First Solar sales hit by PV project slump

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Despite warning that revenue for the second quarter 2013 could impacted by timelines for PV project sales, leading PV energy provider (PVEP) First Solar reported worse than expected sales while downgrading full-year revenue guidance.

The PVEP reported second quarter 2013 sales of US$520 million a 31% decline from the previous quarter. Sales have declined for two straight quarters from a fourth quarter 2012 peak of over US$1.0 billion. First Solar had reported sales of US$957 million in the same quarter a year ago.

The company reported that the slump in sales was due to its PV project business and a delay in selling projects.

Jim Hughes, CEO of First Solar said, “Although we worked diligently in the quarter to close the sale of the ABW projects, the sale was delayed and consequently, as we highlighted on our first quarter of 2013 earnings call, such delay caused a decline in our net sales and earnings for the second quarter from expectations. We still expect the closing of the ABW sale to occur in the current year, resulting in a corresponding increase in net sales and earnings in the second half of 2013.”

“The sequentially lower project revenue is primarily attributed to lower revenue recognition at AVSR and Imperial Valley,” noted Mark Widmar, CFO of First Solar. “Regarding the AVSR, activity at the project trended lower during the second quarter due to delayed approvals in the local county related to materials used for our tracker technology. The Imperial Valley project was sequentially lower as the project is nearing completion. Comparing the second quarter of 2012, the decrease in net sales was primarily attributed to lower systems business project revenue as initial revenue recognition for AVSR and the sale of Silver State North were both achieved in the second quarter of 2012, partially offset by higher sales volume to third party module only customers in the second quarter of 2013.”

However, the issues with major projects could impact sales in the third quarter with management uncertain of the effects to revenue recognition.

“Specific to the third quarter, there are a number of items which could have a material impact on the quarter,” added Widmar in the conference call. “These items include the initial revenue recognition on Desert Sunlight, the completion and revenue recognition of Campo Verde, and potential AVSR project delays pending the required county approvals to complete Phase 3 of the project. It is important to note though, these items are essentially all timing issues. However, if we do not achieve revenue recognition on Desert Sunlight and/or Campo Verde in Q3, and we experience further delays in the build out of AVSR, then sequentially we could see a material decline in Q3 earnings. If these delays were to occur, we could see a materially higher fourth quarter.”

Management also highlighted that it would be delaying two projects (Solar Gen and Macho Spring) that were previously expected to be complete and sold in 2013, resulting in the company lowering full-year revenue guidance from US$3.8 billion to US$4 billion to between US$3.6 billion and US$3.8 billion.

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