US tracker manufacturer FTC Solar is turning to alternative shipping methods and cost-cutting initiatives in a bid to return the business to profitability in Q4, with the company’s cost base continuing to surge.
Having issued a warning to the market in mid-June that it expected to make a significant loss in the second quarter, last week FTC confirmed that it had made a non-GAAP loss of US$16.97 million in the three months ended 30 June 2021, towards the top end of the range given two months ago.
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This loss came despite quarterly revenues – US$50.1 million – beating previous guidance of US$41 – 46 million and contributing towards a 39% year-on-year increase in half-year revenue.
Shipping and logistics costs were a significant hindrance on performance, coming in roughly US$10 million higher than expected. FTC Solar CEO Tony Entyre said the “challenging and tightening global logistics environment” had prompted “meaningful actions” from the company, including an ongoing dialogue with customers and the exploration of alternative logistics solutions to provide more certainty.
Speaking to analysts last week, Entyre said freight costs were continuing to spike into Q3 and had risen another 40% entering into July and August, with project developers now reevaluating any un-contracted pipelines. Entyre said industry estimates of 15% or more of solar projects being delayed was consistent with his company’s observations in the market, with the majority of those delays being for one or two quarters.
Entyre further said that with the majority of tightness in logistics being in containerised shipping, FTC was now exploring breakbulk shipping methods. This, alongside a closer execution of contracts, has allowed the company to exercise greater control over logistics timeframes and costs.
Despite these alternative methods, FTC expects an impact of between US$12 – 15 million on Q3 earnings from higher logistics costs, with the company expecting a second consecutive heavy loss in the current quarter. Opex is expected to rise from US$8.3 million in Q2 to US$8.7 – 9.7 million in Q3, with a loss of between US$14.7 – 19.7 million during the quarter.
This comes despite sequential revenue growth over the rest of the year. Order book growth has seen executed contracts and awarded orders, excluding those incorporated into the company’s H1 2021 results, stand at US$478 million as of 1 August 2021, with those orders set to be realised over the remainder of 2021 and 2022.
Strong order volume will see FTC “transition towards profitability” into the final quarter of the year, with other cost-saving initiatives expected to help boost the company’s fortunes as the year progresses.
While no earnings forecast for H2 2021 was issued, FTC does expect full year revenues to stand at around the US$310 million, equating to a 65% year-on-year increase.
Conference call transcript from Seeking Alpha.