First Solar beats Q1 guidance: sold out till Q3 while project pipeline still replenishing

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Leading PV energy provider (PVEP), First Solar reported first quarter revenue of US$755 million in the quarter, a decrease of US$320 million from the fourth quarter of 2012 but exceeded slightly the top range of guidance.

Jim Hughes, CEO of First Solar said, “We demonstrated progress on several fronts during the first quarter, including continued strengthening of our balance sheet and additions to our pipeline. We remain on track for the year and reaffirm our full-year 2013 financial guidance and are focused on achieving our goal of new bookings to shipments ratio of one-to-one.”

Full-year revenue guidance was previously expected to be in the range of US$3.5 to US$4.0Billion. Module shipments were expected to be in the range of 1.8 to 2.2GW.

First Solar reported a first quarter 2013 gross profit of US$169.3 million, up from US$76.7 million in the previous quarter.

The company said in a statement that the decrease in net sales from the fourth quarter of 2012 was primarily due to less revenue recognition from its systems business projects. This was attributed primarily to the Topaz project, while the increase over the first quarter of 2012 was primarily due to higher sales volumes for third-party module sales and an increase in revenue from systems projects.

Management noted in a conference call to discuss quarterly results that it was sold-out of modules until the end of the third quarter of 2013. PV project pipeline replenishment would therefore not be completed until 2014.

PV project pipeline was said to have reached 5.5GW. However, 3.1GW is of booked pipeline. The 5.5GW of pipeline relates to new opportunities 2014 onwards but no PPA's etc…

Updates during quarterly conference call

Update

Having warned on previous calls that the nature and level of revenue dependent on projects that can at times be delayed in completion or other factors that can delay revenue recognition, the company said that it would be reducing its headcount by approximately 170. First Solar had increased non-manufacturing headcount in 2012 by 400, according to its 2012 annual report.

After many years of anticipation and previous expectations, management noted in the call that it had received governmental approval on its first project, a 30MW power plant, in China. Although no PPA had yet been signed, management expected the project to now go ahead.

Management tried to dispel the common belief that the large-scale utility projects in the US were already past their peak by suggesting that in the future years (2015-2017) large scale projects were still under consideration.

However, management acknowledged that it has been working on reducing costs for smaller utility-scale projects to become competitive in that part of the US market.

In respect to the Middle East, First Solar did not expect demand to take-off for at least the next 18-24 months, based on government plans and yet ‘officially’ approved goals. Typically, plans are being well thought out and not rushed in the region.

Overall there was the issue of the new pipeline opportunity accounting for revenue two-years downstream and the challenge of setting pricing based on expected module manufacturing cost reductions at the time projects would be signed. 
 

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