Module sales at REC rebound in 2Q12

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Renewable Energy Corporation (REC) reported a 13% increase in sales for the second quarter of 2012. Revenue reached NOK 1,987 million (US$327 million) with an EBITDA of NOK 267 million (US$44 million). Sales improved across polysilicon, silane and modules in the quarter but the company was impacted by impairment charges for the closure of its wafer operations in Norway. REC reported a quarterly loss of NOK 4.1 billion (US$674 million), compared to loss of NOK 0.2 billion in the previous quarter and generated net cash from total operating activities of NOK 0.6 billion.

Management noted that the industry wide overcapacity continued to negatively impact prices. Polysilicon and module prices declined 8% in the quarter, while silane prices fell 14%.

However, module production volume increased 14% in the second quarter to 179MW, supported by shipments from inventory of 216MW (up 13%) to generate sales of NOK 1,145 million (down 21% q-on-q). The company is targeting module production of 200MW in the third quarter at its Singapore facility and continues to operate at full capacity, according to the company.

As a result of increased shipments, module inventory decreased with finished goods module inventory value standing at approximately NOK 400 million.

Cost Reductions

REC said that the cash cost of producing modules in Singapore was €0.87/W including SG&A and R&D in the second quarter down 9% from the previous quarter.

The company noted in its quarterly report that its REC Solar division, responsible for module production in Singapore had accelerated a range of cost reduction initiatives as well has have 1 cell line migrated to its backside passivation process, boosting cell efficiencies and lowering the cost-per-watt.

As a result, REC said that it was targeting a cost of modules (excluding depreciation) of US$0.70/W by the fourth quarter 2012.

REC Silicon was reported to have reduced granular polysilicon manufacturing costs in the quarter and is targeting a production cash cost of US$11.5/kg by the fourth quarter of 2012. REC Silicon is targeting production of 21,500 MT based on increased production of FBR in 2012, noting that FBR poly runs at an annualized capacity of about 15,000 MT (70%) of total polysilicon production.

Capital spending guidance for the year was said to be below NOK 600 million, down from previously expected spending of NOK 750 million.

Singapore fab impairments

Due the continue decline in module selling prices, REC said that it had recognized impairments of NOK 3,600 million across its operations. However, NOK 3,513 million actually related to its Singapore module operations, which being an integrated facility includes wafers, solar cells and modules.

Management noted that due to adjusted sales prices the Singapore plant was highly sensitive to these changes noting that it estimated that a change in the estimated sales prices of US$0.12 cents for PV modules would negatively impact the asset value of the facility by approximately NOK 0.7 billion (US$115 million).

REC didn’t provide financial guidance for the third quarter or full-year.

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