production idle costs due to low capacity utilisation, coupled with a fall in the prices of solar cells and modules, led to a total operating loss of €307.7 million in the second quarter and  a loss of €318.3 million in the first half of the year.

However, after interest and taxes, the loss for the second quarter of 2011 amounted to €354.8 million, while a €395.8 million loss was experienced for the first half of the year.

Q-Cells said it was making plans to have cash and cash equivalents of between €300 million and €350 million based on the reduction of working capital.

Update
 
After releasing information on its losses and restructuring efforts, Q-Cells also released second-quarter results, providing further information regarding the restructuring plan and manufacturing plans.
 
Q-Cells noted that its Malaysian manufacturing plant would be running at full capacity in the second half of the year.  The Q.SMART CIGS thin-film module lines at subsidiary Solibro would also be running at full capacity. The company also confirmed that the module production line for its crystalline Q.PEAK high-performance modules was to carry on ramping at its Bitterfeld-Wolfen site, and was therefore not affected by the previously announced cut in production. Total production capacities were said to reach between 1.0 to 1.2GW in 2012.
 
New head of production
 
Q-Cells also announced a new COO; CEO Nedim Cen temporarily took on those duties after Gerhard Rauter left the company in May. Not without a little irony, Q-Cells has chosen a former semiconductor executive, Dr. Andreas von Zitzewitz, who more recently was an executive board member and COO at another struggling firm, Conergy. (Rauter had also made his earlier career at Infineon, the same semiconductor firm as the new COO.)
 
Von Zitzewitz will be responsible for production, R&D, purchasing, logistics and quality and be charged with strengthening Q-Cells' competitive position with regard to crystalline solar cells, solar modules and solar systems as well as CIGS thin-film modules.
 
The company also said that R&D would be expanded to include the ‘full spectrum from solar cells to solar systems and applications,’ in an effort to bring new products to market faster. 
 
In its PV systems business, solutions specifically addressing flat roofs, car ports and system kits for residential and commercial type markets will be emphasized. 
 
Sales efforts would also target customer groups and international markets, while the sales force structures would be simplified. 
 
Q-Cells said that it was expanding its Malaysian production site into a new regional sales hub to tap the growing Asia/Pacific market.
 
Restructuring
 
Q-Cells noted that the restructuring objective was to reduce complexity within the organization. Temporary workers were no longer being employed since production was adjusted in April. The company said that about 90 employees were changing over to the new solar module production line that was started up in July.
 
2Q results
 
Q-Cells reported sales of €316.0 million in the second quarter, compared to €125.1 million in the first quarter of 2011, as the PV market virtually halted, according to Q-Cells management. Revenue was primarily generated from a strong systems business.
 
In the systems business, the sale of the German solar park Finsterwalde II and III was successfully concluded. The company also noted that the first two sections of the Zerbst solar park were also completed. In the current third quarter, Q-Cells said it had received an order for the construction of the following three sections of this project with a volume totalling 26MWp.
 
In Ontario, Canada, Q-Cells received another order for a 10MWp solar project by Starwood Energy Group Global and would realise a total volume of 60MWp in this region. 
 
Q-Cells have also received its first large order for 20MWp of Q.SMART thin-film solar modules in the third quarter. Q-Cells noted that it has an order backlog in excess of €200 million.
 
“In the first half of the year, the difficult situation in the European market hit us particularly hard. I expect competition to remain tough in the coming year with no significant changes to demand, but we will be in a much better position to deal with it,” noted Nedim Cen, CEO. “I am convinced that the strategy of further developing Q-cells into a photovoltaic solutions provider is the right way to go.”
 

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