REC Solar seeking sales growth from US market

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Tier-one PV module manufacturer, REC Solar ASA has said that the US market will become increasingly important to its module sales in 2015 and beyond.

Management noted in its second quarter earnings call that as a result of its recently announced supply deal with SolarCity, its launch of a 72 cell module for the US utility-scale market and ongoing discussions with a number of potential customers in the country, the company’s ongoing capacity expansions to 1.3GW were geared to capturing more business in what has become the third largest PV market.

REC Solar expects to start shipment of its 72 cell modules to the US at the end of the fourth quarter of  2014.

Martin Cooper, CEO of REC Solar ASA, said: “REC's second quarter of 2014 was characterised by high sales volumes in Europe, softer market conditions in Japan and sales pipeline building up in the US market. The launch of our Peak Energy 72 series panels and our recently announced sales agreement with SolarCity demonstrate our ability to react quickly to market opportunities. REC is well positioned to capitalise on the market opportunities in the US market. We continue to have a strong focus on reducing our solar panel cash costs/watt to remain competitive. The furnace upgrade and module capacity expansion is progressing according to plan.”

Part of REC Solar’s US$70 million capital expenditure plans for 2014 are being allocated to tooling for the ramp of its 72 cell module, including recently announced line expansions and solar cell technology upgrades, using a rear-side passivation process.

Historically, REC Solar has been highly dependent on the European PV market, which continued to dominate second quarter sales (60%). However, early entry into the booming Japanese market had led to its first successful penetration of a market outside Europe.

Despite management citing softer demand in Japan during the second quarter, partly due to FiT reductions, declining ASPs and greater competition from Chinese competitors, Japan still accounted for around 25% of revenue in the quarter.

Financial results

REC Solar reported comparatively similar financial results as the prior quarter as the company remains effectively at full utilisation rates, while de-bottlenecking and line expansions continue.

The company reported revenue of US$175.8 million, up 0.2% from the previous quarter. EBITDA improved slightly to US$21.1 million, including the one time benefit of a US$7.4 million property tax re-imbursement related to its Singapore headquarters and manufacturing operations.

Module production increased 7.4% from the prior quarter to 232MW, while the module business generated revenue of US$164.3 million, down from US$169.8 million in the previous quarter.

ASPs declined 1.5%, primarily due to ASP declines in Japan. The company said that global module ASPs had declined 4.5% in the quarter.

Production guidance

REC Solar guided module production in the third quarter to be around 240MW with annual production of around 950MW.

The company noted that multicrystalline wafer production would reach around 800MW in the year, while solar cell production, impacted by the facility fire in March would be around 735MW.

Higher levels of ingot outsourcing and slightly higher polysilicon pricing would potentially hinder achieving cost reduction targets set for 2014. REC Solar had targeted module cost reductions of 8-12% for the year.

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