Phoenix Solar financial results miss badly: updates market dynamics

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High exposure to key European PV markets for project developer Phoenix Solar meant that sales fell dramatically in the first quarter as weak demand and inventory write-downs impacted financial results. Sales were down approximately 60% to €32.4 million in comparison to €80.4 million posted in the first quarter of 2010.

Earnings before interest and taxes (EBIT) were reported negative €16.9 million in the first quarter, compared to €4.6 million in same period a year ago. This was impacted by inventory depreciation of €6.1 million as market demand weakness meant it was unable to clear inventory.

Phoenix Solar also had start-up costs of around €1.0 million for entry into the US market and an increase in fixed costs as against the previous year's quarter.

Phoenix Solar reported that its Components & Systems segment generated sales revenues of €17.0 million, or 52.5% of sales in the quarter. Revenue in the Power Plants segment was €15.4 million, 47.5% of total revenues.

Module sales amounted to 18MW compared with 37MW in the same quarter of 2010.

Dr. Andreas Hänel, Phoenix Solar’s CEO noted in a conference call to discuss financial results that he didn’t expect the PV market in 2011 to grow from 2010 levels. He characterised the market as similar to that experienced in 2009, which followed a weak first quarter, ending with the fourth quarter being the strongest in the year. The executive noted that April was weak but May had already shown “significantly more momentum”.

Hänel expects the PV market to be ‘stagnant’ in 2011 and forecasted installations to be in the range of 18-20GW.

Due to FiT reductions in Germany of 13% at the beginning of the year module prices failed to fall inline and potential buyers withheld purchases, believing further system price declines were in the offering. Hänel noted that module and inverter prices had already declined in the first quarter by a double-digit amount but that both module and inverter prices were already falling rapidly in May.

Hänel also noted in the call that he expects PV installations in Germany to fall to between 5-6GW in 2011 and a further reduction of between 4-3GW in 2012.

However, the positive developments in government policy regarding the phasing out of nuclear energy would benefit PV in the long-term in the country. Hänel said that the potential for a hard cap in Germany and further heavy FiT cuts were now seen to be “off the table” and that large-scale plants could be back on the agenda in 2013 onwards. 

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