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In the fourth quarter of 2011, SunPower benefited from PV power plant project execution and its US-based residential leasing program that supported GAAP revenue of US$563 million, compared to US$705 million in the third quarter of 2011.Full-year record revenue was US$2.31 billion, up from US$2.2 billion in 2010. SunPower said it reduced production to better manage inventory build. The company is targeting overall production cost reductions of 15% in 2012, while production of its Maxeon Gen 3 solar cell with up to 24% conversion efficiency entered production. GAAP net loss in the fourth quarter was US$83.1 million and full-year loss was US$603 million.
Cost reduction roadmap
SunPower’s management noted in a conference call to discuss financial results that is was targeting further manufacturing cost reductions in 2012, designed to reduce costs by a further 15%. Management claimed that on an efficiency adjusted basis manufacturing cost per watt declined to US$0.86 in the fourth quarter, down from US$1.08 in the third quarter.
The company noted that it had one production line transitioned to its lower cost programme, which had provided lower cell process costs of 15%. Technology updated lines represented 40% of all of SunPower’s production lines at the end 2011.
SunPower also announced that it was launching its Maxeon Gen 3 solar cell with up to 24% conversion efficiency having entered production in the fourth quarter. The higher cell efficiencies will enable SunPower to initially produce modules with 21% efficiency with plans to introduce 22% efficient modules later. When fully ramped, the Maxeon cell is expected to support its cost reduction efforts, according to management.
“We finished the year with a better than expected fourth quarter, as demand for SunPower’s differentiated technology sold through our diversified downstream channels enabled us to reach annual records in both revenue and shipments,” said Tom Werner, SunPower president and CEO. “Operationally, we achieved both our panel production cost target and accelerated manufacturing step reduction program milestones. Research and development investment results included initial volume production of our Maxeon Gen 3 next generation cell technology with a maximum cell efficiency of 24 percent. As the market transitions, the companies with the strongest balance sheets will gain share. Our strategic partnership with Total SA solidifies SunPower as one of the leading companies in the industry today.
SunPower said it had produced 922MW of cells in 2011, compared to 584MW in 2010. However, 766MW was recognised in revenue, though was up 40% from 546MW in 2010. Production in the fourth quarter was said to have reduced in the fourth quarter in order to manage high inventory levels that had risen in the year.
Management said that it had improved inventory turns to 6.6x from 5.9x in the third quarter and reduced inventory from US$425 million in the previous quarter to US$397 million at year end.
Capital expenditures for the quarter were US$46 million and US$131 million for the full year and first quarter CapEx was guided between US$45 million and US$55 million. Management noted that about 50% of the CapEx budget in 2012 would target manufacturing cost reductions.
The Utility and Power Plant (UPP) business generated non-GAAP revenue of US$377 million in the fourth quarter, up 16% over the third quarter. Non-GAAP gross margin for UPP also improved in the quarter to 17.2% from 12.6% in the third quarter of 2011.
Management noted that its UPP segment had 85% of forecast projects for the year already booked, which included the CVSR project and deal with NRG for 54MW.
“Our Utility and Power Plants (UPP) business continued to outperform as we met our project commitments and began major construction activities at the 250 megawatt (MW) California Valley Solar Ranch (CVSR) power plant project. Additionally, we completed the permitting process for our three contracts with Southern California Edison, totaling 711 MW,” noted Werner.
2012 financial guidance
The company guided first quarter GAAP revenue to be in the range of US$420 million to US$495 million, with a gross margin of 9% to 11%. SunPower guided both GAAP and non-GAAP revenue for 2012 to be in the range of US$2.6 billion to US$3.0 billion. The company also noted that its expected recognized between 900MW to 1,200MW of sales in 2012.
According to Jeffries financial analyst, Jesse Pichel, the guided net loss per diluted share of ($0.20) to ($0.05) for the fist quarter of 2012 was wider than expected and said in a research note that company didn’t provide any visibility to 2012 profitability.
‘Module cost remains a drag, cost reduction plan accelerating: While the project and leasing business is quite profitable, the module sales business is extremely challenged with a product that costs more than Chinese product. Only when sold as a system or in a lease is the full value of higher efficiency SPWR panels monetized,’ wrote the analysts in an investor note.