REC to temporarily reduce wafer and cell production in Norway: warns weak 2Q revenues

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The combination of a huge global inventory build and weak market conditions that have dragged on into the second quarter of 2011 has meant that REC is to reduce production of wafers, cells and modules, from July 1st 2011 onwards. REC said that it would also halt production at its oldest wafer plants at Herøya, Norway, and at the solar cell plant in Narvik, Norway to weather the weak market conditions.

REC management had warned in early May that should weak market conditions continue then the company may need to reduce capacity utilization.

REC-branded modules manufactured under contract by third parties would also be halted in the third quarter, the company said.

The actions taken by REC would see wafer production reduced by approximately 125MW in the third quarter, representing 30% of wafer capacity in Norway in the quarter. Solar cell and module production would be reduced by approximately 50MW in the same period, affecting approximately 300 employees at Herøya and 200 employees in Narvik, through temporary lay-offs, according to REC.

REC also noted that dependent on market conditions, management would continue to monitor and adjust production as necessary.

Importantly, REC warned that due to weak wafer and module demand and lower selling prices, second quarter operating results would be ‘well below the previous quarter.’

REC posted revenue of NOK 4.1 billion in the first quarter of 2011. The company had guided in early May that it was expecting margin pressure on modules and wafers in the second quarter. However, management noted that polysilicon margins were expected to remain fairly stable.

REC said in a statement that it was not yet prepared to indicate the expected effect of the reduction in capacity utilization on the annual production volumes in 2011.
 

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