REC sees strong demand in first quarter: returns to profit in 2010

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A significantly better fourth quarter than REC management had expected saw revenues rise 29% over the previous quarter to NOK4,874 million (US$846.2 million). Increased sales of polysilicon, wafers and modules supported the revenue growth in the quarter. Revenue for the full-year reached NOK13,776 million (US$2.4 billion), an increase of 56% compared to 2009. The most integrated solar energy company also returned to profit of NOK 1,018 million (US$176.7 million) for the full-year, after experiencing losses in 2009 of NOK829 million (US$143.9 million).

REC said that it anticipates average selling prices for polysilicon, wafers and modules were to decline approximately 5% in the first-quarter 2011 – surprisingly lower than management expectations.

Strong market demand also helped fourth-quarter results in other ways, noted Ole Enger, CEO of REC. Within its Silicon group, as supply of polysilicon remained tight, REC was able to sale accumulated off-spec poly that had already been written-off at a higher book value, netting an additional revenue gain of NOK150 million.

Extra volumes of increased poly production were also successfully placed at attractive prices in the spot market, helping to boost revenue, according to the company. Silane gas volumes were also markedly up in the fourth quarter by approximately 18%.

Total polysilicon production was 4,369MT in the fourth quarter, a quarter-on-quarter rise of 29%. Granular polysilicon production (FBR process), accounted for more than 60% of the production in the fourth quarter, suggesting a maturing manufacturing ramp and less downtime for repairs and maintenance after a series of previous setbacks.

Production of solar- and electronic-grade polysilicon reached 3,856MT in the quarter, an increase of 43% compared to the previous quarter. Interestingly, FBR process poly yields climbed significantly from 66% in the third quarter to 85% in the fourth, again highlighting improved maturity of the technology under meaningful capacity ramp.

Guiding production for 2011, management noted that the Silicon division expects polysilicon production to reach approximately 17,000MT, up only 1,000MT, while silane gas sales volumes were expected to reach 2,150 MT. Polysilicon production in the first quarter of 2011 was estimated to be at 4,000MT.

The wafer division saw average selling prices increase by 4%, again driven by demand, helping revenues in that unit to reach NOK2,077 million (US$360 million) in the fourth quarter, up 31% from the fourth quarter 2009 and up 26% from the previous quarter.

Wafer sales volumes increased to 342MW, a 44% increase from the same period a year ago and up 10% over the previous quarter. However, production volumes were down slightly as upgrades to its oldest ingot furnaces take place, the company said.

Guidance was given for the wafer division of reaching a combined multi- and monocrystalline wafer production of approximately 1,650MW. For the first quarter of this year, multi- and mono-wafer production was expected to be approximately 350MW.

REC Solar reported revenues of NOK2,112 million (US$366 million) in the fourth quarter, up 16% from the previous. Module sales (external) amounted to 150MW, compared to 139MW in the previous quarter.

Module production reached 166MW in the quarter, as the company's Singapore fab continued to ramp to capacity.

REC Solar is forecasting that module production will reach 750MW in 2011, while production should reach 170MW in the first quarter of this year.

REC management noted in the conference call that despite the good market conditions shown in the first quarter, the favorable trends are not expected to last. As a result, overall price declines of between 15-20% should be expected this year as supply exceeds demand.

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