MEMC catches its breath after US$1.48 billion loss

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Restructuring charges, impairments and write-downs led to MEMC's reporting a fourth-quarter loss of US$1.48 billion, US$1.4 billion of which was due to the one-off charges. The company is resizing its solar wafer operations in light of ASP declines and reduced market demand. MEMC reported its Solar Materials segment revenue was down 46% sequentially due to a more than 20% decline in solar wafer shipment volumes and 25% lower prices.

Year-on-year, revenue was down 61% due to a 23% decline in wafer volume and a 53% decline in average wafer prices, which was in line with its major competitors. The company reported fourth-quarter GAAP revenue of US$717.8 million, an increase of 39% quarter-on-quarter and a 16% decline year-on-year.

“During the fourth quarter and in the midst of a semiconductor market cyclical downturn and what we view as a prolonged and severe solar market dislocation, we initiated a broad restructuring to improve our overall competitive position,” said MEMC's CEO Ahmad Chatila.  “In the restructuring, we have sized the Solar Materials business to supply our downstream pipeline with low cost, high quality solar materials products.”

Chatila noted in a conference call to discuss financial results that the company had seen a 70% decline in the wafer market over the last six months of 2011, forcing the company to reduce its nameplate capacity expansion plans at its new Malaysian wafering operations from 600MW to 300MW.

“When we made our decision to build the factory in 2009, industry leaders had a cost of US$0.30 a watt and our target was less than US$0.20 a watt. This would be accomplished using innovative ways to counteract our smaller scale versus industry competitors,” noted Chatila in his prepared remarks.

“A couple of R&D developments fell behind our plan, and that, coupled with 70% decline, made the situation untenable. We had no choice but to slow our expansion. Currently, our cash costs are greater than US$0.20 a watt, clearly not good enough, but we are targeting to be competitive by year end [2012].”

Wafer cost reduction strategies also include its wafering JV operations in China, which were expected to be the main contributor to lower costs in 2012. Managment noted that the facility was producing product at US$0.15 per watt cash cost.

“Kuching continues to be important to allow MEMC to control our destiny in the case of trade war that we all hope will never happen. The technology is good, and the manufacturing flexibility is important, but cash economics will drive our utilization of the plant, going forward,” added the CEO.

SunEdison expanding projects and pipeline

In contrast to the challenging environment of the Solar Materials segment of the business, MEMC reported that its PV project subsidiary, SunEdison, had grown from PV interconnection that totalled 40MW in 2009 to 300MW interconnected in 2011.

MEMC reported PV interconnections had reached a record 161MW in the fourth quarter and 296MW for the year, a 77% year-on-year increase. The company said that 102MW of interconnections were recognized for revenue under GAAP and 109MW under non-GAAP. A further 52.25MW, primarily projects in Europe interconnected in 2011, are expected to be sold by mid-year. Management noted the delays were due to financing constraints in Europe.

MEMC said that it currently has 255MW of PV projects under construction and that almost 70% of its 3GW pipeline is located in North America. Around 75% of the pipeline was said to be made up of projects below 100MW, which was intentional as management noted this was to manage risk across the project pipeline. Project ASPs in 2012 are expected to average US$3.75 for the full year.

The all-important project pipeline was said to have increased from 1.4GW to around 3GW by the end of 2011. However, management said that interconnections would rise to only 400MW in 2012.

Consolidation of the company's Solar Materials business with those of SunEdison this year is the main reason behind the conservative approach to interconnections in 2012.

“We're going through a major restructuring. We're reducing OpEx in the Solar Energy business, like I told you, by 30%. So when I combine Solar Materials and SunEdison, we're going to slash OpEx by 30%”, noted Chatila in response to questions from financial analysts.

He said that MEMC was taking a short breather, considering the pace of expansions over the last few years.

SunEdison comprised 50% of revenue in the fourth quarter, while Solar Materials declined to less than 15% of total revenue.

MEMC did not provide financial guidance for 2012, but noted that it expects module prices to decline by over 20% in 2012. 

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