Inventory writedowns and a weaker-than-expected recovery in demand for PV installations, specifically in Germany, are behind revised financial guidance by Phoenix Solar. The project developer warned of significant losses for the fiscal year 2011 and said it would be looking at its current business model in an effort to make changes and reduce costs to return to profitability in 2012.
Phoenix Solar reported that it expected 2011 revenue in the range of €350 million–€400 million, significantly down from €635.7 million posted in 2010. EBIT losses are expected to be in the range of €42 million–€49 million, due to inventory writedowns on solar modules, caused by the continued price declines.
Indeed, Phoenix Solar noted that it had previously expected revenue to be slightly higher in 2011, compared with last year. However, the recovery in demand did not materialize as expected in September and the expected year-end rally was said to have yet to materialize. Revenue would also be affected by lack of module pricing stability.
Phoenix Solar is one of the first PV firms to write down inventory, regarded by some in the financial community as a key development to draw a line under the lack of demand elasticity and help improve a demand recovery cycle.
However, Phoenix Solar’s comments on lack of market recovery in Germany would seem to be at odds at the moment with a recent forecast from IHS iSuppli that a strong recovery in German PV installations was already under way.
Although the project developer and distributor noted it was reviewing its business model in light of the poor business conditions, details of where the business model changes could be made were not disclosed.