Materials supplier Ferro reported net sales of $594 million for the three-month period ended June 30, an increase of 9% from a year ago, with net income reaching $20 million, well up from $8 million in the prior-year quarter. But declines in gross profit and a drop in income from the company’s electronic materials segment, which includes its solar cell conductive paste business, were attributed to what Ferro called “reduced customer demand resulting from excess inventory of completed solar power modules.”
The company said it expects net sales to grow between 9% and 12% percent in 2011, to between $2.30 billion and $2.35 billion. Ferro has reduced its expectations for sales of conductive metal pastes in the electronic materials segment during the second half of the year, although revised forecasts for foreign currency exchange rates should offset the reduction in metal paste sales.
Current sales expectations for solar conductive pastes are the result of reduced demand forecasts from PV cell manufacturers, according to the company. Increased customer inventory of completed modules, primarily related to the European market, has resulted in reduced cell production volume. Installations of modules are expected to increase in the second half, and this is expected to lead to recovery in orders for Ferro’s solar paste products, once excess inventories are depleted.
The company cited a number of difficult-to-forecast factors that impact whether a return to growth in solar cell manufacturing will be seen, including solar module pricing, possible changes in government incentives for solar installations, interest rate movements, and changes in the price of silver.
Primarily as a result of reduced expectations for sales of conductive pastes to cell makers, the company has downgraded its adjusted earnings per-share guidance range by an average of about 20 cents per share. The current outlook assumes that demand from the company’s customers for solar pastes will remain at or near the current level during the third quarter and will begin to improve more significantly in the fourth quarter.