First Solar profits down in Q2, yield co decision nears

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First Solar announced lower than expected revenue and profit for Q2 on the back of project delays. The company also revealed a decision on a yield co would be made before Q3 results were announced.

A record cell efficiency and rising module efficiency provided a silver lining to the disappointing financial results.

Net sales in the second quarter were US$544 million, down 43% on the previous quarter but up 5% on the same period last year.

Gross profit was 17%, down from 27% in Q2 2013.

“The decrease in gross margin was affected by the higher mix of module business in Q2, the mix of system projects between the quarters and the deferral of revenue from Desert Sunlight through the second half of the year,” said Mark Widmar, CFO, First Solar.

The company said delays to the Desert Sunlight project were linked to inverter issues and required “some engineering hours” and was not a major concern.

First Solar also reduced its production guidance for year by 100MW to 1.8-1.9GW citing downtime required for the lines to roll out its Series 4 modules.

Faced with repeated questions from analysts about whether it would set up a yield co investment vehicle, Widmar said no decision on this had yet been taken but would soon.

But Widmar also noted that should it decide to pursue a yield co strategy, all bets on the company’s shorter term figures could be off.

“Any decision to pursue yield co may significantly impact our ability to meet the earnings and operating cash flow guidance shown. Second the balance of the year, revenue and earnings is highly depended on our systems businesses and some key projects such as Solar Gen, Desert Sunlight and Topaz,” he warned .

In response to a question from Deutsche Bank analyst, Vishal Shah, Widmar also credited yield cos’ contribution to making solar power cost competitive.

“[Yield cos have] resulted in a steady lower in a way and cost of generated solar power for the customer and that's not a surprise, that's something we have been talking about for a year and half,” said Widmar. “And we think that it's appropriate and puts solar into that position to compete as a mainstream participant in the overall generation mix particularly in North America.”

First Solar’s Q2 financials are available in full on its investor relations website.

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