Solon suffering from lack of sun

The continued weak demand for both residential and commercial rooftop installations in conjunction with the lack of project finance available for utility-scale solar plants are forcing major module manufacturer Solon to undertake a further round of restructuring. Solon plans divestments, a reduction in its temporary workforce, and part-time work among other cost-saving measures. Solon also said it would review a potential spin-off of the Austrian production company, Solon Hilber Technologie.

Key to the restructuring efforts will be a renewed focus on module sales in Germany, Italy and the U.S., deemphasizing sales efforts in other regions. A new business arm ‘Rooftops’ is to be established that will service both German and international demand for large-scale commercial rooftop installations.

In the U.S. Solon said that it would continue to work on large-scale utility projects with the likes of PG&E but expects the pipeline of those new contracts to only begin to convert to revenue from 2010 onwards.

Having drastically cut module production in Q109, Solon will continue to better match supply with demand. Various workforce measures are being undertaken that include the reduction of temporary staff as well as the introduction of short-time work at several facilities. The company said both management and a large number of workers will have to take waivers on variable salary components to generate cost savings of €15 million, mostly effective in 2010.

The ongoing module price erosion caused by a massive global overcapacity has resulted in writedowns of inventories and sale of inventories below manufacturing costs. This writedown amounted to a negative €30 million in revenue for the company in the second quarter.

Although business overall was picking up and there were signs that the financial constraints on projects was easing, Solon is still being forced to keep production levels significantly below capacity levels. Due to the reduced demand, production output was reduced to 39MWp in 1H09 (prior-year period: 84 MWp). This accounts for a 54% decline YonY. However, product was up from the first quarter to 21MW. Annual nominal production capacity remained at 450MWp. 

Total module production reached 176MW in 2008, which could mean that without a significant increase in shipments in the second half of the year, production will be lower in 2009 and could fall back to levels set in 2006.

Solon did not publish an updated forecast of revenue and profit expectations for 2009.